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Venture capitalists know how to deal with engineers, but engineers don't know how to deal with VCs. The result: engineers with new ideas get shortchanged while the return to the VCs' investors is maximized.
So writes Nick Tredennick, an engineer with experience of more than 30 start-ups as founder, advisor, engineer, and executive. In "An Engineer's View of Venture Capitalists" in the September 2001 issue of IEEE Spectrum, he sounds a "wake-up call for engineers." He points out that VCs:
o Don't sign nondisclosure agreements. This way they are freer to fund someone other than the inventor to develop an idea, if they choose.
o Act like sheep. Either all fund ideas in a particular area or none will. So an engineer with an idea that's different will struggle for funding.
o Rely on "experts" who know less than expected. The people VCs ask to vet an idea most likely will be unable to follow it if it strays too far from traditional implementations.
o Collude amongst themselves. They make sure not to fund too many start-ups in any one area, to keep competition down and the rewards--for themselves--up.
o Wind up with most of the start-up's stock. It may be the engineer's idea and the engineer's work, but it's the VC's company.
In this decidedly different view of venture capitalists and how they operate, engineers are warned what to look out for, and told what should be done if they are to be treated more equitably.
Contact: Nick Tredennick, [email protected]; Alfred Rosenblatt, 212 419 7550, [email protected].
For copies of the complete article ("An Engineer's View of Venture Capitalists" by Nick Tredennick with Brion Shimamoto, IEEE Spectrum, September 2001, p. 13) or to arrange an interview, contact: Nancy T. Hantman, 212 419 7561, [email protected].
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