- Description
- A personal connection based on rapport, trust, shared experiences or other factors can be useful in winning a deal. The relationship can be long-standing dating back to pre-founder or pre-VC days. Or the relationship can be built in the course of discussing the startup.
- Benefits
- Increased Information – by spending time with the founder or other members of the team, you have more information on the team. People often will share more information with people they are in a comfortable trusted relationship. Therefore, time spent building the relationship may not reveal information immediately but may open the door to the specific information being shared later.
- Better Working Relationship – some liken a VC and founder relationship to a marriage. Particularly if a VC is leading a round and joining the board, the founder and VC could be working together for a decade or more in a key business relationship. That relationship can go more smoothly if there is a foundation of a good connection.
- More Referrals – If a founder has a good experience with a GP whether or not the founder and GP do a deal, the founder is more likely to refer other founders.
- Trade-offs
- Takes Time – depending on the style of relationship building, it can take more time interacting or can take place over a longer period.
- May Lead to Bias – if the relationship or rapport building is based on shared interest or attributes, it can skew deal flow and which types of deals advance. The shared interests or attributes may not be predictive of the success of the business. Also, if the relationship clouds the GP’s judgment, it can detract from good decision making.
