Conscious VC (or: believe it or not – VCs are human)Posted: May 12, 2014
Although there seems to be some doubt and debate, it is fair to assume that VCs are humans. Humans with self-doubt, prejudices, insecurities, character quirks, pressure at work, a private life with ups and down, belief vs logic systems, etc – the lot.
All of this can heavily influence how a VC engages with entrepreneurs and acts as a board member. It is human, but it is not always a good thing. As a hyper-rationalist I am always interested in getting to truth – i.e. fully understanding a situation based on facts – and also understanding my (and other people’s) feelings and actions in that context. Yet it is so easy to just go with your knee-jerk reaction that fits with your agenda / belief system – and usually, if you are smart enough, you will be able to cook up good arguments to defend your view / actions to others and yourself.
Let me give you one example:
A company is proposing a tough pivot, or a re-structuring of the company – that will lead to a near & mid-term decrease in growth. However, let’s assume this is in the best long-term interest of the company and will lead to much greater growth and strategic value down the road. Yet, a VC on the board argues against this course of action (the re-structuring) – opting for short-term growth. In this case not because she / he can’t see why the re-structuring is in the best interest of the company – but maybe because it may make her / him look bad in front of the other partners of the VC firm, to admit that things aren’t really working out (and say this is her/his most important investment). There are probably a million different twists to this story you could imagine, but you get the picture: being human is getting in the way of being a good board member for this VC.
I am not immune to this and have probably made more than my fair share of mistakes along those lines. What I have learned though is to run through a few mental cross-check questions to help me be more aware of my feelings and actions when we are making tough decisions as a board:
- Why am I really feeling / acting the way I am?
- Do I fully understand why the entrepreneur is really feeling /acting the way they are?
- What is the tough truth about this situation I have trouble facing up to?
- What would a neutral, external observer that had all the facts think and do in this situation?
- What have I done to contribute negatively to the situation?
- Have I done all I can to contribute positively to the situation?
These questions won’t guarantee good decision-making per se, but they sure help me to be a more conscious VC.