This Is the Key to Truly 'Founder-Friendly' Venture Capital Most venture-capital funds describe themselves as "founder friendly." But what does the phrase mean, exactly?

The term "founder friendly" is ubiquitous in the venture-capital world — so much so that the phrase no longer feels meaningful. Entrepreneurs have become rightfully skeptical of such empty claims, and cautionary tales of "supportive" VCs undermining founders abound.

Enough with the smoke and mirrors. A successful relationship between VCs and founders can only be built on mutual trust and transparency. In the almost two decades that I have been working in the venture-capital and asset-management industries, I found that putting people at the heart of all investment activity is paramount to achieving long-term goals for both the investor and the portfolio company. To foster these mutually beneficial relationships, you need comprehensive, people-first due diligence — on both sides of the partnership.

At Beyond Capital Ventures, my venture-capital fund investing in early-stage companies in India and Africa, we focus on conscious leaders who are committed to their companies' missions. We view every interaction with companies — from the moment we start due diligence, to when we make them partial owners in our fund — as an opportunity to build a personal and professional relationship.

Trust and collaboration are the two most essential elements in a founder-friendly due diligence process. Trust is derived from collaboration, and collaboration is a result of transparency and responsiveness. An entrepreneur should know early and often that we are considering the best interest of all parties involved — company, shareholder, employees and founders — and be ready to have a straightforward discussion regarding not only opportunities, but also risks and mitigations to their business. In other words, for investments to be authentically "founder friendly," both sides need to provide honesty, clarity and conviction throughout the relationship.

We know that raising capital is not an easy process. Some investors forget that startups are lean and in overdrive mode — and now, will be asked by multiple investors for their time away from core operations. Founder-friendly diligence can acknowledge the bandwidth constraints and also that founders likely do have blindspots. Investors should share those observations and help the company pre- and post-investment to realize its greatest potential, and they should also be respectful of founder and startup staff time and resources. Stop playing games. Tell the company if you have the capital, how much you think you might commit and your concerns, timing and realities.

Related: What VCs Look for in a Startup Investment

Here are three ways VCs can support founders.

1. Give founders a stake in your work

Recognize that your fund's incentive structure could lead you to become extractive. Venture capitalists can pressure companies to grow faster than they are able to, or prioritize their own exit multiple over the long-term success of the business. Why should entrepreneurs trust you to think about all stakeholders? What can you do to make sure your incentives are aligned with your portfolio companies? At Beyond Capital Ventures, we decided to give a percentage of our profits to every founder in our portfolio — a structure we call Equitable Venture. We see every founder as a potential owner in our fund. Our success is their success, and we want to share it with the people who are working the hardest to generate that upside. In this way, we are showing founders that we are truly in this together.

2. Take an active and collaborative approach

As you get to know a company through your due diligence process, understand its unique needs and where you can help. Be straightforward about your timelines, concerns and priorities to manage expectations. We want to be true partners to our portfolio companies, so we ensure that our communications are always respectful and empathetic. Founders will proactively share information with you if you create the space for it. Due diligence should be about finding the opportunities and potential of a startup, not just what's there now or where the company has fallen short. Investors should act as strategic partners and advisors.

Related: 3 Measurable Ways Collaboration Grows Businesses

3. Offer value-add via support from your networks

As a founder-friendly investor, you can step up and champion the company with your value-add network. When Beyond Capital Ventures moves forward with an investment, we invest our team's time into mobilizing capital and collaborating with co-investors. We want our portfolio companies to have the support they need. Our team has built relationships with service providers like law firms, accountants and financial-analytics firms, and created an Expert Advisory Council of individuals with deep knowledge across a broad range of sectors. We work to proactively share insight and guidance from our network — when it's requested. For example, in our first fund, we mobilized 80 times the amount we invested for our portfolio. What support are you prepared to offer? Will you genuinely open doors for your portfolio companies?

Related: How Networking Can Increase Your Business's Net Worth

The active, people-first approach to working with portfolio companies is a combination of careful mutual selection, intentional guidance and incentive alignment. In this way, being "founder friendly" is about providing management teams with a fair opportunity and environment to build the generation-defining businesses of the future.