I honestly can't think of a more important topic for venture capitalists. It's pretty important for entrepreneurs as well, but entrepreneurs can build companies without VCs. It's not possible to be a great VC without being really good at working with entrepreneurs.
Having good personal chemistry helps a lot. Both VC and entrepreneur should consider that carefully before getting into business together. That was the subject of last Thursday's post.
Once you've signed the documents and started working together, my number-one suggestion is frequent face-to-face communication. If you can't do face to face, then I suggest Google Hangouts or Skype. And do it regularly. Make it a routine. I have breakfast every two weeks with quite a few of the entrepreneurs I work with. For those who get up late, we do afternoon meetings or hangouts.
Email is great for information sharing. But for building a relationship, I can't think of a good substitute for frequent face to face communication. So make the effort. Take the time. Get together often. Break bread if you can.
My second suggestion is figuring out how to be frank and honest with each other without making the other person defensive. I like to say, "Do you think your tech co-founder is up for the job of leading a ten-person engineering team?" Instead of "I don't think your tech co-founder is up for the job of leading a ten-person engineering team." You communicate the same thing with both lines but one leads to a conversation and the other puts the entrepreneur in a position where they are inclined to defend their co-founder. And then they box themselves in. Which is really bad for both parties.
However you figure out how to communicate, it is important to be honest early and often. If you feel that something is a problem, put it on the table. Don't push for a decision right away. But put the issue on the table, talk it through, let it sit there for a while. Most entrepreneurs will make the right call if given the time to make the decision themselves.
This leads me to my third suggestion: Do not ever act like the entrepreneur works for you--they don't. If anything, the VC works for the entrepreneur. So the relationship must be as peers who respect each other and are working together to get to the right answers. This is a partnership not a boss/subordinate relationship.
My final suggestion is to help the companies as much as you can. When you help an entrepreneur you get karma points. Get lots of them, you'll need them at times of crisis and conflict. If an entrepreneur asks you to help recruit an engineer, help close a deal, fly to Seattle and back on a Sunday (my partner Albert did that a week or two ago), come give a pep talk to the team, make an important intro, or even use an iPhone so you can try out their new product, you have to say "yes." You have to work every day to help entrepreneurs succeed. That is your job.
It is very easy as a VC to get frustrated with the people that start and lead the companies you invest in. I am constantly frustrated with the companies I work with. That frustration comes from caring a lot, not just financially speaking--it's an emotional thing. There comes a time when you've made a lot of money as a VC and your track record is secure. I am there. But I am still as frustrated as ever. I want these companies to live up to the dreams and vision that the founder described to us when we invested. And most of them won't. That reality is incredibly frustrating.
So, they key is to keep the frustration to yourself. Be positive. Be honest. Be critical, but always constructive. Help the companies as much as you can and learn to take a deep breath, bite your tongue, and wait a few seconds before you speak. It took me forty-some years to learn how to do that. It comes in handy. It has made me a better VC.
A company is a bit like a family. You can't have a happy family if the parents are fighting all the time. Same goes with a startup. The entrepreneur and the VCs have to get along. When they do, it leads to a better company.
This article originally appeared on Fred Wilson's blog, A VC.