In venture capital, the theme of partnership is often discussed. The topic can range from perspectives on the role of the community to the manner in which venture capitalists (VCs) support founders – beyond providing capital. In this Extraordinary Pursuits podcast interview clip, legacy Atlanta technology and venture lawyer John Yates shares over three decades of experience and insight into the partnerships between founders and funders.
What is the importance of identifying a good partner?
We have clients who often express, "I really want to find someone who can help me grow my business. What should I be looking for?" You find entrepreneurs who say, "I've got a great idea and know the market well, but I don't understand the financial aspects. I need a partner."
Interestingly, some of the most successful tech companies are not founded by a single individual but by co-founders who complement each other’s skills. Often, a founder will come to us and say, "I lack financial knowledge." Fortunately, we have access to fractional CFOs and organizations that can assist them. These professionals are integrated into our community. Finance is a critical area of partnership because success and growth are impossible without understanding the key metrics.
The second type of founder might say, "I attended business school. I am knowledgeable about balance sheets and income statements and understand capitalization tables. I have this great idea, but I’m unclear about the market." In such cases, we turn to our tech advisory council to connect the founder with someone experienced in their field, whether it's the former CIO of Southern Company for energy startups or a former drug executive for pharmaceutical ventures. We help them determine whether they are addressing a real problem in the market.
The third type of founder says, "I'm a smart, technical person who understands the technology, but I’m not a people person. I need someone who can represent us publicly." They look to us for assistance in finding the right person for that role.
We are fortunate in our community to have a rich talent pool, not just from a technology and programming standpoint, but also for filling other key roles on the organizational chart. Atlanta is particularly lucky to have many retired Fortune 500 executives who bring invaluable experience and can serve as board members, investors, or advisors.
Let’s discuss the relationship between founders and investors.
A common point we make about founders seeking investors is that engaging a venture capitalist is somewhat like entering a long-term relationship. Once you bring a VC on board, it can be more challenging to part ways with them than with a spouse. It’s crucial to make the right choice; often, they will end the relationship before you have the chance to do so. Entrepreneurs need to keep this dynamic in mind.
In a sense, it’s like dating: if you act hard to get, investors may become more interested. We often see companies in desperate situations that state, “I need to raise capital now; I have no choice.” This approach can lead to significant challenges. Many companies find themselves in such predicaments, but urgency and desparation often restrict their options.
Before you press that button to start raising capital, ensure all your groundwork is laid. Imagine your first board meeting with an investor. It will be different from presenting your company on a stage. In the first board meeting, a founde might get to showcase their company for 30 seconds before the VCs start to ask the tough questions. Investors will want to know about your pipeline, your best prospects, the likelihood of closing deals, your forecasts, and contingency plans if you miss those targets.
We guide entrepreneurs to prepare thoroughly and properly so during their initial conversation with an investor, they can effectively address the questions likely to arise. Atlanta's environment allows us to connect entrepreneurs with members from our technology advisory council, who can provide valuable insights and preparation.
John Yates is a partner at Gunderson Dettmer and a pioneer in technology law who has practiced exclusively in the area since 1981. John co-founded and has been a board member of a long list of leading technology organizations and is a nationally-ranked lawyer in the venture capital industry. He frequently speaks at conferences on technology law issues and is a prolific writer whose articles have been cited in the tech law area and major business publications. John is also called upon for his perspective on technology law and high-growth innovation companies. His breadth and depth of experience make him one of the most trusted observers in the technology innovation space.
.jpg)
