he speaketh the truth in An Engineer’s View of Venture Capitalists:
“The VC’s version of a pet is the “executive in residence.” Many venture firms keep a cache of start-up executives on staff at $10 000 to $20 000 per month (a princely sum to an engineer, but just enough to keep people in these circles out of the soup kitchens). Start-up executives, loitering for an opportunity, may collect these fees from more than one venture firm, since the position entails no more than casual advising. These executives have “experience” in start-ups. When you show your start-up to the VCs, they will grill you about the “experience” of your executive team. It won’t be good enough, but not to worry, the VC supplies the necessary talent. You get a CEO. The CEO replaces your friends with cronies.
The VCs’ pets are like Hollywood’s superstars. Just like Julia Roberts and Tom Cruise, the superstar CEOs command big bucks and big percentages (of equity)–driving up the cost of the start-up–but are “worth it” because they give investors and VCs a sense of security.”
[ via dave ]