Partners vs non-partners – clarifying their role and importance
I was at a Dealmaker Media event the other week and was asked a question about the role of entrepreneurs dealing with partners vs non-partners at venture capital firms. Its a very interesting and relevant question for many entrepreneurs starting out who are unfamiliar with the fund raising process. Since I’ve been in both roles, I think I have a pretty good perspective on this dynamic.
To differentiate the roles, I’ll actually split them into two groups, not based on title, but on their “authority”. From my experience, it really comes down to check-writers and non-check-writers, Hopefully this distinction is fairly self explanatory but really comes down to do they have the authority to decide (obviously with the general agreement of the other partners in the fund) on whether they will fund a startup or not and serve on the board. Rarely do even check-writers decide completely on their own – that’s why they call it a partnership since there is a level of trust, influence, and sharing of responsibility.
Titles, just like in companies, often mean very different things in venture capital firms. With titles ranging from Analyst, Associate, Senior Associate, Vice-President, Principal, Senior Principal, Operating Partner, Associate Partner, Venture Partner, Principal Partner, Partner, General Partner, Managing Partner, Managing Director, etc – it can get confusing very very quickly. Basically, its really hard to tell who is a check-writer vs not. VERY GENERALLY, if forced to bucket them, the breakdown is (not 100% across firms but maybe 90% accurate)
- Check-writers – Managing Director, Managing Partner, General Partner, Partner
- Non-check-writers – Analyst, Associate, Senior Associate, Operating Partner, Associate Partner
- Can go either way – Vice-President, Principal, Venture Partner, Principal Partner
The unfortunate thing (or fortunate depending on your perspective), even VCs (not just entrepreneurs) themselves often can’t tell the different when it comes to another firm unless they are very familiar with that particular firms structure and the individual’s involved. It gets even more complicated because many non-check-writers at firms want to project to the outside world that they can write-checks (trying to boost their credibility and influence in a firm to the entrepreneur) even though they can’t.
Essentially, if you want funding, you need to get to a check-writer (pretty obvious at this point). They will be the one who champion’s your deal in their partnership and can push to get it funded – putting their own reputation on the line with their decision.
The area that is less clear is the role of the non-check-writer. Simple advice – they are valuable and can be your greatest ally or your worst barrier to getting funding, but they are often a necessary and intermediate step to get to the check-writer.
To get into more detail, the non-check-writer (typically an associate) is often the “first line of defense” for a VC firm. They are responsible for screening deals so they at least pass the initial sniff test. Unless you get a trusted referral directly to a partner in a firm, the associate is generally the one who will do the first pass and often take the initial pitch. Often due to bandwidth limitations (or laziness), the partner will just pass deals they receive directly onto their associate anyway. This initial review by the associate is important as they are the gatekeepers to get access to the check-writers. Impress them and they will convince the partner to take a meeting as they often will have the ear of the partner.
In addition to being the gatekeeper, pitching the associate can be extremely valuable to get feedback on how the partnership thinks about investments as they will have a good sense of what excites the partners in the firm. Use this time well to hone your pitch, get feedback, and prepare yourself for the next one. Often, the associate will also have a good read on the personalities and preferences of the partners that can be immensely valuable as well as fund status.
The things you want to watch out for is continuing to meet with the associate over and over again without any sense of moving forward to that partner meeting. This can be a slow and painful death….but, don’t necessarily expect that you should get to that partner meeting after just 1 meeting with the associate. Often, if your pitch isn’t quite ready or there just wasn’t enough information to “let you through the gate” they will ask you for some additional information and another meeting to make sure. This can be a worthwhile exercise as you typically will only get 1 shot with the partner and if you screw up, its over. You’ll just need to read the associate well and/or ask them directly about what additional information they need before a partner meeting might be expected. Be straightforward but realistic about the questions and diligence items that are being requested but generally, if you aren’t getting invited in at least after a 2nd meeting with an associate, better to just cut bait and fish somewhere else – its likely a dead end.
Ultimately, an associate is balancing trying to find a company to “get a deal done” and making sure his filter is tight so he doesn’t waste the partners time. Understand the associate’s motivations, listen carefully to their feedback, and treat them professionally and you’ll maximize your chances of getting through. Treat them poorly and ignore their feedback and you’ve likely just shot yourself in the foot. Remember, VC’s judge teams (not just experience and qualifications but personality) as much or more than the business itself. Leave a bad personal impression with the associate and it will absolutely get passed onto the partner.
Going through fund-raising can be a long and confusing process – even in the smoothest of deals. The associate can be a huge ally to guide you through this so work with them and take advantage – you’ll be better off….but keep your eye on the goal – get to a meeting with the check-writer and convince them as they are the decision makers in the end.