Just as the board of directors evaluates the CEO/entrepreneur every year for their performance against results, the CEO/entrepreneur should have the license to evaluate their VCs for their performance. Who did they help recruit? What business development introductions did they make? Were they proactive in giving critical strategic advice? Were they available and responsive when needed for emergency issues?
The article also points out how VCs apart from being answerable to investors in their funds (the "Limited Partners" or LPs), also have to answer to their partners.
In a VC partnership, each VC is investing the money of their peers as well as theirs, and affecting the overall results of the fund. And so while an LP may not hold a VC accountable for periods shorter than 6-10 years (the period after which fund performance is well-known), VCs are accountable to their partner every week at the partners meeting. For 4-6 hours, the partners pour over their strategies for deploying the capital, high-priority projects and individual portfolios. Every week, each individual VC must stand and deliver and demonstrate in front of their partners that they are on track to fulfill their obligation to their LPs to make money.
Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.