A few days ago, Gil Dibner posted what he called a VC code of conduct. I read articles all the time where VC’s write about how venture capital “should work” and the vast majority of the time I either disagree or find them a waste of time. I feel that most of these articles are just self promotion with no actual new intellectual capital being created.
But Gil’s article is fantastic. It’s also depressing that he felt compelled to write it. It is yet another indictment that many VCs behave poorly and have given our ecosystem a bad, but deserved, reputation. When I read it I had three strong reactions: one, I have tried my best in my career to comply with these ideas (call me out if you feel otherwise!), two, I think others VCs would do well by adopting these proposals, and three I think my partners at Foundry Group score well on these metrics to date.
I’m going to summarize his idea of a VC code of conduct and add a few wrinkles of my own. That being said, you should read his full article here. I’m only going to detail where I have a particular spin. I also think that Gil missed three themes that are important as well.
1. I will do no harm. Should be “duh,” but being on boards for the last 15 years proves this isn’t as simple as it sounds.
2. I will respect your time. CEO / Entrepreneur time is simply more valuable than my time. I don’t make the companies successful – y’all do.
3. I will not ask for material I don’t need. And I wish Gil would have added “And I will read and be responsible for understanding all materials that you send me.” I can’t stand board meetings where a CEO is having to go through the presentation for the benefit of lazy board members.
4. I will not string you along. It always surprises me how many people thank me for a quick NO. It’s the humane thing to do.
5. I will let you know about competitors in our portfolio. Done.
6. I will be transparent about any conflicts of interest between and entrepreneur and myself. I’d argue that this should be even broader. Just be transparent in general! An entrepreneur should never wonder what a VC is thinking. Let’s just be open and keep filters to a minimum and clear honesty to a maximum.
7. I will not sign a NDA, but will act as if a reasonable one is in place. Simple. But also know that if you ask me for a NDA I’ll know you haven’t done much homework and you aren’t starting off on the right foot.
8. I will not share your slide deck unless you give me permission. With my partners, yes. With others, no.
9. I will not speak to your customers without permission. This is horrible behavior in our industry that must stop.
10. I will educate before I negotiate. I’ve always loved doing this and this is what led to Brad and I writing our book Venture Deals – Be Smarter Than Your Lawyer and Venture Capitalist.
11. I will be honest about what standard terms are. I agree with the sentiment, but as a former lawyer, I hate the idea of negotiating over the term “standard.” I’d prefer to just put our term sheet out on the web and give the same deal every time as we’ve done at Foundry Group.
12. I will not issue a term sheet unless my firm has made a firm decision to invest. This is perhaps the worst behavior in our ecosystem today. I see it more often with late stage firms than early firms, but it is present at all stages. Once a firm pulls this trick on a company I will never work with them again. Ever.
13. I will reflect the term sheet in the final legals. A deal is a deal. ’Nuff said.
14. I will not seek an unreasonable equity stake in your business. I think this is an important one. Everyone must feel like they have proper “skin in the game.” This seems like a simple concept, but often you find people fighting over things that shouldn’t matter. Assume the company will be a huge success and don’t over optimize around the edges.
15. I will avoid surprises. I think that if VCs and entrepreneurs have transparent relations, as in 6 above, then this just follows.
16. I will act in the best interests of the company at all times. It’s not only the law, but a good idea too.
17. I promise to try not to look at my phone in meetings. This is a hard one, but an important one. I’m not perfect, but I’m trying. Frankly, I find myself looking at my phone when the meeting gets bogged down, usually by a board member who didn’t come prepared.
I also think that there should be three additions to the list. I welcome your feedback.
18. I will respond to you promptly, especially if we have an investment in your company. This should be table stakes to a VC, but it isn’t. There are always particular emergencies and situations which will make this difficult, but it is really important for an entrepreneur to know they always have someone to turn to. After all, being CEO is a lonely job.
19. I will not collude with other VCs to harm your company. I find it reprehensible when VCs collude to either drive down valuation / terms prior to a financing, or when the company is in dire straights collude to take over the company on the cheap. There are plenty of other situations, too. This one may have the greatest “subject to interpretation” issue to it, but I’ve seen this line crossed at times and it disgusts me.
20. I will answer all well-tailored emails. If I am sent a well-crafted email, I will answer it. I promise. Whether or not I know you or not, you’ll get a response. This doesn’t mean that I will answer spam, emails created from mail merges, emails with so many grammatical and spelling mistakes that I can’t read or emails that are clearly from someone who has done no research into what Foundry Group invests in. But if you at least try, you’ll get a response from me.
That’s an even twenty and I’m sure we could add a few more, but this would be my Twenty Commandments of VC, or as Gil put it a VC Code of Conduct.
I’m proud to say that Foundry Group signs up to this code of conduct as we feel this should be the minimum baseline for good VC / entrepreneur relations.
Have an opinion? Feel free to leave comment below or hit me up at @jasonmendelson on Twitter. Well done Gil and thanks for getting an important conversation started.