What is the role of a VC for entrepreneurs?
I suppose it can be different for every founder and for different VCs but I’d like to offer you some context on what I think it is and it isn’t. I was recently contacted by an entrepreneur who was consider a few different business models for his company. I barely know the guy (or his markets) but he wanted me to weigh in one “which market I thought he should pursue.” I responded
“I can’t tell you that one approach is surely better than the other. If I said so I’d be disingenuous. My job isn’t to predict markets but rather to find entrepreneurs who want to create markets through insight and conviction.”
And that’s the simplest way I view my job. It’s to find great entrepreneurs who are passionate about solving a problem. They become obsessed with why the problem exists and they start chipping away at ideas for solving the problem. They develop so much conviction that they can solve it that they do the most difficult thing one can do with one’s ego. They tell the world publicly that they not only are going to solve the problem but they’re going to do it better than anybody else in the market.
I see this on a regular basis like the founders — Josh Mangel & Aaron Peck — at Skurt who are asking the obvious question of why renting a car at an airport sucks so badly. Of course, as a frequent traveller, I know this, too. But the infinitesimally small daily decisions that one needs to make the better that system will never come from me. (Note: before you jump down my throat this founder is no longer with the company after making a mistake and apologising to Jcal he decided to move on.) I can spar with the best of them but at best this will be 5 hours per week.
The entrepreneur who is driven to solve a market problem that bugs her will have to tell her family and friends that she’s really going to do it knowing full well she may fail. She’ll have to quit her well-paid job at a respectable company and tell her parents that although she studied hard throughout school and got into a great college and graduated in 3 years that she is now leaving it to change the way that manufacturers sell products electronically through their distribution systems.
Or whatever seemingly hair-brained idea that would make a Tiger Mom panic and wonder how it had all come to this. Or a Jewish mom wonder why you’d make YouTube videos instead of being a doctor. Yes, Miles, I mean you…
Why A VC Cannot Make Your Decisions
VCs have the safety of not being that person. That is what separates us. And what makes you crazy. And special. I think the best VCs understand that we are enablers not masters of the universe. We are money, advice, coaching, cheerleading, interventionist but not “the decider.” That’s you.
Some VCs pretend to know markets better than you and kid themselves into thinking that their instincts on how to do it are better than yours. These are mostly VCs I would avoid. It’s like trusting your 28-year-old fresh-from-MBA-school McKinsey consultant to make executive business decisions about your 128 year-old-business that they know nothing about just because they are wicked smart, have a black belt in Excel & Powerpoint and do better graphs than you. Consultants should provide you data & frameworks — not decisions.
No. In my view the best VCs are merely your guides. They are your sparring partners. They are there to help you correct your course when you want to make decisions that their history and wisdom tells them might lead you into a dark alley.
Each situation you face is different and unique. Platforms have changed. Marketing channels have changed. Crowd funding now exists. Mobile is now more important than desktop computer for many apps. International markets are now bigger than the US market. Virtual reality is now becoming just reality. Your decisions are unknowable. They are unique to you and not to each other situation that VC has faced. At best they can be your history guide.
You are the only person or team that stares at your exact problem every single day, obsesses about your decisions at bedtime every night, wakes up in a sweat at 4am with decisions spinning in your brain about whether you should sign a deal with unlimited liabilities or not.
How can we know better? What person in their right mind would pretend they did? If you rely on your VC to make the toughest calls that probably says more about your own insecurities with tough, unknowable, judgment calls than about your VC. Strangely — I have found over the years that even the smartest people I know often prefer not to make the hardest calls when it comes down to the wire.
How A VC Can Help An Entrepreneur
That’s not to say that we as VCs are without strong opinions. I’m no wall flower. And I cherish my role of being difficult to persuade about strategic moves without strong data or logic or conviction on your part. It’s my job to help you find your True North. To know that while acquiring a business in China will help you globalise faster it most certainly will take you off of your most immediate problems at home and that dominating your national opportunity first is far better than being spread thinly across two complex opportunities. You want to do that early in your company’s existence? Bring it on. You’re going to have to run over me like a Mack Truck to get that decision approved. But I would never say “no” 100%.
I was reminded of the role of a VC last week when my partner Kara Nortman (← — yes, of course you should follower her! just click that link) was preparing for our annual meeting with our LPs. Kara worked in VC for more than 5 years but more than a decade ago. In preparation for her re-entry into VC she spoke with many mentors of hers for advice on venture capital.
One such advice came from Sharon Weinbar (who I, too, am a fan of) who said, “View every situation with a beginner’s mind.”
Such simple yet poignant advice. Kara and I discussed what we thought that meant to each of us. I pointed out that when you become a partner in a VC firm almost by definition you’ve seen years of businesses that failed or concepts that didn’t quite work. So you become jaded.
Of course, the taxi lobby and its cozy relationship with local government will never let a business like Uber exist! Document management? Nah. It’s been tried for 10 years with minimal success. I can’t see how DropBox or Box break out of this mold. Disappearing messages? Nah. Facebook already has critical mass.
It’s not the job of a VC to predict markets, only to have a good sense of where innovation and disruption could lead to big opportunities and to find entrepreneurs who are more driven, more passionate, more committed and more informed in these markets than we are and who we believe are also more of all of these than the competition.
[This post by Mark Suster first appeared here and has been reproduced with permission.]