What to look or in a VC ?

The recent news article about LPs getting increasingly disenchanted with their emerging markets portfolio is at odds with the bull run in the capital markets. I had talked about this in my earlier post - about the imminence of consolidation in the PE market in India. While this shake-out is going to inflict a lot of pain all across in the medium term, hopefully it would lead to sanity all around in the long term.

Getting back in line and continuing from the last post, I thought it best to do a critical self-appraisal of my brethren. So, what are some of the aspects an entrepreneur (or an investment banker) should look for in a VC during the limited interactions they have ?

• Understanding of business & appreciation: Is the VC giving you undivided attention during the meeting ? Does he/she come across as one who is willing to learn about your business and appreciate the finer aspects ? Can he understand the business beyond just numbers- CAGR, EPS and the like ?
  

• Communication: The same point I had outlined in last week's post holds true here. If he cannot pick up calls/respond to mails and convey decisions unequivocally and on time, how can he hold water for the long term ? What is the reputation of the person you are dealing with in the market ? Is he known to be not temperamental, rude and professional ?

• Relationship vibes and passion to build a business: Is this a guy you can get get comfortable with personally ? Will your team be comfortable interacting with him ? Is this person a shoulder you can cry on should times turn bad ? The easiest way to ascertain this is to look for anecdotal evidence from the VCs side of having added tangible value in their portfolio. A lot of inward looking entrepreneurs would rather have a passive financial partner than an activist, high-maintenance VC. The smart ones look beyond the pester (much like Socrates did with his wife Xanthippe) - "If I can tolerate her, I can attach myself to every human being else."

In summary, some of the best relationships are informal and between two level-headed people who have no qualms in disagreeing yet share a collective vision.

Regards
Varadha

varadha.r1@gmail.com
+91 9940670064