Inside the board room

In 2015, our consulting company Percolate Studio was acquired by Meteor Development Group, maker of the popular open source Javascript framework Meteor. In 2017, we started Chroma, our new product company.

The question first and foremost on the minds of budding entrepreneurs, ourselves included, is whether to go it alone and bootstrap our next company or to raise venture capital. Having recently worked at Meteor as Director of Customer Success, I experienced what it’s like to run a venture capital(VC) backed company in as close a capacity to being a founder as possible. Great VCs provide connections and the wisdom from experience to give you the greatest chance of success. In exchange, there is daily pressure to produce a small miracle — a billion dollar company. Read on to hear what we learnt.

Investors are your partners

Company boards meet regularly to guide the business and give VCs an opportunity to monitor their investment. They consist of founders, advisors, and representatives from the largest investors. Each meeting gives you, the founder, a regular interval to step back and view your company from an informed outside perspective. You get a valuable reality check of sorts.

Founders present a “board deck” that contains a snapshot of recent company performance and a look into upcoming initiatives. There are standard sections on revenue, growth, burn rate as well as product plans and overall strategy. Producing a deck may seem onerous but it’s an important piece of communication to get right that affects the quality of advice from the board.

It’s important to choose friendly investors who you want to work with as people and who aren’t in the game purely for a return on their investment. For example, after each meeting, Meteor’s board sits down for lunch with the entire company and participates in an ad hoc ask-me-anything session. Apart from boosting morale, this helps connect the efforts of the individual contributors to the success of the company’s overall mission.

What VCs know that founders don’t

Accepted wisdom is that investors provide more value than just cash in the bank. That sounds reasonable, but it left me wondering what that value actually is. After all, why do VC’s need founders if they know which ideas will work and how to execute them?

Meteor’s board meetings showed how this mutually beneficial relationship works. Founders are left to dream the future, lay down the vision and make product decisions to realize that vision.

VCs have incredible knowledge about the industries their portfolio companies operate in. They’ve seen which tactics work for early stage companies years ahead of what the public currently knows. Since investors specialize in industries, Meteor gets to benefit from the aggregate wisdom gleaned from other open source portfolio companies like Docker and MongoDB.

The value of a good network

The other area where VCs really help is giving founders access to their networks and reputation. If you want to get advice from respected people in the industry about product or business, the best VCs can usually make this happen. Either through a personal contact or by leveraging their brand/reputation. This is a powerful asset that you simply don’t have as a bootstrapped founder.

The fact that a respected VC firm has backed your company provides social validation. It’s an indicator that people believe you’re working on something important. This means it’s much easier to set up cold conversations with potential customers and knowledgeable insiders who have a premium on their time. It’s also easier to convince people to spend their valuable time trying out your new product.

Part IV

During our time at Meteor we had the good fortune to work on birthing two software-as-a-service products: Galaxy and Apollo Optics. In the fourth and final part of this series I’ll reflect on finding product-market fit for SaaS products.

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