Being Careful About Whose Money You Take

But Mr. Krishna found the guidance of one of his investors, Maria Cirino, invaluable largely because, he said, she had been an entrepreneur herself. Ms. Cirino is a co-founder of .406 Ventures, a venture capital firm in Boston, but before that she spent 20 years building technology businesses.

“Maria had run a sales cycle before and knew it was complex,” Mr. Krishna said. “She had dealt with the angst of not bringing in that crucial deal, so she provided empathy and an ability to push forward. Every company goes through challenges, and the question is, How do people around the table react when that challenge comes upon us? Who’s there for you? Former entrepreneurs are the most understanding, though not necessarily the most lenient. They won’t hold you to a lower standard, but a person who has grown a company from nothing is more able to deal with it.”

Only a minority of small-business owners seek venture capital, but for those who do, it can feel like a deal with the devil. Venture-backed companies are expected to grow quickly, and their boards can impose rigorous controls, audits and metrics. A founder who takes venture capital gets the opportunity to grow but also risks losing control of the company. One way entrepreneurs mitigate the tension in the relationship with investors is to work with venture capitalists who may have more patience during the company-building process because they have been through it themselves.

Such entrepreneurs-turned-investors have become more common recently, even as the venture capital industry contracts after years of lackluster returns. Some insiders see this as the industry righting itself after a bubble, saying venture capital has gone back to its roots now that many M.B.A.’s lured by giant paychecks have left the field. They say they believe that venture capital is once again attracting the right mix of former founders and operators who are truly passionate about nurturing companies and who have hard-won insights that can help founders succeed.

“It’s back to the future,” said Kate Mitchell, a managing director at Scale Venture Partners and former chairwoman of the National Venture Capital Association. “Silicon Valley was founded by a balance of entrepreneurs and finance types. The bubble brought a huge influx of people, but the tourists have gone home and the ratio is back to normal. A lot of the new venture firms are led by former entrepreneurs.”

Some business owners say entrepreneurs-turned-VC’s are more supportive, particularly in times of trouble or when dealing with thorny issues. Mr. Krishna, a serial entrepreneur who is now president and chief executive of MineralTree, an accounts-payable security provider for small businesses that is also backed by Ms. Cirino’s .406 Ventures, recalls a time when one of his male employees was insensitive to a working mother. This human resources conundrum was not a board-level issue, but if left unchecked it could have become one.

“If I take these situations to my board members, are they going to say, ‘This person is an idiot,’ or be glad I’m opening up to them?” said Mr. Krishna, who again sought advice from Ms. Cirino. “Sometimes you need to wear your angst and emotions on your sleeve. Certain VC’s might see that as a sign of weakness, but I know Maria’s experience is so deep in these areas.”

For many venture capitalists, replacing founders with professional management, or at least providing adult supervision, is part of a well-established strategy to increase the value of companies in their portfolios. It is not always a last resort; sometimes it is just a question of when. “You don’t want someone who’s constantly thinking, ‘Should I fire this C.E.O.?’ ” Ms. Cirino said. “Unfortunately that’s the relationship the majority of entrepreneurs have with their VC’s. Some of that is the entrepreneur’s fault, if the entrepreneur never allows the VC to gain important insight into the business.”

Scott Friend, who is now a managing director at Bain Capital Ventures, said his history as an entrepreneur informed the way he navigated the more difficult aspects of the relationship between founder and investor, such as structuring employment agreements.

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