This is a transcript excerpt of a YouTube conversation between Jason M. Lemkin and Harry Stebbings about how venture capitalists should give feedback to founders. Lemkin says VCs must sometimes give a hard "arse-kicking" and describes that many founders react poorly — he estimates roughly 50% can take feedback, 25% will merely tolerate it, and many will resent it (he says ~60% will hate you). Both discuss fiduciary duty, board dynamics, and the trade-off between honest advice and damaging founder relationships; Lemkin gives an example warning a founder their burn rate was unsustainable and that they risked failure within days.
Chapters
What's wrong with telling them how to raise money? Surely we're here to help coach some fundraise.
I think as a vc, look, you gotta, and look, it's, it's harder these days when things are stressful in the markets. You gotta give the best advice you can, timed the way you can. And once every two years you have to give some arse kicking advice, which I hate doing because I'm usually the only one left these days that'll do it. Every two years you have to give some arse kicking advice. But then they gotta just run with it. It's their company. Right. But there is this. When I grew up As a founder, VCs were still much more patriotic, patriarchal and patronizing than they are today. They're still patronizing today, but boy, it used to be worse. And I still, I still had that a bit of the abused founder in me by being abused by my, by a couple generations of VCs where I acted a little bit like that. And then I immediately saw what I did and I'm like, I could never, never do this again. I'm just gonna, I'm here to. And it helped going to one of the conversations we had actually before we started, it helped that my second investment, I wasn't on the board, interestingly. Right. Because then Talk desk, I was my third. It allowed me to have a more aligned collaboration with the founders than I might have had if I were Excel, the largest investor. Right. That's an interesting learning. So I course corrected, but I see.
I would disagree on the patronizing. Well, maybe I'm sure they're patronizing, but I find steady. I've had one which has not gone well recently. And I say to the other investors, why are we not doing more? And they go, oh, Harry, it's a bad look. It's a bad look.
They're right. You and I are wrong and they are right.
Well, fuck off. I don't want to be part of a business where we just say, yeah, sure, we're happy to actually not oblige by our fiduciary responsibility and actually not do what's best for the company. I'm going to say the hard truth, Jason, and say you should be on tip.
No, Harry. And I think, I think, I think I Time will tell whether we're right. I, I, it's funny, I put this on Twitter yesterday and this tough conversation, right? And maybe the sixth investment I did is a company called Logical. I love this company, it's e discovery, but it'll take A long time. It'll get to 100 million. It's worth hundreds of millions for real. But it's not, it's it, it's on a thoughtful growth. It's never raised again. And Andy's like, yeah, you gave me that kick in the ass conversation 2017. And I, I needed it and I'm grateful. But he still remembered it as a hard kick in the ass in 2017. And I realized there's this line and I would say the very best founders, the top and not the very best. Well, hopefully you're investing in pretty good founders, right? So you're already in kind of this Ivy League segment. But I would say even of this Ivy League of venture backed founders, I would say only maybe 50% really can take the feedback and 25% will tolerate it. And then 60% will hate you for it. They hate you for it. And that's why all the other folks in the room say nothing. Harry and I tried to say, literally, I had a tough board meeting about a month and a half ago and the founders asked me eight times, what do you think, Jason? I'm like, I'm just not, I'm going to pass. I'm going to take a pass on this discussion. I said, you literally, you do not want to hear what I have to say. I got to be honest. You don't trust me, you don't want to hear what I have to say. Like, they kept pushing me and pushing me and pushing me and finally I was clear. It's like, I love what you guys are doing, but your burn rate's unsustainable. And if you don't make, you have to make a change this week, right? You have a lot of. But if you don't make a change in the next three days, you will fail. And here are the 10 reasons you'll fail. And they're upset with me to this day. And the Andy's from logical. I'm glad he wasn't. We bailed out the company when he spent too much money and. But I would say the majority of the time I've had to be the ass kicker. The relationship is damaged permanently. And, and not with the best ones, right? Not with the Algolias like we're talking about, but with more than I would have expected. Harry and is it worth it? I'm not sure. I'm not sure it's worth it.
I just want your thoughts. So when you go to an enterprise customer and you fucked up or the product is SSO is not working or whatever permission is not working, they're going to kick your fucking ass. And if you are a child and can't take that, well, you're not going to have very good enterprise division. You're going to have great engineers, great employees, great, who are going to advise you on your leadership and how it could be improved. If you can't take that, you're not going to be a very good leader. So stop being a. Like, help me. Like, that's indicative that they just can't take feedback. And then, you know what? Fine. We'll point to anomalies like Steve Jobs and Elon Musk. But predominantly, especially in B2B, that's actually just a sign of a bad leader.
Maybe it's not. I also think that the, the board member CEO relationship is a nuanced one. It's complicated what it means and how it works. And I would say most folks, my feedback's always honest. It's always from the heart. It's. There's never any malice. And if we lose the money, it's fine. Like it, really, it's, it's relatively trivial for me compared to the founder. But most, most folks take months to deliver tough feedback. The truth is, this is the VC approach in 20. You know, 2022 is like, give the tough feedback, but hint at it. Get into it, tell them maybe this and then, and then talk about the big tough layoff meeting in two months. It's, it's. And that's. I'm not that I'm like, I, I just. Do you really want my. And then that I'm asked you really. And then they, you know, you get it. But I just don't have the, the, the patience to sugarcoat the, the honesty. It's not even. But, but it's tough. I don't know that that's right. I think that VCs, you know, they're, they have a, they have a peculiar relationship with startups and it, maybe it makes sense to sugarcoat your feedback over three months. And at the end of the day, as a manager, and I don't know that VCs are managers, it's always better if your report comes to the conclusion themselves. It's always worse if you have to tell them the answer. Like, you don't want to do that. And so VCs are so weird. We have these board meetings every two months and we don't have the daily meetings to kind of hope that in a month or 2 your VP of sales realizes Jack and, and Jill aren't going to work out like. The problem is there's these. These punctuated moments in time, and if you don't speak up, you can try it out of. Out of band. Don't get me wrong, you can pick up the phone, but sometimes three months later is pretty late.
