positioning a partnership

Corporate & Business Transactions Tips for Startups

By Bryan Wasser

 

When venture capital (“VC”) firms or private equity (“PE”) firms invest in start-up companies their goal is to work with management to strengthen operations, accelerate growth, enhance profitability and position each portfolio company to become a market leader.  One of the most important advantages of a company being owned (or minority or majority-controlled) by such a VC or PE firm (referred to as a “portfolio company”) is the strength and focus of the directors of the portfolio company that are appointed by the VC or PE firm. However, senior management must stay focused as the day-to-day decisions will rest solely with them. To help senior management, we have put together the following set of principles that start-up companies can utilize to forge the strongest possible partnership between their management and the VC and PE firms that they partner with.

1. FREQUENT AND DETAILED COMMUNICATIONS ARE ESSENTIAL.
The most effective CEOs and CFOs are sophisticated communicators. They understand their role in managing the flow of information between the VC or PE firm and the other members of the management team. and can quickly communicate developments in the business to the VC or PE firm’s representatives. Investors expect their CEOs and CFOs to be straightforward and open about the challenges the portfolio company faces. what management is doing about those challenges and the likelihood of successful outcomes. (more…)