After this post about the need for investors to get to, and continue to know their portfolio a little better, happened to have a chat with an investor on similar lines.
Apparently they sometimes run into what was described to me as a Chinese Wall, although the context was not potential insider trading, and for the purpose of this topic there is no conflict of interest. A few examples were shared that I obviously cannot talk about here, but boy, was that a revelation! I'd kinda assumed that being important stakeholders, and often with controlling stakes, they could breach any such walls that came up. But clearly, there are other dynamics at play, at least in some cases.
Some follow up thoughts:
Apparently they sometimes run into what was described to me as a Chinese Wall, although the context was not potential insider trading, and for the purpose of this topic there is no conflict of interest. A few examples were shared that I obviously cannot talk about here, but boy, was that a revelation! I'd kinda assumed that being important stakeholders, and often with controlling stakes, they could breach any such walls that came up. But clearly, there are other dynamics at play, at least in some cases.
Some follow up thoughts:
- If/once, as an entrepreneur, you ask someone to invest (and its a whole new topic whether, and when, you should), their interests are are your interests and their interests are ... you get the idea. The more you share, the more likely it is that you may get an decent perspective of your business that you can miss/gloss over while involved in the day to day running of it.
- Tough questions are better asked early. If there are no tough questions, and no revenue, be worried. VCs can, and should play that role. And as an entrepreneur, it would do your business a lot of good to pester them for it. Your comfort zone is surely a bad place for your business to be in. The final call is still yours, and you need to treat the advice as an input, not a command, because even the best of VCs can miss aspects of the business that you may understand better. Yet, they do bring in a concerned outsider's viewpoint so seek it aggressively.
- Trust. Its key to all startup activities. Be it with employees, partners, customers, investors, vendors. And this is even more true in India, where a ton of business happens in good faith and 'carrying people along'. There's also no ownership sharing without trust.
- All the above is all great - but whether as an investor, or even as an entrepreneur, you'd still do well to have an "outsider" driven in-depth assessment of your business on a continuous basis. Not that you're sucking or that this will solve everything, but it brings in functional expertise with an unbiased viewpoint, and thats rarely a bad thing. Its also less dependent on maintaining relationships, worrying about appraisal cycles, and the like. In the finance world, auditors are almost always external, and I'm guessing they serve more than just a "external policing" role.
On a tangent, a question was asked about whether any business in India was VC fundable at all !?? Thats the topic of a future post, but at the outset, I'd wonder if the VC model is necessarily a static thing, or does it need to adapt to a different market, different set of rules, and success rates ? The endgame is to essentially provide a 25%+ return while promoting entrepreneurship, isnt' it ?
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