Finance & Operations

Roundtable: What Should Companies Look for When Choosing a VC?

October 26, 2011

Previously, our panel of experts looked at how companies can prepare for the M&A/IPO process and what they should look for in an investment banker. In the last of this three-part series, Philip Ianniello, Michael O’Hare, and Alex Hart discuss the key considerations for choosing a venture capital firm to work with.

What is a banker’s perspective on choosing the right VC?  What should companies be aware of?

Philip Ianniello, Managing Director, Needham & Company, LLC

img class=”alignleft” src=”https://openviewpartners.com/wp-content/uploads/2011/10/phil-ianniello.jpg” alt=”Philip Ianniello” width=”100″ height=”125″ />Companies should consider several variables when making this important partnering decision: 1) track record/reputation of the firm; 2) personality fit with the partner that will be involved with the investment; 3) what the firm offers in terms of access and expert advice that will help you further your company’s goals (e.g., geographic reach, good relationships in a particular industry, support team of experts, complementary portfolio companies); and 4) targeted check size and holding period (making sure these are aligned with your needs and time horizon).

Michael O’Hare, Managing Director, Head of M&A, Pacific Crest Securities

Michael O'HareA company should build a relationship with a VC firm that understands their market and business model, and can provide operational and strategic advice.  It’s important to have a VC that is focused on the long term and provides sound advice during difficult times.  It’s also very important that the current board and management team gets along with the VC representatives on a personal level.  The cultural fit between the VC and the company is an intangible, but an important factor to consider.


Finally, the company should understand the VC fund’s goals and limitations (e.g., the total dollar amount the VC can invest in each company and the term of the fund), and ensure the firm’s capital contribution and return horizon will support the company’s growth plan.

(Editor’s note: For more from Michael, check out our breakdown of his paper on the 8 rules of sell-side technology mergers and acquisitions.)

Alex Hart,Managing Director, Morgan Keegan Technology Group

Alex HartIt’s about both the individual and the firm.  First and foremost, make sure you get along with and see eye-to-eye with the individual who will be investing in and playing a significant role in your business.  Look for examples of prior investments they have made and see how those relationships have developed over time.

In terms of the firm, make sure to think through what types of investments the firm likes to make.  If you are seeking minimal dilution and a $150 million sale in two years, think carefully before going with a firm that tends to focus on building larger businesses and seeks $1 billion exits.  On the other hand, if you do plan to build to that scale, make sure your VC is comfortable with taking on additional rounds of capital that may be required and staying in for a longer period.

Most importantly work with someone whose interests you believe will be aligned with yours as closely as possible.  When this is the case, things tend to go a lot more smoothly.

Content Marketing Director

<strong>Amanda Maksymiw</strong> worked at OpenView from 2008 until 2012, where she focused on developing marketing and PR strategies for both OpenView and its portfolio companies. Today she is the Content Marketing Director at <a href="https://www.fuze.com/">Fuze</a>.