5 ms·

How to handle a VC who flies First

74 points by danshapiro 15y ago

annon 15y ago
Maybe it's just me, but it seems like it would be better to speak with the VC directly about this. If you can't have a candid conversation about expenses with one of your investors, you probably shouldn't be in business with them. Drafting up the expenses agreement, having the board approve it, and having the comptroller deal with it seems like a lot of work that could have been dealt with by a simple conversation instead.
- deleted 15y ago
  [deleted]
- sokoloff 15y ago
  This seems like a very elegant solution to the issue. Rather than pitting the CEO against one VC board member, it makes the decision one of the entire board. And allows the VC to make his pitch to his peers, who understand the travel demands of serving on several boards. First class, and especially private aviation, can be more money but also can be justified in the right circumstances. I fly my own (single-engine piston) airplane for recreation, most of our east of the Mississippi family travel and have flown it for a prior company on business trips. Even my little bug-smasher can save a night's hotel stay on one end, and often on both ends, making my life and my family's life better for that, making me more willing to travel for business, and I had no problem (ethically or practically) submitting a spreadsheet with column B as what the airlines would have cost, including airport parking and hotel charges, and column C showing what my airplane cost (including hotel and landing/ramp fees) and submitting for reimbursement the lower total (almost always airline, but saving 2 nights hotel and 4 days parking at Logan takes away a good bit of the difference).
- ams6110 15y ago
  Any company should have a reimbursement policy anyway, just as they should have HR policies. It avoids charges or perception of unfair treatment.
  - danshapiro 15y ago
    Yes - but you can imagine that it's not Priority One when you're a 5 person company and the only travel is being done by a tightfisted CEO and acting CFO who are staying in Motel 6's.
- URSpider94 15y ago
  This may be hard to remember in these banner times for start-ups, but as a CEO, you may occasionally end up taking money from an organization that you don't see 100% eye-to-eye with.
littlegiantcap 15y ago
I kind of feel like this is a bandaid solution. While this may help with travel expenses this seems indicative of a larger issue that needs to be dealt with directly. I think you need to have a talk with your investors about this rather than taking the passive approach. On a side note most investors I know (admittedly that number is very very small), but still they would be incredibly conscious of any sort of over the top expense and would want the money to stay in the company and be used for something more productive than a better seat on a plane.
danilocampos 15y ago
Is it really that common to be in charge of a company and simultaneously lack the basic assertiveness necessary to say you're not going to cover lavish travel expenses?
- crenshaw 15y ago
  It really depends on the board member is. Imagine you have a board member who has been one of the key people who have brought your VC funding. You're about to start up a series B and again, he's one of your rocks. Now you're having some extra meetings to get things straightened out. You know he typically flies first class in any case. Do you want to ask him to inconvenience himself (which is really what you're asking him to do) so that you can use him to raise more money? While youy may say that this is a basic lack of assertiveness -- I could see the board member saying, "You're missing the forest for the trees."
  - wisty 15y ago
    It will also depend on how independent the board member is. Some board members are relying on your companies success. Others may be just there for the ride. It should less of a problem for startups, where all the board members will be investors.
- suking 15y ago
  It's probably intimidating to ask someone like Jim Breyer or Mike Moritz or John Doerr. I imagine that would be a conversation I'd be nervous to have :-).
  - brandonb 15y ago
    Ultimately, it's their money. If you were a VC, wouldn't you be re-assured to see the company being frugal?
    - danshapiro 15y ago
      In my experience, investors in high-growth startups that raise a lot of money are not particularly concerned about frugality. Joel Spolsky has an old article that may help explain the mentality. http://www.joelonsoftware.com/articles/fog0000000056.html http://www.joelonsoftware.com/articles/fog0000000056.html
pjhyett 15y ago
Not for nothing, but full fare economy can often be more expensive than discounted biz tickets. Having an actual conversation telling the VC to cool it might have ended up saving you more money.
- roel_v 15y ago
  So you're positing that it's in a significant % of cases possible to fly business at less cost than economy? If so, you'll need to back it up, because it's a very bold claim to make.
  - burrokeet 15y ago
    full fare economy will mean fully refundable and changeable with no fees etc. discounted business/first class will be just like discounted economy - not refundable, and not changeable w/o fees - the latter can definitely be cheaper if you don't mind the constraints.
latch 15y ago
Off topic but...Last year I started work on the other side of the world at a large bank. The reimbursement policy clearly stated that for any flights longer than X hours (might have been 5), business class HAD to be taken and any non business class WOULD NOT be reimbursed even if it ended up to be less expensive.
- ams6110 15y ago
  Maybe they realize that flying these days is a basically awful experience, and a 5 hour flight means more like 8 hours door-to-door so why not do a little to make it a bit more tolerable.
  - mathattack 15y ago
    It's actually that they don't want people to lose a day of effectiveness to save money. Some quick math - for an investment bank, average wages can be as much as $400K/year. Divide that by 200 days, and you have someone getting paid $2,000/day. If flying coach kills their productivity for a day, saving $1,000 doesn't amount to much. At the senior levels, this is much more true. Of course having one policy for execs and another for everyone else has many negative consequences.
    - jacques_chester 15y ago
      Some companies also take the view that cramming folk who fly 20+ hours a month into economy is a health risk. (Nobody's told this to FIFO miners, however).
      - jmacd 15y ago
        Yeah, companies who hire consulting firms also get worried about this. Jr consultants on planes 3 or 4x a week and when you get them at your office they are unhealthy and not as effective as they should be. Smart clients force the firm to fly the consultants less in most cases (the economics of paying for biz class aren't as attractive or necessarily the point)
- 15y ago
rdl 15y ago
Another advantage of being in the bay area and taking investment here too. I'd be fine with ubering board members, or picking them up myself. Do board members seriously expense meeting costs to early (series a) companies? I haven't seen this, but I haven't seen non local investors at late stage companies either.
- jmacd 15y ago
  A definite advantage. It also makes it easier to pull specific board members in for help in situations where you need them as well. Just not possible when you aren't nearby.
- danshapiro 15y ago
  Yes, AFAIK it's a part of every standard law firm's templates. To be clear this refers to Series A (>$1mm - in our case $4.5mm), not seed.
  - rdl 15y ago
    I know it is part of the documents, but I haven't seen a series a company actually get an expense reimbursement request from a friendly boardmember. I've seen money flow the other way ("let's meet at my house"). I assume this all depends on many factors.
KirkWylie 15y ago
I liked this article so much that I wrote a response ( http://kirkwylie.blogspot.com/2011/09/good-vcs-dont-charge-their-companies.html http://kirkwylie.blogspot.com/2011/09/good-vcs-dont-charge-t... ) about a reasonable policy that I wish all VCs would adopt: charge firms what they'd pay for employee travel.
typfy 15y ago
I don't really understand this post. Why would a VC stay in a crappy hotel? Traveling is stressful and a burden. A company should do everything in its power to ease that burden. Everyone from our CEO to our admins stays at the Ritz Cartlon when traveling to NYC. If a company can't make similar accommodations then I wonder how much they truly care about their employees.
- darklajid 15y ago
  And everyone, from your CEO to your admins, likes this policy? I know that I wouldn't want to - stay in a 'classy'/'grand' hotel - fly first class (although I recently, I'm 32.., had my first business class flight and liked parts of it, granted) if you'd ask me to. Frankly, I prefer picking the accommodation. No suits, no ties please and give me a decent hotel bar instead of a spa area w/ business lounge. --- Uhm. Come to think of it, your post makes so no sense to me that I wonder if this new account was set up to troll. Did I accidentally bite?
- rdl 15y ago
  The differential between crappy hotels and nice ones is maybe a factor of 4-8, and often around 2x With discounted coach vs full fare coach, often 10x, and for coach vs first, another 10x (maybe 5x if negotiated). I have a fondness for nice Starwood hotels (since I get a suite for the lowest rate), or luxury rentals via airbnb, but still stick to upgradable coach and then pay for SWUs, even if a client offers business class. Marginal luxury dollars can go to better meals (even a great meal, without alcohol, is 20-100), then renting luxury cars (50-150 per day vs 25-50), then hotels (200-300 outside NYC), then upgrading flights (500 or so to go business internationally) and choice of hotel/airline for points. Little things like having an exec or ops person personally spend time with you vs fending for yourself cost little and seem like the first dollars you should spend, especially at a startup, when dealing with clients, investors, potential hires, etc.
- danshapiro 15y ago
  Three data points from your post: 1) You have more than one admin 2) Said admins stay at the Ritz 3) The only reason you can imagine that a company would not pay for luxury accommodations is a lack of caring From this, I deduce... you do not work at an early stage startup. Perhaps your comment was inadvertently cross-posted from your investment banker peer support group?

74 points by danshapiro 15y ago

annon 15y ago

Maybe it's just me, but it seems like it would be better to speak with the VC directly about this. If you can't have a candid conversation about expenses with one of your investors, you probably shouldn't be in business with them. Drafting up the expenses agreement, having the board approve it, and having the comptroller deal with it seems like a lot of work that could have been dealt with by a simple conversation instead.

deleted 15y ago
[deleted]
sokoloff 15y ago
This seems like a very elegant solution to the issue. Rather than pitting the CEO against one VC board member, it makes the decision one of the entire board. And allows the VC to make his pitch to his peers, who understand the travel demands of serving on several boards. First class, and especially private aviation, can be more money but also can be justified in the right circumstances. I fly my own (single-engine piston) airplane for recreation, most of our east of the Mississippi family travel and have flown it for a prior company on business trips. Even my little bug-smasher can save a night's hotel stay on one end, and often on both ends, making my life and my family's life better for that, making me more willing to travel for business, and I had no problem (ethically or practically) submitting a spreadsheet with column B as what the airlines would have cost, including airport parking and hotel charges, and column C showing what my airplane cost (including hotel and landing/ramp fees) and submitting for reimbursement the lower total (almost always airline, but saving 2 nights hotel and 4 days parking at Logan takes away a good bit of the difference).
ams6110 15y ago
Any company should have a reimbursement policy anyway, just as they should have HR policies. It avoids charges or perception of unfair treatment.
- danshapiro 15y ago
  Yes - but you can imagine that it's not Priority One when you're a 5 person company and the only travel is being done by a tightfisted CEO and acting CFO who are staying in Motel 6's.
URSpider94 15y ago
This may be hard to remember in these banner times for start-ups, but as a CEO, you may occasionally end up taking money from an organization that you don't see 100% eye-to-eye with.

littlegiantcap 15y ago

I kind of feel like this is a bandaid solution. While this may help with travel expenses this seems indicative of a larger issue that needs to be dealt with directly. I think you need to have a talk with your investors about this rather than taking the passive approach. On a side note most investors I know (admittedly that number is very very small), but still they would be incredibly conscious of any sort of over the top expense and would want the money to stay in the company and be used for something more productive than a better seat on a plane.

danilocampos 15y ago

Is it really that common to be in charge of a company and simultaneously lack the basic assertiveness necessary to say you're not going to cover lavish travel expenses?

crenshaw 15y ago
It really depends on the board member is. Imagine you have a board member who has been one of the key people who have brought your VC funding. You're about to start up a series B and again, he's one of your rocks. Now you're having some extra meetings to get things straightened out. You know he typically flies first class in any case. Do you want to ask him to inconvenience himself (which is really what you're asking him to do) so that you can use him to raise more money? While youy may say that this is a basic lack of assertiveness -- I could see the board member saying, "You're missing the forest for the trees."
- wisty 15y ago
  It will also depend on how independent the board member is. Some board members are relying on your companies success. Others may be just there for the ride. It should less of a problem for startups, where all the board members will be investors.
suking 15y ago
It's probably intimidating to ask someone like Jim Breyer or Mike Moritz or John Doerr. I imagine that would be a conversation I'd be nervous to have :-).
- brandonb 15y ago
  Ultimately, it's their money. If you were a VC, wouldn't you be re-assured to see the company being frugal?
  - danshapiro 15y ago
    In my experience, investors in high-growth startups that raise a lot of money are not particularly concerned about frugality. Joel Spolsky has an old article that may help explain the mentality. http://www.joelonsoftware.com/articles/fog0000000056.html http://www.joelonsoftware.com/articles/fog0000000056.html

pjhyett 15y ago

Not for nothing, but full fare economy can often be more expensive than discounted biz tickets. Having an actual conversation telling the VC to cool it might have ended up saving you more money.

roel_v 15y ago
So you're positing that it's in a significant % of cases possible to fly business at less cost than economy? If so, you'll need to back it up, because it's a very bold claim to make.
- burrokeet 15y ago
  full fare economy will mean fully refundable and changeable with no fees etc. discounted business/first class will be just like discounted economy - not refundable, and not changeable w/o fees - the latter can definitely be cheaper if you don't mind the constraints.

latch 15y ago

Off topic but...Last year I started work on the other side of the world at a large bank. The reimbursement policy clearly stated that for any flights longer than X hours (might have been 5), business class HAD to be taken and any non business class WOULD NOT be reimbursed even if it ended up to be less expensive.

ams6110 15y ago
Maybe they realize that flying these days is a basically awful experience, and a 5 hour flight means more like 8 hours door-to-door so why not do a little to make it a bit more tolerable.
- mathattack 15y ago
  It's actually that they don't want people to lose a day of effectiveness to save money. Some quick math - for an investment bank, average wages can be as much as $400K/year. Divide that by 200 days, and you have someone getting paid $2,000/day. If flying coach kills their productivity for a day, saving $1,000 doesn't amount to much. At the senior levels, this is much more true. Of course having one policy for execs and another for everyone else has many negative consequences.
  - jacques_chester 15y ago
    Some companies also take the view that cramming folk who fly 20+ hours a month into economy is a health risk. (Nobody's told this to FIFO miners, however).
    - jmacd 15y ago
      Yeah, companies who hire consulting firms also get worried about this. Jr consultants on planes 3 or 4x a week and when you get them at your office they are unhealthy and not as effective as they should be. Smart clients force the firm to fly the consultants less in most cases (the economics of paying for biz class aren't as attractive or necessarily the point)
15y ago

rdl 15y ago

Another advantage of being in the bay area and taking investment here too. I'd be fine with ubering board members, or picking them up myself. Do board members seriously expense meeting costs to early (series a) companies? I haven't seen this, but I haven't seen non local investors at late stage companies either.

jmacd 15y ago
A definite advantage. It also makes it easier to pull specific board members in for help in situations where you need them as well. Just not possible when you aren't nearby.
danshapiro 15y ago
Yes, AFAIK it's a part of every standard law firm's templates. To be clear this refers to Series A (>$1mm - in our case $4.5mm), not seed.
- rdl 15y ago
  I know it is part of the documents, but I haven't seen a series a company actually get an expense reimbursement request from a friendly boardmember. I've seen money flow the other way ("let's meet at my house"). I assume this all depends on many factors.

KirkWylie 15y ago

I liked this article so much that I wrote a response ( http://kirkwylie.blogspot.com/2011/09/good-vcs-dont-charge-their-companies.html http://kirkwylie.blogspot.com/2011/09/good-vcs-dont-charge-t... ) about a reasonable policy that I wish all VCs would adopt: charge firms what they'd pay for employee travel.

typfy 15y ago

I don't really understand this post. Why would a VC stay in a crappy hotel? Traveling is stressful and a burden. A company should do everything in its power to ease that burden. Everyone from our CEO to our admins stays at the Ritz Cartlon when traveling to NYC. If a company can't make similar accommodations then I wonder how much they truly care about their employees.

darklajid 15y ago
And everyone, from your CEO to your admins, likes this policy? I know that I wouldn't want to - stay in a 'classy'/'grand' hotel - fly first class (although I recently, I'm 32.., had my first business class flight and liked parts of it, granted) if you'd ask me to. Frankly, I prefer picking the accommodation. No suits, no ties please and give me a decent hotel bar instead of a spa area w/ business lounge. --- Uhm. Come to think of it, your post makes so no sense to me that I wonder if this new account was set up to troll. Did I accidentally bite?
rdl 15y ago
The differential between crappy hotels and nice ones is maybe a factor of 4-8, and often around 2x With discounted coach vs full fare coach, often 10x, and for coach vs first, another 10x (maybe 5x if negotiated). I have a fondness for nice Starwood hotels (since I get a suite for the lowest rate), or luxury rentals via airbnb, but still stick to upgradable coach and then pay for SWUs, even if a client offers business class. Marginal luxury dollars can go to better meals (even a great meal, without alcohol, is 20-100), then renting luxury cars (50-150 per day vs 25-50), then hotels (200-300 outside NYC), then upgrading flights (500 or so to go business internationally) and choice of hotel/airline for points. Little things like having an exec or ops person personally spend time with you vs fending for yourself cost little and seem like the first dollars you should spend, especially at a startup, when dealing with clients, investors, potential hires, etc.
danshapiro 15y ago
Three data points from your post: 1) You have more than one admin 2) Said admins stay at the Ritz 3) The only reason you can imagine that a company would not pay for luxury accommodations is a lack of caring From this, I deduce... you do not work at an early stage startup. Perhaps your comment was inadvertently cross-posted from your investment banker peer support group?