Being A Venture Capitalist — Who Is Your Customer and Who Is Your Shareholder?

Some thoughts and insight from Howard Lindzon

“My friend Fred Wilson, one of the best Venture Capitalists in the business, brought back an old post on the subject the other day. Here it is. Do read it.

Fred brought the post back up after technology journalist Dan Primack tweeted that Venture Capitalists ultimately work for their limited partners not their portfolio companies.

The whole conversation restarted because of this Citizen App ‘cramdown’ story where major investor Sequoia decided to walk away from further funding. We can expect a lot more cramdowns and walk-aways as ‘pay to play’ rounds come together as companies run out of capital in this tougher fundraising environment.

I have my own thoughts here on the customer/shareholder discussion.

I think the answer is much more nuanced.

I won’t argue with Fred but I contend that both the LP and the founder are the customer and shareholders in the venture. From 2005–2012 the VC held most of the power in the VC/founder relationship and from 2012 to 2021 the pendulum swung too far (my opinion) towards the founder. I believe a good venture capitalist needs to understand these dynamics as the power shifts. To have paid market prices for seed and venture deals in 2019–2022 was to treat your customers (the founders in Fred’s definition) too well at the expense of your LP’s.

Large venture capital brands have a luxury that seed funds like Social Leverage do not. I/we can’t afford a poor performing fund early as a firm because our ‘shareholders’ under Fred’s definition do not want to continue making investments until we prove we can produce great returns

Call it chicken and egg, or catch 22, but too many seed funds and VC funds were leaning too hard towards founders being the customer (2012–2021) and now the LP’s will start feel like stupid and/or poorly represented shareholders.

I believe the best seed and vc funds know how to treat both founders and LP’s as customers and shareholders at the right times.”

Originally published at on March 1, 2023.



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