Advice From Serial Entrepreneur Austin Veith On Accepting Venture Capital Funding Without Compromising Your Values Or Ownership Stake

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Lifelong techie and entrepreneur Austin Veith, who currently helms startup factory First Light, has decades of experience when it comes to starting businesses and navigating partnerships. Early on in his career, Veith saw the incredible potential of leveraging technology to access a global customer base and huge revenue streams, with a comparably small staff. As Tech Company News discovered, he immediately turned his attention to building internet and tech-related companies.

In the early 2000s, Austin Veith found himself running several high-profile startups that attracted serious venture capital financing. Although his track record varies as a venture capital darling, he has learned a tremendous amount about practices and parameters that should be put in place when you’re seeking out a big-money partnership.

Now with more than 20 years of business ownership and development under his belt, Veith is sharing his top tips for protecting yourself and your ownership stake while also building relationships that propel your company forward.

Accepting VC Funding? Here’s What You Need to Know

Do your homework on your VC partners.

After seeing some of his partnerships go south, Austin Veith is adamant about founders making the time and effort to research those they’re going into business with.

“One of those mistakes [I’ve made] and one that I’ve witnessed other founders making, is not realizing that the due diligence process is a two-way street. Investors or VCs are not your boss. You are not their subordinate. You are potential partners. You should research potential investors and ask just as many questions about them, their past, their vision, their goals, their team, etc., as they ask about you. Do not hold back, do not hesitate to reach out to other founders of companies in their portfolio, ask to see financials and sources of capital, etc.” he says.

In addition to weeding out predatory investors whose goals may not align with yours, there are other benefits to interviewing potential VC partners:

“First, it will weed out the imposters, especially at the angel level. Second, sophisticated investors will hopefully gain confidence that you are the kind of founder who does the WORK. Third, your chances of finding investors that are the best possible match for your company and for your goals, go way up.”

Seek mentors who can guide you.

With all the attention that coaching and mentorships are getting these days, this advice should come as no surprise. Connecting with those who have been there, done that, and can offer their perspective can make the difference in how fast you find success. An outside, expert opinion from someone else in a similar industry is also a valuable asset when you’re deep in a big decision that may leave you blind to potential drawbacks.

Never get too confident.

Staying humble and continuing to put in the hard work will help to keep you from rushing into wrong decisions. Becoming too confident clouds your judgment and can attract the wrong partners, as well as push away partners who would be serious and beneficial to your company’s growth.

“My youthful overconfidence was a weakness and did not in fact give me the appearance of strength that I thought it did,” Veith recalls. “When I was younger, I had this naive belief that overwhelming self-confidence, whether real or fake (usually fake), was the way to overcome those doubts and project future success. That approach led to a number of poor business decisions and some of my biggest failures.”

Retain legal counsel from the get-go, and consult with them on all major decisions.

Looking back on his experiences, Austin Veith stresses the importance of attorney input. “I would always get a second or even third opinion on major business decisions from people outside of the company, especially when it came to legal opinions from attorneys.”
Attorneys are notoriously conservative, and that influence is valuable when the venture capital funding offers are flowing. Their function is also to protect their client’s interests, which is critical when and if things ever need to be addressed in a court of law.

“Get it all in writing and hire the most reputable attorneys you can find. Whether that’s a partnership agreement, an employment contract, or whatever the case may be, do everything you can to make expectations and roles as clearly defined as possible… in advance. That will help avoid 90% of the situations that lead to a bad partnership,” Austin Veith says firmly.

Setting expectations and hiring an attorney shows potential VC partners how you do business, and that you’re not in it for a quick dollar.

As a founder, pay yourself a reasonable salary.

One of Austin Veith’s biggest regrets in his first large-scale startup was not budgeting a reasonable salary for himself. As a young entrepreneur, Veith believed that his foregoing a salary showed his commitment to his company and his confidence in its future success. Instead, he put himself in a difficult financial position that left him unable to focus fully on building the company to its full potential. In the end, the decision may have deterred smart investors who recognize that this will leave founders stressed and distracted.

“I talk a lot about founders paying themselves a reasonable salary to ensure the decisions they are making for the business are not coming from a place of stress or worry about personal finances,” he says, while also noting that serious VC partners should be comfortable with this arrangement.

Take contemporaneous notes on everything.

Along with retaining legal counsel, this is a major takeaway for Austin Veith: “This has saved me dozens of times when disputes inevitably arise. It used to be a pain in the ass to save stacks of yellow legal pads, but I recently switched to a digital notebook and it has made saving and organizing my notes a breeze.”

With no excuse not to write it down, get to note-taking as a precautionary measure.

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