If you ask 100 VCs what their worst nightmare is, I suspect (after loosing money) you will get a bunch of different answers.
Here's mine: The Entrepreneur Brain Flip (EBF)
An EBF happens when a founder wakes up one day and 'flips' into employee mode. To me, nothing is scarier then a founder saying "It's just a job."
This can happen for a number of reasons but the signs are pretty clear.
When you are closing a deal and the entrepreneur negotiates for his/her pay like it's a job, that's trouble.
When I look at our investment in Healthunity, I point with pride to the co-founders (Jay/Prem). They are passionate, work insane hours, take almost no money out of the company rather took additional equity vs. cash. Total owners and you know it ten seconds after talking to them. These guys don't talk to me about "market" CEO rates or car allowances, etc. They are the owners and do what's right with the business and then own enough of the company that is matters.
This, of course, brings me to my message:
If you don't feel like you are the owner, jezz, don't take the money; don't close the deal. If you feel the need to fight over severance in your employment agreement and it runs 30 pages, bad start to the game. If you worry about ' getting fired ' and aren't thinking about the business, who is right for the business, etc, etc, don't close the deal.
Yes, negotiate value, negotiate terms, negotiate the color of the toilet paper but if you brain flip into this is just a job, that's a red alert, stop the train, issue. There is an interesting post from Gerald Joseph regarding what seed VCs look for in a seed.
No Salary Expense-Very few Startups can successfully bear the burden of salaries; restricted equity adequately diversifies the risks and rewards of a volatile Startup venture
Everyone Paid With Restricted Equity [Vestment, Performance Clauses]-restricted equity is the only currency that should be used by a early stage Startup to reward founders and employees for sustained, quality performance
I am NOT advocating everybody taking a vow of poverty. What I am saying, tho, is there's a specific mindset around what defines a Start Up and a Founder within the VC community. Make sure it is your definition.