What CEOs want from an investor and what investors think entrepreneurs want are two pretty different things.
A survey of CEOs, venture capitalists and limited partners done by the National Venture Capital Association and two marketing/communications firms found that when CEOs look at venture firms, they want an entrepreneur-friendly, trustworthy, collaborative firm. Meanwhile, VCs say they most often described themselves as being experienced, a quality that wasn’t so important to CEOs.
Fewer than half of the 158 CEOs surveyed said a strong track record was a top criterion when evaluating a VC. Instead, they prioritized a firm’s reputation of principles and ability to add value to portfolio companies beyond funding.
And more than a quarter of VCs described themselves as “hands-on,” which hardly any CEOs said they wanted. One commenter on this WSJ story put it this way: “The expectation is the entrepreneur/CEO better know the product/market more than the VC and the VC exists for guidance, ideally wisdom.”
A VC’s reputation, according to CEOs, is most influenced not by the success of portfolio companies but by other entrepreneurs and third-party recommendations. It’s also driven by the reputation of individual partners, especially in the IT industry.
Gender makeup of a firm’s partner base is another area where CEOs and VC firms’ perspectives didn’t match up. One in four CEOs said gender make-up was important (that number was higher among female CEOs) while only one in 10 VCs thought it was important.
It’s fitting that PR firms were involved with the survey, since it underscores the importance of branding for VCs. But nonetheless the data that’s presented does raise some interesting points. In the life science industry, report after report telling of fewer investments in medical device and pharmaceuticals over the past several years has cast a bit of a shadow over the venture capital industry, especially when it comes to early-stage investing. Simultaneously, it seems that firms are paying more attention to their messaging. I’ve noticed an uptick in the number of media-friendly VC firms lately who are willing to talk about what they’re looking to invest in. A number of firms or individual investors also now have blogs.
One of the big takeaways from the report that’s worth repeating is that to attract great opportunities, VCs should build a brand around what they do, not just what they’ve achieved.