“These VC’s would return to their firms with steel in their eyes. They’d be relentless about accountability from board meeting to board meeting with laser like focus on the one or two issues that matter” -Steve Blank.
In our previous posts we were mostly focused on entrepreneurs, writing about what it takes to be an entrepreneur, what kills a startup, what makes Silicon Valley startups successful, as well as many tips regarding startup web marketing, funding, SEO, or pitching to investors. Thus, the main focus was the entrepreneur. But what about the VC? What it takes to be a great VC? Let’s take a look at 3 key things that great VCs do.
1. Steel in their eyes: Two days ago Steve Blank published a great post -“Steel In Their Eyes: Why VCs Should be Startup CEOs”. The message is that if you want to be a good VC then you need to be a startup CEO first. Why? He says “My hypotheses is simple: what most VC’s lack is not brains or rolodex or people skills – but hands-on experience as a startup CEO – knowing what it’s like trying to make a payroll while finding sufficient customers while you’re building the product. Sure, a year as a CEO won’t make them an expert, but it will change them quicker than 10 years in the boardroom”.
Blank is convinced that everyone who wants to be a VC should first do the following 5 things:
2) take a year as a product manager in a startup,
3) become associate for a year – shadowing board and partner meetings,
4) take a year and $250-500K to start and run a mobile/web/cloud company, and then
“These VC’s would return to their firms with steel in their eyes. They’d be relentless about accountability from board meeting to board meeting with laser like focus on the one or two issues that matter. They would understand the CEO-VC-board dynamic in a way that few who hadn’t lived it could. They’d be ruthless in their choice of people and teams, looking for those few who have natural curiosity, a passion to win, and who won’t take no for answer”, explains Blank.
Fred Wilson is supporting this view too saying “You might be surprised to know that I agree with Steve. I have never run a startup company. By Steve’s measure, that is a weakness in my background and experience. And I agree that it is. I’ve managed to overcome that weakness, but it is a weakness nevertheless”.
2. They engage, don’t dominate : “Take it or leave it “ situation is definitely not a practice of great VCs. Moreover, they don’t compete with entrepreneurs, they don’t try to dominate or the other extreme: make the deal and then disappear not answering to emails or calls. Great VCs dedicate to the startup, get engaged and try to guide, try to help entrepreneurs to make it. VC- startup CEO should be a win – win partnership. It’s not about any of those two parties dominating the situation.
Deepak Srinath, a member of the Board of Directors at Viedea Capital Advisors,says: “Perhaps the most important skill of a good VC is the ability to engage and build an equitable, trusting relationship with the entrepreneur. This comes to the fore especially during term sheet negotiations. Too often VC’s hold a gun to the entrepreneur’s head and put them in a take it or leave it situation (and vice versa one may argue). If the rationale behind asking for certain terms is explained to the entrepreneur, the entrepreneur is more likely to agree to them (assuming the terms are not blatantly unreasonable)”.
3. The Four Fs: Mohanjit Jolly, venture investment professional, Partner at Draper Fisher Jurvetson and previously Managing Director at Garage Technology Ventures for 8 years, has a great blog post “Top 10 Traits Of A Great VC”. He claims that great VCs truly excel in the Four Fs and those are: “Finding (generating deal flow), Funding (selecting the right ones), Fixing (most companies need some guidance and often, major overhaul), and Fostering (continuing to add value, whether it’s by hiring, opening customer and partner doors or other strategic as well as tactical issues)”.
To sum up, there are many other traits and circumstances that make one VC a great VC. Moreover there are extraordinary VCs such as Fred Wilson who for example doesn’t meet Steve Blank’s requirement but he is still one of the most successful and respected VCs. Thus, these 3 key things are things that have been identified among successful VCs. So the message is: one can be a great VC even though he/she doesn’t fulfill the criteria defined by Blank, Srinath, or Jolly but it’s good to be aware of some traits that eminent people in the tech world have found to be critical to VCs success in many cases.