In the past couple of days there have been a couple of posts floating around that I really agree with: Michael Arrington's post on working hard; and the response of the quoted developer, Jamie Zawinski, who says, in essence – dont forget who really makes money from your hard work.

Are VCs really just parasites that make money off the work of entrepreneurs? Are entrepreneurs all so desperate to take that evil, evil money?

I really struggle with this. Like brain battling for hours. 

Its no secret that I have a real interest in helping startups become successful and that one piece of that success often comes in the form of financing. 

After letting it rattle in my brain for the past day or so, here is what I came up with:

The true measure of the VC/entrepreneur relationship is not the money. Its not about "evil" or "desperate." Its not about being taken advantage of, or who makes the most. 

Yes money is the most obvious and optical representation of the VC/entrepreneur relationship, and there are many, many VCs that see their entrepreneurs simply as investments regardless of the lip service they provide. 

And, yes, almost always the VC makes more on a winning liquidity event than the entrepreneur. (By the way, if you say that's because the VC is taking all the risk…fuck you. The entrepreneur is the one giving up his/her life, health and often sanity to see their dream live. Yes, the VC is taking a risk, but its his fucking job. If he is good at it, he will mitigate the risk appropriately.)

If working with a VC was ONLY about the money, then every entrepreneur that I know would never take the money, unless they desperately needed it.

But, its not about the money. Yes, its about the connections, and yes its about the social capital, and yes, in many ways, its about the ego.

But thats not it either.

Its truly about advocacy. Its about having someone in your corner that cares only about your success. (Let me also be clear here too. When I say VC/Entrepreneur, I am really referring to the CEO/VC, with the expectation that the CEO is the founder. VCs tend to not talk to the whole team, just like CEOs tend to not talk to the whole partnership. This is an important distinction.)

On the entrepreneur side its about having someone that can help provide you data to help make decisions. Big decisions. Company decisions. Vision decisions. 

That's it. Its those two things: advocacy and data.

When I watch the young/first-time VCs its easy to see who will become great.

Its not that they care about entrepreneurship (I would hazard to guess that 90%+ of VCs got into the business because they believe in entrepreneurship), its that they care about entrepreneurs. Their blogs are full of information for entrepreneurs. They are accessible. They spend hours and hours with entrepreneurs — some of which they are not investors. (Its easy to see the ones that arent going to do as well – their blogs are full of bluster and they dont tire of showing how smart they are in their understanding of markets, products or companies.)

I've mentioned these guys before, but as I continue to think about what kind of VC I would be, I keep coming back to them.  Josh Felser of Freestyle Capital and Jeff Clavier of Softtech VC have both passed on me — probably more than once — but I know I could reach out to either for an introduction/conversation/whatever.

I have been really impressed watching Kent Goldman at First Round (passed), Ryan Swagar and Brandon Zeuner at Venture 51 (invested) and Jonathon Triest at Ludlow Ventures (invested) grow as investors over the last year or so. I once spent about 10 hours playing Werewolf with Dave Hornik, of August Capital and while I have never pitched him or had much opportunity to spend time with him, the value he placed on people (intelligence, truth and leadership) tells me that one day I hope to do both.

My current lead investor, Blair Garrou of DFJ Mercury and I talk probably 2-3x a week. Often not about the business, but about being a better CEO and leader. 

An entrepreneur spends an amazing amount of time learning about the market they are entering. They spend hours and hours pouring over metrics.

The best VCs have enough personal experience with enough companies to say "you guys are thinking about doing X. Here is what happened when companies A, B, C and D made the same decision." When I was at Lijit, Brad Feld of Foundry Group talked about the "one key metric" a startup should manage towards, and I watched Todd Vernon make real decisions around that metric and saw the company continue to focus and grow until they recently had a positive exit.

Its impossible to get that type of data from other CEOs, or from the market or Google Analytics.

As a entrepreneur there is nothing more important than advocacy and data. Nothing.

So are VCs evil? Do they make all their money on the backs of desperate entrepreneurs?

I wish it was an easy answer. What I do know, is that for me, the only type of VC I will ever work with is one that understands the value of advocacy and data, and believes its their responsibility to provide both, rather than just write a check.

Related articles

• A New Deal Flow? Startup Raps For Angel Funding, Venture Firm Responds In Kind (techcrunch.com)
• Morgan: Why Entrepreneurs Should Never Meet VC's Unless They're Formally Pitching (askthevc.com)
• Are People Who Claim To Be "VC Brokers" Legit? (askthevc.com)
• Entrepreneurs Thoughts On VCs And Angels (askthevc.com)
• 500Startups: Cohort Metrics For Startups (askthevc.com)

Sunday morning. Football’s on. I have a cup of coffee I brewed (Im getting good at it!) and am catching up on ESPN.com.

Yesterday, or maybe the night before, I read a post about 500startups and their approach to investing. I tweeted that it was both what I loved and disliked about the 500startups process. Dave was quick to ask me to explain further, imploring me to outline what I thought was wrong so they could work on it. (I sent him an email this morning for those keeping track).

On Tuesday, I am heading to Half Moon Bay for DFJ‘s annual CEO Summit. Its a good time, and DFJ and 500startups are as different as two funds could get.

All of this has got me thinking about what a perfect venture firm looked like. If I were to have $100mm in my pocket, and I was to build a firm from the ground up, what would it look like?

Im not sure if I am ready to completely outline that — still thinking about it, and in truth it would be stealing from Foundry Group, Union Square Ventures, First Round, Spark Capital, 500startups, Tim Draper, Chris Sacca and others — but this morning, I read this post on how Jim Harbaugh is putting Alex Smith in the best position to win.

The premise is that by simplifying the playbook, and removing “sight adjustments,” that Alex Smith has gone from a shitty QB to a decent one.

A “sight adjustment” by a receiver refers to the concept that, if a defense blitzes, the quarterback and receiver must both — on the fly and after the snap — recognize it and adjust routes accordingly.

How does that relate to venture capital?

VCs pride themselves on the ability to pattern match and through that bring additional wisdom to the startup process. In many ways, the VC acts as the coach, and the CEO as the QB. If the VC is helping develop the playbook by injecting their knowledge from other deals they have done or have knowledge of, there is an inherent risk that they are helping to create a startup that is built to succeed based on their experience, not on the skills of the CEO.

Most first-time entrepreneurs — like young NFL QBs — dont have the faith in themselves to say to their investors “I got this. Here is what I do best, and this is how we are going to build this company.” Instead, they look to carry out the playbook as dictated by their VCS — “we didnt fund you to have you save it — hire fast — move the company — whatever” and if their skill set doesnt match the “perfect” startup playbook, they are removed or diminished.

The genius of what Jim Harbaugh has done is that he has removed the “complex ballet of synchronized adjustments” and replaced it by “just look[ing] for a different receiver.” Its not simplification, its the reduction of complexity. A company that I am advising, CAGE, said it perfectly in a blog post:

Too often, companies strip out features for the sake of being simple. But that’s not simple, it’s frustrating. So we spent some time carefully finding a balance between useful new features and the simplicity that has made CAGE so easy to adopt. You could say we’ve been on a mission to make every detail perfect and to limit the number of details to perfect (thank you, Jack).

The best VCs are the ones that work to put the CEO in the best position possible to succeed, not because the CEO is the best to work the playbook they devised, but because the playbook is devised to allow the CEO to succeed.

If I were to start a fund today, it would be with the philosophy of removing the need of the CEO to make sight adjustments, and providing a supportive environment to allow the perfection of the simple.

Of course, coaches often say they are “simplifying the playbook,” but Harbaugh has been able to do it coherently and in a way that actually aids his quarterback’s ability to succeed rather than simply removes options.

Related articles

• Why Jim Harbaugh Is Insane to Suggest Alex Smith Is an Elite QB (bleacherreport.com)
• Cautious optimism: Startups will come out ahead (venturebeat.com)
• So You Think You’re a Shot Caller? (learntoduck.com)
• I’ve Got an Idea for a Startup: NOW WHAT? by Amit Klein (chaitanyapramod.wordpress.com)