Mario runs The Laudi Group

I had lunch last week with a VC-hired CEO on the verge of having his company sold. We spoke about many things…the buyer, his next career move, and the abysmal track record of Canadian VCs.

And of course, he explained ‘why’ the company was being sold and what he learned along the way.

His biggest lesson: before you join a venture-backed company, be sure you know what motivated the original investment.

Here’s my advice for an executive who’s considering a jump to a startup. If you’re being interviewed by a VC, be sure to look into their track record before you assume they’re qualified to hire you.

“Bear in mind that VCs spread their risk across several companies. You, on the other hand, only work for one company at a time. They’re not necessarily smarter than you—they just get to make more bets.”

Typically, VCs invest for one of three reasons:
1) they love the ‘whiz and bang’ of the solution,
2) they believe in the entrepreneur and can see him winning; or
3) they believe they can buy up a market and sell it for more than it’s worth.

Why does a smart software exec need to understand the VC’s rationale? Because the motive helps them to understand how the VC will play the game, for how long and with whom.

Imagine a VC who meets a brilliant entrepreneur who combines raw intellect with truly superior knowledge of an industry. He or she is an energetic and charismatic individual with an impressive track record.

The same applies when market realities neutralize a company’s competitive edge. The CEO might choose to make a stand. And, if the VC bet on the CEO in the first place, chances are they’ll stand with you. But, if the VC originally felt they were betting on technology, they might choose to cut their losses and exit.

The lesson is simple. Take the time to know thy VC.