Cindy Padnos, founder of a venture capital firm, explains how relationships work differently in VC than in startups. Raising a fund requires far more investor commitments than raising capital for a company. Success in VC is measured by returns to investors, but Padnos also values building sustainable companies with other founders.
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How is being the founder and managing director of a venture firm different from being the founder and CEO of a software company? Well, some things are the same, but they end up taking on very different attributes. I guess I would say relationships matter a lot. They matter in any business environment that you might work in, but they particularly matter in a startup and they particularly matter in venture. They're different how you leverage those relationships, but it may even be the same people. So for example, people who might have been customers of mine when I was a founder now become prospective customers of our portfolio companies and I can make those introductions. People who I was soliciting capital from for my own company become co investors. And the credibility that you built with them in that last relationship absolutely translates to the new one. So the relationship element is, I guess I'd say, similar, but different. Maybe the same people leveraged and they leverage you in different ways as well. It's very interesting. Same would be true that you have to, as a founder, raise capital. As a founder of a venture capital firm, you have to raise capital. You raise it from different people. I will tell you, for what it's worth, it's a lot easier to raise capital for a startup than it is for a venture capital fund. And the reason I say that is if any of you have done it, you know that to raise capital for your own company, you probably need one or two yeses. You need a lot more yeses to raise fund money for a venture capital fund. And they're different people and the metrics are different, and so many things are different. How you're measured, your performance is measured, is very different in a startup than it is in a venture capital fund. I'm measured on internal rate of return on the financial performance that I return to my investors. How I measure myself, frankly, isn't that different though. Have I built great sustainable companies with the help of other great entrepreneurs?
