Published on March 16, 2015
It was the Dalai Lama who once said “A lack of transparency results in distrust and a deep sense of insecurity.” But what is the meaning of transparency in the world of VC? And why is it so important?
Let’s sketch a case with entrepreneur X. Entrepreneur X has a company who needs funding so he seeks the help of Venture Capital. The problem in this case is that the company isn’t running that well and so he thinks being a bit shadowy about the facts will be the best way to getting where he needs to be. Then again nothing ventured, is nothing gained. But the issue here is one that’s the ground of the whole principle of venture capital.
As a venture capitalist it’s not the idea that we just invest in anyone so what we do is we analyse a company extensively before we invest. This isn’t just good for our self, It is also good for the company since we give feedback which a company might save time, effort and money in the future. This research is a timely activity and requires a lot of effort from both parties. So chances are that transparency might save the company in issue and us a lot of time and effort.
But let’s assume in this case that we decide to invest in company X based on false view on the company. Company X might view the point of investment as the finish line. But in fact to state it in formula one terms the qualification rounds have just begun. The relationship with a venture capitalist is usually a long term relationship. Then again in return off an investment we get a stake in the company. Both parties have the same goal: making the company as successful as possible. But the pathway{route} is long and every now and then differs. Having a good start in this long term relationship is essential to reach this goal.
Having raised venture capital means monthly meetings and when everything goes right there might even be an B-round for investment where together you might win the grand prix. Of course forgetting to mention that you lack the possession of a driver’s license might be a big issue in this case.
