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Interesting idea: VCs should have in-house finance folks specifically meant to work with portfolio companies who spent a few days a month for year 1 after inves
by joshjkim 11y ago
Interesting idea: VCs should have in-house finance folks specifically meant to work with portfolio companies who spent a few days a month for year 1 after investment, or until the company gets it own finance team. Most VCs do less than 10-15 deals a year, so this seems tolerable and a relatively low cost way of to really know what's going on with the portfolio. (I know some VCs already kind of do this (Vantage Point). Also, harder for YC, given # of investments, so maybe not as applicable for true seed funds but still might be worth it - I'm sure they could get 5 mid-career CPAs for the price of one partner, and they would love the job! I think)
The fun part is that then the VCs will have a direct line into the company's nitty-gritty operations, which really they are entitled to receive anyhow (though usually they just take the board deck at its word..which is not always good).
This might suck for the company since you have the VC in-the-know on your nitty-gritty (though I'd argue that if you don't want them in-the-know, you should not have taken their $$...though I understand it's more complicated than that haha), BUT that might also serve to incentivize the company to build out the finance team quickly, and also give the management team a taste of what a good finance person can provide (assuming the person the VC provides is good, which they should be if they are to be trusted with multiple portfolio companies).
- OliverJones 11y agoNot such a great idea, in my opinion. There are honest and competent people willing to work one day a week as contract CFO. Such a person works as part of the management team and doesn't have divided loyalty (management / investors).
- joshjkim 11y agoyou are right, I've worked with a few. Problem is that it's a cost to the company they often don't want and they don't value the work (I think this is what SA is trying to change). Also, vetting/hiring folks etc. is it's own burden. VC pushing this gets rid of the friction and forces founders to take this seriously. Agreed they may have divided loyalty, hopefully mitigated by a very temporary relationship and the fact that at early stages, VCs and founders should be super aligned, at least around the ops numbers (sale decisions, etc. are a totally different ballgame for sure).
- w1ntermute 11y ago> Interesting idea: VCs should have in-house finance folks specifically meant to work with portfolio companies who spent a few days a month for year 1 after investment, or until the company gets it own finance team. Doesn't a16z already do this, not just for finance, but also for PR, hiring, etc.?
- joshjkim 11y agoYes, they do! Other VCs are kind of following suit, but it sure cuts into those management fees so they aren't running to it =)
- mathattack 11y agoI've seen early stage VCs suggest hiring temp CFOs (though it didn't pan out for Virtual - highlighting that the onus is still on the CEO) and late stage VCs saying, "We'll give you $25 million, but we hire the CFO"
- dudurocha 11y agoWe always put a new CFO in the company. But non of them are from the VC firm. This method you talk about is way more commom on large deal, like Private Equity, LBO, etc. Those companies make 2 to 4 deals a year. 10-15 deals isn't a small number of deals.