There are steps VCs can take when a founder’s behavior takes a turn
Venture capitalists often say that they don’t just back a company because of its vision, but also because they believe in the founder or founding team and think they’re the right people to execute the startup’s goals.
However, being the right person to bring an idea to fruition has no correlation with being a good CEO or manager of a resulting startup, and investors may find themselves tied into a yearslong relationship with someone who turns out to be problematic.
Though it’s impossible to predict whether someone makes a good CEO, Cameron Newton, a founder and general partner at Relevance Ventures, told TechCrunch that a good indicator of how a founder will act in the future can be how they interact with you throughout the pitch process.
“Those sorts of things you pick up on right away,” he said. “Do they like constructive criticism or are they defensive? How are they responding to your criticism or the holes you are trying to punch in their pitch?”
Eric Bahn, a co-founder and general partner at Hustle Fund, said that you don’t always see a founder’s true colors until they start to come under stress or enter personally uncharted territory, like managing a growing staff.
So, when one slips through the cracks even after performing due diligence, what can you do?