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Tuesday, August 16, 2005

Entrepreneur & VC : Different Perspective On Time

Jeff Bussgang thinks that the biggest change has been in transitioning from sitting in the entrepreneur’s seat to the VC’s seat, is the profound difference in the way entrepreneurs and VCs look at that all important dimension of time. He writes, for an entrepreneur, time is the enemy. He need to scale up and do product rollouts, raise money and close deals , take decisions with limited data – all in parallel. Every quarter can be looked like an hourglass, with the sand running out every 90 days and a mad scramble to close as many deals as possible before time ran out. At an earlier stage company, that hourglass metaphor is similar, but the sand running out is the cash on your balance sheet! In short, entrepreneurs learn to fight hard against the passage of time. In contrast, Jeff writes, VCs seem to love the passage of time. When you’re evaluating a deal, more time means more information. When making investment decisions, VCs prefer to watch movies rather than look at snapshot pictures - in other words, they like to see a project evolve over time, not evaluate it at a discrete point in time. They like to see teams gel together. They like to see entrepreneurs actually achieve the milestones they claim they’ll achieve with time. The key to working together is to simply recognize this difference in this attitude towards time and try not to fight against it.

My Take:
While the logic looks good - we may need to recognize a few additional issues besides style of management - participative/guidance oriented to plain intervention –
A. Not all investments are the same – some may need a different approach towards investment assessment – (while it is true every deal needs a thorough assessment – a few among them may need totally different approach)

B.Another thing to watch would be the difference in perspective - post investments – when it comes to issues of expansion, selling , when VC wants to exit – he wants it fast – the entrepreneur may like to keep the process controlled – VC may not care post investment – the entrepreneur may choose to continue – and therefore he may like the VC exit to be smooth and without noise. At that stage the entrepreneur is anxious about continuity and may desire subdued action - the VC choosing to exit may like to do it fast - even with lot of noise. There the entrepreneur and the VC have different perspectives on Time & Noise

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