During a talk recently, Bo Peabody, author of "Lucky or Smart" and founder of Village Ventures and Tripod, mentioned that one of the things that entrepreneurs don't understand about VC's is that they really don't want to run the company. He pointed out that indeed they don't have time for it, and are busy with at least a few other portfolio companies and are really jazzed about the next few deals. Investors of many types, including angels, do count on the management being there to do their job, at least at the beginning of the relationship. Passive investors (yes, they do exist) may not even meet with management post-investment let alone have a seat on the board.
However, those active investors do get involved. Most often it is a board seat through which they evaluate, coach, advise, and assess a whole range of issues. From my survey (see survey report "Shining a Light") on boards of private equity-backed companies, a typical number of board meetings is 5-8 per year with a noticeable portion having more than 9 per year. Outside the board meetings the investor director is also searching for good candidates, dealing with financing issues and actively supporting the company in other ways. Adding in these other activities, the majority of these board members spend 10-30 hours a month on a portfolio company.
It is not all just support when the CEO wants it. They are routinely monitoring the performance of their investment. Some entrepreneurs find this borders on "running their company", especially since most investor directors are querying what is happening with financials and sales on a detailed level. These reporting requirements are usually spelled out in the investment documents. So, entrepreneurs, read the fine print and if you can't live with the involvement or monitoring by your active investor, then don't take their money.
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