VCs say 'people problems' are the biggest reasons startups fail. This is what they mean, and how entrepreneurs can avoid them.
Lead-investor VCs visit portfolio companies about once every three weeks, for a morning or afternoon. Sahlman wrote in
that their primary concerns are hiring and firing high-level managers, and working on matters of financing and strategy. VCs commit funds to senior leaders in the early days of a startup and continue to keep those leaders as their main points of contact. Senior leaders deliver bad news, spend time with VCs on the phone, and meet with them in person.
If the company isn't doing well, the entrepreneur and the VC are suddenly on opposite ends of the bargaining table: The founder wants to keep the dream and the company alive, and the VC wants to maximize return on investment. Thus if the company fails, the failing becomes personal to VCs — traceable back to the source of investment, or the founder.
Sahlman wrote that in responding as they did to the survey, VCs sent a clear message: "Senior management is the critical ingredient that makes or breaks venture-backed businesses."
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