The Qualities of an Effective VC PartnerJanuary 8, 2021
By Mohit Aron
Recently, the Cohesity team announced a strategic collaboration with AWS to bring to market an comprehensive Data Management as a Service solution that is unlike anything on the market today. This SaaS-based data management solution will usher in a new level of simplicity, scalability, and flexibility for thousands of midsize and enterprise customers around the world—while also giving these customers the ability to derive enormous value from the cloud and from their data.
As we celebrate this latest chapter in data management and a new level of partnership with AWS, I am reflecting on the major milestones in Cohesity’s journey to this point; from the pre-seed product decisions we made, to our seed fundraising and beyond, to game-changing innovations which resulted in attracting some of the largest brands in the world. Through it all, a theme that continues to surface is the concept of effective partnership.
So many young enterprise tech startups that I engage with on a regular basis are deeply focused on the flashy headline of their fundraise—raising as much as they can, as quickly as possible—but an investment, especially in the early days, can and should be about so much more. In particular, it's the investor you'll partner with, hopefully for a decade or more, and all the things they bring to the table that really matter early on. But founders often, unfortunately, feel pressure to skip some of their own due diligence on partner fit, including cultural fit and other important qualities.
“Does the investor have so much conviction around the idea that they are willing to take a bet without all the glossy metrics?”
Founders should do their homework about what kind of partner an investor will be, and what that partner’s biggest positive impact on their business will be—beyond the financing itself. It could be credibility in the sector, access to talent resources, or connections to a highly-relevant customer network, for example. Effective investment partners should also operate as true company builders. They will be in the trenches with you and will actively mobilize resources you couldn't on your own. Much like we knew that AWS was one of the most effective partners we could choose to disrupt the SaaS-based data management space, so too should founders identify the most effective early partners in your journey as a founder and as a company.
Founder to founder, I want to share the qualities I have actively sought out in my financing partners during Cohesity’s journey—especially when we were an early-stage company raising money.
I’ve talked previously about the 5 things I wish someone had told me before founding my companies, much of which centers around hiring the right leadership. I’d like to expand that definition to include an additional leadership role—your VC partner—as a critical “hire” you make to your startup’s leadership team.
There are a few key qualities from my point of view that will help you select the most effective partner for your company:
- Willingness and ability to help: the best partners at an early stage are going to be willing and proactively supportive in areas you need help with. They will also often have operating expertise, subject matter expertise, or available resources in areas complementary to your founding team. A few questions you can ask to better understand this quality are things like “What is the nature of your involvement with companies?” “Would you mind if I talked to a company you’ve invested in that’s at a later stage?” With this connection, you can ask the executive team directly about the investor’s involvement over the course of a company’s maturity.
- Long-term alignment to founder’s vision: do you feel this investor is really bought in on the big vision and potential for your technology to transform a market? Your investors, and particularly board members, have a responsibility to provide guidance and that includes guidance on strategy mapping to the big vision—and not all advice is equal. Some investors will see dollar signs and be interested in just a portion of the founder’s vision commercially, and these friction points can cause issues as the company matures or needs to make strategic investments in areas not supported in that original, limited buy in.
You can ask “Is the investor excited about the same problems/outcomes/etc. that you are for the long term?” “Does the investor have so much conviction around the idea that they are willing to take a bet without all the glossy metrics?” If the partner asks you to go back for metric after metric on everything from net retention, to sales productivity metrics, to yearly churn rate, or signup velocity without showing much interest in the company vision itself, it might be a red flag. This is especially important at the earliest stages because these metrics assume you’ve been selling the product for more than a year, which many companies aren’t equipped for early on.
- Strong rapport: Do you share the same ethical stances and do your values complement one another? Does the partner communicate well with you and your founding team, or do you find yourself missing each other’s points or requiring major clarification frequently? Do you feel comfortable and confident sharing conflicting points of view with one another? If not, these misalignments will only become more obvious and painful as hard decisions need to be made and times get tough.
- Deep understanding of market dynamics for your unique business: the most effective partner will have a deep understanding of what's happening in the market that affects decisions your customers will make, and they will have access to communities, information, or resources that help the founder navigate around those dynamics.
- Expertise in helping build a company: It’s so critical to work with partners that understand what it takes to get companies off the ground. Can the partner play a key role in interviewing and hiring executives, or perhaps referring external organizations to work with, or helping a founder close their first 10 customers?
- Network access: Additionally, not all partners will have equally valuable networks for your business. An investor at a great VC brand who focuses primarily on B2C companies will not be a good fit for your enterprise tech startup, regardless of the cache the brand might have, due to a misaligned professional network. You should audit what type of talent, customer, and partner network a potential financing partner might be able to help you tap. If there is too much misalignment on network access, it might not be a fit.
- Helpful in catalyzing future rounds and/or interest to follow on in subsequent rounds: not all partners and firms will be able to lead all future financing, but many firms have excellent financing networks that they will broker conversations with to help boost a young company’s chances of future funding. A founder could ask “How do you engage with companies in future rounds?” “Do you have an example of when you opted to participate in a future round, and when you decided not to, and why? Can you share the name of a company with whom you helped broker their series B/C/D round?”
Choosing the right partner, especially in the earliest stages of growth, is critically important for startups. In the early days, each pair of hands around the table will have an outsized impact on the success or failure of the company, especially at the most senior levels of leadership and corporate governance. Also, your seed-stage VC partner(s) will often make up your early board and will have just as much influence on the company’s direction as your other co-founders. They’ll help you with and approve executive hiring, weigh in on major decisions, and solve hard problems that haven’t been solved before—and if they can’t, the effectiveness of your partnership will be severely limited.
Wing has been an incredibly effective partner to Cohesity and to me from our earliest days to today—a seven year journey so far in building an enduring company. We have developed mutual trust, respect, the ability to brainstorm and coalesce ideas on critical issues, and then followed through to support the Cohesity journey beyond our earliest stages. A great example of this support was the important role Wing played in helping Cohesity raise half a billion dollars in our last two funding rounds, including introducing us to new investors and working alongside us to get to a fair and reasonable agreement done.
If you’re a founder with a transformative company and big vision, the partners at Wing can help—from developing your technology into a business to scaling that into an iconic brand.
Mohit Aron has more than 15 years of experience building scalable, high-performance distributed systems, and has been attributed as the father of hyperconvergence. Aron founded his current company, Cohesity, in 2013 and co-founded Nutanix in 2009. Prior to his time at Nutanix, Aron held positions at a variety of technology companies, including Google, where he served as a lead developer on the Google File System engineering project.
Under his leadership as CEO of Cohesity, the company has received numerous accolades including being named to the Forbes Cloud 100 and the CNBC Disruptor 50. Cohesity was also listed as one of the World Economic Forum’s “technology pioneers.”
Aron graduated with a Ph.D. in Computer Science from Rice University with a focus on distributed systems. He holds a Bachelor of Science in Computer Science from the Indian Institute of Technology, Delhi, India.
Cohesity ushers in a new era in data management that solves a critical challenge facing businesses today: mass data fragmentation. The vast majority of enterprise data — backups, archives, file shares, object stores, and data used for dev/test and analytics — sits in fragmented infrastructure silos that make it hard to protect, expensive to manage, and difficult to analyze. Cohesity consolidates silos onto one web-scale platform, spanning on-premises, cloud, and the edge, and uniquely empowers organizations to run apps on that platform — making it easier than ever to back up and extract insights from data. Cohesity was named to the 2020 Forbes Cloud 100 and has been cited as a Technology Pioneer by the World Economic Forum. Visit our website and blog, follow us on Twitter and LinkedIn and like us on Facebook.
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