VCs NEVER Talk About These Two Things, But They Happen All The Time

Bill Gross and Mark Suster

Today, we listened to venture capitalist Mark Suster speak at DogPatch Labs.  The room was packed with entrepreneurs, and Suster was very candid.

Among the notable advice he gave, one statement in particular stood out.

“There are two things that never, and can never, get written about [by VCs],” he says.

1. Just how screwed founders get.

2. How badly cofounder situations turn out.

About the first: “I ran into a founder last week,” Suster says.  “It’s a company that at least 50% of this room has heard of.  Now, he only owns 1% of his company. 

“I told him it’s time to cut the umbilical cord and move on.  I think he fell for the VC narrative.  And that outcome is so common I can’t tell you.”

The best way to avoid this fate, Suster says, is to succeed. “If you are successful or perceived as being successful, a VC won’t want to replace you.”

Also, Suster says to make sure you are well connected in the VC community. That way, one VC can’t back you in a corner. “If you have options in life, you won’t get screwed.”

As for the second, “More often than not, cofounder situations blow up,” he says. “The reality is most companies don’t succeed.  The guys who went to high school together, who knew they always wanted to work together, wake up on day and realise their 31-year-old cofounder has a  girlfriend. They realise they’re busting their arse for someone who doesn’t care as much.”

His advice is to start a company on your own, then hire a cofounder.

“I mean that seriously. You might hire a cofounder and give him/her 15% or even 40%, but not 50% of the company.

“Treat that person like your true business partner. Show them respect; tell the world that person is your cofounder. But do not give them half of the company.

“That way, if you ever fall out of love with that person, you have a pre-nup.”

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