I Almost Died - The Importance of Key Man Insurance

People often ask me:

"Paul, why do VCs seem to make such a fuss about key-man insurance?"

I've said it before and I will say it again. People matter most.
Thus, VCs often insist on key man insurance, because they fund people, not ideas. They simply want to protect their investment. VCs who insist on key man insurance feel that you, as the entrepreneur, are critical to the success of your company.
I've been very sick for the last week, and it made me realize how critical key man insurance can be. While I was out of commission, many things just couldn't get done. If my illness was more serious than just a flu, my business would have been at risk. When a founder/CEO gets hit by a bus, a lot of domain expertise and experience is lost. From an operational standpoint, it's also a huge distraction and disruption to the business.
A VC friend of mine from MIT has an interesting view on key man insurance, which I will leave you with.

"We want to make it (key man insurance) high enough to protect ourselves, but not so high as to make us want to knock you off."

Keep it in mind when VCs talk to you about key man insurance. Don't fight it, understand that VCs just want to protect themselves and think that you are important.

You're Not Perfect - Surround Yourself With Greatness And Own Up To What You Suck At

People often ask me:

"Why are VCs always on my case to hire more people? I'm doing all of the jobs they're hiring for just fine."

The unfortunate reality is that startups are complex. To be successful, they require a variety of backgrounds, skillsets, and expertise. Previously, I blogged about walking the factory floor. It was one of the things a founder could do to try to keep the CEO job after getting funded.

However, the most critical skill to have when you're at the top of a startup is self-awareness. No founder/CEO is perfect. Know your weaknesses, and be able to admit them. In other words, know yourself. The best entrepreneurs are the ones who can recognize the exact holes they have to fill in their organizations.

What the entrepreneur says: "I don't need to hire a dedicated business development guy, because I've been doing that job since the day we started."

What the VC is thinking: "This guy obviously doesn't have the skills to be a great CEO, because he can't even see the holes in his own organization. He can't fill gaps he doesn't even see. Looks like we'll have to replace him."

In fact, if you really want to impress a VC, communicate where you think you need expertise, and potentially how the VC could help. Be proactive and do this before they have even funded you. VCs love hearing an entrepreneur asking for help, especially when it comes to finding good people. The faster you can recognize your weaknesses, the better. You'll more easily avoid a lot of the problems that plague early stage ventures, create a vastly stronger team, and live to fight another day as CEO.