In Chapter 10 of 17 in his 2011 Capture Your Flag interview, Internet entrepreneur and SimpleGeo CTO Joe Stump learns to work with venture capitalists (VCs) after taking a Series A financing round. He shares the VCs provide a strong checks and balances feedback system that helps a business accelerate growth and refine product. He notes that while criticism around products is usually valid, acting on the feedback should be a startup team responsibility and not a VC responsibility. Stump is the co-founder and CTO at SimpleGeo (www.simplegeo.com), a San Francisco-based mobile location infrastructure services company. Previously Stump was Lead Architect at Digg. He programs in PHP, Python, Django and enjoys scaling websites. He earned a BBA in Computer Information Systems from Eastern Michigan University.
Transcript:
Erik Michielsen: How has taking venture financing affected what you do and how you do it?
Joe Stump: I would say as far as day-to-day operations, it hasn’t changed what I do that much. The venture-funding thing has been interesting to say the least. I think what it changes is it - that influx of cash puts everything into overdrive and also creates a balance – a checks and balances kind of system between what the company is doing with the people that put in the money, which I think is good.
I think most entrepreneurs would be like, ‘Oh, our VCs stink and all they try to do is screw up the product.” And there are definitely VCs out there that will do that, but I think that’s an exception to the rule and not the norm. Most of the time when they are telling you you’re doing something wrong, you probably are doing something wrong. The thing with the investors and the VCs in particular, when they say you’re doing something wrong, they’re almost always right that you are doing something wrong. Where they tend to I think overstep and overexert is how the problem should be fixed. I don’t think that VCs and investors are in a good position to force a specific fix. I think that needs to be done from within the company. And I think that’s where things to tend to go off the rails pretty frequently. Like when a VC is like, “There’s a problem.”
And at first the people and the company will be like, “Well, there’s no problem.” And they’ll have a little fight over whether or not there is a problem. Usually there is a problem. And then they’ll come up with two totally separate solutions on how it should be fixed. I think it’s fine for there to be problems, I think it’s great that VCs point out those problems, where it’s bad is when the VCs attempt to force their specific fix. I think it’s pretty rare that the company, once that they recognize that there is a problem, that the company will come up with an inferior fix compared to the VC’s. I think it will usually be a superior fix.