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Danger, Will Robinson, Danger

When Robot B9 spoke those words to Will in the ancient series Lost in Space he was warning his charge that trouble was ahead. Today those words have become a part of the urban lexicon to cover most anything that looks ‘iffy’ on the horizon.

I was talking with a senior member of the parking industry about the tons of VC money that is coming into the parking industry and she uttered that fabled phrase. Her experience was that companies who received an influx of cash often lost their focus. In one case she had to remove a product after a VC fueled merger. “I had difficulty getting phone calls returned. That wasn’t a problem before.”

A friend who is in the VC business agreed. “When companies start, they are working on ‘friends and family’ money. Their goal is to get the best product and service delivered on time and under budget. The pressure on them is great to perform.” Then the money arrives and the pressure changes.

“The VC goals are different than those of the company. They are looking for the valuation of the company to increase, and for the company to reach a point where they can get their 5X or 10X return.” He said.  “The pressure and focus changes almost immediately. What was a customer centric company focused on product and service becomes a money centric company focused on ROI.”

Although his company is more of an incubator than a true VC organization, he told me that his primary job is to keep the founders focused on their product and their customers.

I think it all boils down to why the founders of a company started their enterprise in the first place. Did they do so to take an idea and make it something that made the world, industry, or service better, of did they do it so they could exercise an ‘exit strategy.’

I know, all you MBAs out there are shaking your heads and wondering what I’m going on about. Of course you have to plan for your exit from a company you began. You have to protect yourself, and after all, isn’t your goal a comfortable retirement?

Dunno, it is? Isn’t that comfortable retirement the end result of a job well done? When the VC money comes knocking on your door, should the headline of this blog be ringing in your ears? Maybe B9’s word should be “caution” rather than ‘danger.’

JVH

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