Tuesday, October 22, 2013

Looking after business

Last week I had breakfast with 'smart' Larry. Over a bowl of oatmeal he opined that at the end of the day, the role of an investor is to create returns. He went on to note that entrepreneurs, VC's and entrepreneurs easily get confused when caught in turbulent times, or when money flows like a river. He highlited that it's the money, not necessarily company building that is key to investor survival (e.g. building companies, but not showing great realized returns will not get you to the Limited Partner fundraising finish line). As usual, Larry is right.

It's important for entrepreneurs and investors to recognize that it's the making money part of the business that is ultimately key to survival. Often this creates positive alignment between entrepreneurs as well as multiple classes of investors. However, sometimes (e.g. when a company is not doing well) it creates a zero sum situation. When this happens, as is more common than not, the rational expectation is that folk will look after their own interests. If someone acts irrationally, it's usually the entrepreneur, who bends over backwards to take care of employees and investors.

As Tessio said in the Godfather " it was only business"


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