Monday 20 September 2010

Paying VCs for being on your board

Recently I talked to an entrepreneur who just closed his first round and got a VC for a board member. All good and well, however the VC asked to be paid for sitting on the board.

I think that's really strange, because:
- it's immoral: VCs give founders money, than take it away to their own pockets! I wonder what their LPs are saying?
- it's misaligned: First rounds are meant to prove the product or leverage revenue generation, not paying the VC.
- it's wrong: VCs should help their companies, regardless of the fact if they are directors, observers or just investors in the company! It's their job to grow the companies they invest in and they are already being paid for that.
- it's pointless : founders and VCs become partners on the project - the startup. If they start charging each other, the whole point get's lost. Should startup charge VC for their services?

I'm not naive and understand that non-executive director get paid in a well established companies even if they are investors, however with a startup, there is whole different story in my view. Every single friction point is potentially dangerous, and a startups don't need insiders bringing new ones up!
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