Rajeev Madhavan | Crain's Silicon Valley

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Rajeev Madhavan

Background:  

Clear Ventures is based in Palo Alto, California and is a founder and venture investment firm that helps startup teams succeed in business technology and services.

The Mistake:

My mistake was not building a strong relationship with my board when I was with my second company, Ambit Design Systems.

I started Ambit in 1993. We were going up against a giant, a very entrenched player in that space. So, when we went to the venture community, it was very tough to raise capital. We ended up raising money from 60 to 70 private investors. If nobody’s funding you, and you have no choice, you’ve got to keep the lights on, and you’ve got to go to private investors.

But with it came the hassle of dealing with so many private investors. They kept calling and asking “how’s the progress? Are things going well? Is my money safe?”

This was a very big distraction for the company.

At the same time, I didn’t build a very strong board, and I didn’t build a relationship with the board. I didn’t have people who could have helped me with raising capital.  I didn’t have a board where I could have an open discussion about all the issues and challenges of dealing with so many private investors.

The lack of a strong board meant that a year before the company was sold, I ended up having to leave the company. I was basically fired.

So, being fired from your own company after three and a half years is not fun. It was a very tough point for me.

Communicate with the board and make sure they are part and parcel of your business. 

The Lesson:

I learned a lot from that—to build a great relationship with the board.

The bottom-line lesson is very simple. In my previous company, I screwed up my board relationships. I did not have an honest and open relationship with them. I since talked to some of my members who were on that board and did not work to support me. Today, I’ve developed good relations with them.

They’ve said, “Rajeev, you should have told me about these things and what you were doing.” I did not and that’s my fault.

A lot of early stage startups think that giving bad news is all negative. It’s not. Actually, many people in the valley, such as venture capitalists, understand there’s turbulence and they can help you get past the turbulence. You need to build a very strong relationship with the board, communicate with the board and make sure they are part and parcel of your business. They can help you get sales and they can help address issues before things become chaotic. 

Follow Rajeev Madhavan on Twitter at @rajeevmadhavan.

Photo courtesy of Rajeev Madhavan.