When a VC decides to invest, he focuses on structuring both his relationship with the company and the relationship of others within the company in a manner that will increase the odds of success. 

To be clear, by success I mean two things:

• First, that the VC's position will be protected, and
• Second, that the company is poised to generate at large exit. 

VCs protect their positions through the use of preferred stock structures and other rights that I elaborate on in other posts.  At the end of the day, though, a VC maximizes his chances of top-tier returns not through legal structures but by ensuring that a company's management shares the same goals for the business as a VC.

In my post, Why Liquidity Preference Exists, I address one way in which incentives are aligned through liquidity preference.  However, another more basic incentive is typically considered during the structuring of the deal: the equity stake of key team members. 

At the end of the day, VCs do not run portfolio companies.  As a result, the best VCs want to make sure that the key members of each management team have a good bit of equity, ensuring that they have significant upside and real incentives to build their company to a scale that generates returns for everyone.  It's worth repeating:  good VCs want current and future team to own a significant share of the company. 

This premise also holds true when the company is more mature - board members often issue key operators additional options to keep incentives aligned.

This reality doesn't imply that entrepreneurs are sometimes challenged by the ownership requirements of VCs.  Entrepreneurs that are less experienced with the venture process may have valuation expectations that are unrealistic given the risk profile and the return requirements of an early stage investment.  As a result, VC ownership requirements can surprise newcomers.

However, industry veterans are usually aware of VC ownership requirements, why they exist and the fact that founders can do very well despite despite not owning the vast majority of a venture-backed company.  When a company lives up to its potential, the model typically works - VCs get their returns and entrepreneurs become very wealthy.

In sum, VCs also want entrepreneurs to have a significant stake in the company.  However, it's worthwhile to be familiar with the venture capital model, as understanding the typical ownership stakes after a VC investment can ensure that expectations are aligned before term sheets are issued.