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In the Know?

The inside scoop on what should and shouldn't be shared with your VC.

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This story appears in the July 2009 issue of Entrepreneur. Subscribe »

Your CFO is having an affair with your office manager, and you're a little concerned about what petty cash is being used for. No one in your company wants to be in the same room as your CTO, and your vice president of engineering has laid down the ultimatum: "Him or me." Worse still, you know you're going to miss your revenue forecast for the quarter, but you have one last chance to pull it off with an upgrade from your largest customer--the one whose executive sponsor just quit and you don't know who's going to replace her.

Some entrepreneurs believe they should treat their VCs like mushrooms--keep 'em in the dark for their own good. But the best entrepreneurs view their VCs as business partners and key advisors. The word transparency, while overused, is a good starting point.

When to Share

There are some vitals that you need to communicate to your VC no matter what, including:

. Fraud of any sort, or any suspicion of it

. Credible threat of litigation

. A fundamental concern about business or technology

. A major issue with anyone on the management team

. A major issue with any key partner or customer
Now, a VC doesn't ever want to hear the blow-by-blow of everything going on. The daily ups and downs of being the CEO of an entrepreneurial company are well documented; being an is an extreme sport. VCs are involved in multiple companies, so the operational details of each are often too much to process in any reasonable amount of time. And it's a huge burden on the CEO to provide such detailed information on a near real-time basis.

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