Feb 23 2007 by Jason

What Do Venture Capitalists Think About Founders Leaving and Starting New Businesses?

Question: I founded a hardware startup in 2000. We have not had an exit yet, but it’s been successful. We have 9 VCs who invested in us and 4 are on the board. I am thinking about starting another company, because the idea is worth it. What would be the VCs point of view on this? (at least if that was you?)

Our Take: Assuming that you are still working for your current business, this is probably a bad idea. Venture Capitalists don’t just invest in ideas and companies, but also people. In other words, they’ve put their money in you. If you decide to leave and start a new business right away, my guess is that most VCs would feel abandoned and it would not reflect well on you when you try to raise money for your new venture.

That being said, if you are at a point with your first company where it’s a natural time for you to move on, then you may be able to make a graceful exit. Whatever you do, be honest with your board – you usually only get one chance at a good reputation. If your heart is no longer in the company, you need to let those around you know, because invariably it will affect your future chance of success.