The Venture Capitalist Struggle


Psychology Of A VC And How To Take Advantage Of It

In the startup community, we often hear and read a lot about the entrepreneurial struggle — the daily difficulties and challenges facing those building companies. Rarely, however, do we hear about the other side of the equation — the investor struggle. Although it may appear that the life of an investor is a charmed one filled with great travel, luxury hotel and amazing conferences that couldn’t be farther from the truth.

When you ask any VC how it is going you always get the same answer: amazing. Company XYZ is a home run! There is a sort of unwritten law that if you are a venture capitalist you cannot perpetrate any fear, any weakness or hesitation. Basically, a sort of conviction that venture capitalists’ success is function of a never ending positive attitude: aka the right to be dis-illusional. Good news is that this is for free. No drugs are used in the industry ☺

There is a long often tedious path that a VC must go down, in order to successfully sign a term sheet and/or have the opportunity to invest in a company. The things people often see on the surface are only a fraction of the life of a VC and don’t reflect the regular “struggles” that go on daily basis behind the scenes.

Don’t get me wrong, I think that being a venture capitalist is an amazing job (add in all the stuff you love….) but I believe that understanding what goes on behind the scenes can be helpful to entrepreneurs.

Things for any entrepreneurs to keep in mind…

1. The hunting struggle

I personally believe that in Europe, to be a successful venture capitalist, proactive hunting is a major source of competitive advantage: this is due to both the level of maturity of the ecosystem and the high level of geographic fragmentation. Therefore, a lot of the discovery process tends to be a random walk and as such sometimes feels totally exhausting (even physically). I have no doubts that some venture capitalists at some point suffer so much from the no-deal syndrome that intentionally or unintentionally they decide to compromise: the must do deal. Sometimes an investor is on the hunt for 15 months without doing a single deal and then, all suddenly, he/she does two deals in a month.


When you meet an investor always try to get a sense of where his/her head is vis a vis the hunting struggle. A simple innocent question such as When did you do your last deal? has the potential to reveal great insights. Other questions that can help entrepreneurs understand the psychological dimension of the hunting struggle are questions such as Where are most of your investment located? or How do you find out about investment opportunities? Keep in mind that investors do not change their behaviours often. If your target investor only invests via referrals of trusted party make sure you build strong relationships with people he/she knows.

2. The decision struggle

Making binding decisions is always a complex process in any field. It’s even more so in venture capital because once the decision is made it’s generally extremely difficult to reverse.

The decision struggle has two different dimensions: first, the venture capitalist needs to convince himself/herself about the investment. Second, depending on the partnership decision making process, he/she will also need to convince his/her partners. Different investors approach this problem in different ways. I have noticed that in Europe, a very common way to deal with the decision struggle, is to procrastinate. Some investors never give an answer and keep going asking for additional data points in the hope that the data will make the decision for them. I have never seen data making decisions by themselves and I am pretty sure it will never happen. Still the practice is quite well spread.


Understanding the decision making process is the key. This is not easy because, on the other side, venture firms make a deliberate effort to obfuscate their process.

First, try to understand if you are talking to a decision maker (aka partner). If you are stuck talking to a non-decision maker try to play the venture firm politics until you find a way to engage with a decision maker. It’s also very important to understand how the firm decides and the partner’s role in that decision. Best way to learn this is to ask direct questions and call other entrepreneurs who have already gone through the process with that specific firm/partner.

What’s more…When you engage with a venture capitalist you never engage with a single person but with the whole partnership. If you like it or not there are times in which your investor will need to regroup with his/her partnership in order to make a decision. Never forget the partnership dynamic.

3. The passing struggle

As an investor, 99 times out of 100 the answer is NO. While it’s tough for the entrepreneur to hear, telling someone who is working 24/7 on his/her dreams…sorry you are not good enough is NOT a pleasant experience!

There is a human and therefore emotional dimension in passing on a deal but I want to make clear that this is a symmetric feeling: the rejection that any entrepreneur feels, is often associated with a sense of guilt on the investor side. This becomes significantly more difficult when the investor likes the entrepreneur. I try as much as I can to be transparent and provide a clear view of the rational behind the decision making process whether it’s personal reservations or the pass is driven by partnership dynamics. However, it’s not always easy.

In my personal experience time (or lack of it) can also be an influence. The partner looking at the deal might just be swamped with other deals and as such does not have the head space to drive and manage the decision making process. It is also totally legit to pass on a deal based on a very personal rational: I am just not the right investor for that type of company (e.g. I would not know how to help).


As much as possible try to read the situation and develop your own view on why such and such decided not to invest. Focus more on the relationship aspect especially if you really like the investor. The why question is key. If you see that you are not getting a clear answer start thinking why you are not getting such answer... Keep in mind that this can be a unique opportunity to build a strong relationship with your preferred investor. Getting a no today might mean a yes in the future. Leveraging the guilt that the investor might feel in passing on your company is a great technique to get tons of free help and support.

4. The company building struggle

When I meet an entrepreneur and consequently decide to invest, I always do it on the basis that he/she will always know much more than I will ever be able to understand about his/her business. This is the whole point about investing: supporting with cash the dream of an entrepreneur and becoming part of that dream too: almost by osmosis.

Good investors try to help the entrepreneur with whatever means they have: leveraging their network for good hires, sharing cross portfolio knowledge, being available as an external sounding board, psychological support, practical support, etc.

Sometimes however you want to help but you feel useless and unappreciated. The harder you work or try to be supportive, the less impact you have and less appreciation you gain. Sometimes my inability to engage with an entrepreneur lasts a short period, other times a longer period. My reaction has been always the same: work harder and try to be there when needed. Be supportive without being a pain.

I have learned that sometimes it is better not to try and just let it go if this is what the entrepreneur wishes.


Think of your investor as an extension of your team and figure out what’s the best way to manage/motivate him/her. Do not think that all the investors need to be managed in the same way: try to understand who is the person, his/her strengths and if and how he/she can contribute to your success. A disengaged investor might be what you want but might also be a missed opportunity for your company building process.

5. The rumours struggle

I often hear things where the facts as I know them are completely re-arranged. I therefore assume that this happens a lot and that in many cases it’s just more difficult for me to recognise the truth because I am not familiar with the matter. To be clear I do not think this is the result of shabby tech media or blogger community: I actually find some of the written pieces out there completely brilliant. To write you need to be able to articulate an argument with some depth. I am referring to some sort of low level gossiping that flows in the industry.

Recently I heard an entrepreneur totally re-shaping my thoughts on a startup to the point that I could not recognise myself in those thoughts. Funny enough I was furiously attacked for my views and what I had supposedly said… without for a single moment the person in front of me feeling the need to confirm Roberto, did you actually say this? Why? Are rumours the real reality?


Do not judge your potential investor depending on what you hear in some random rumours. Overcome the he said/she said logic. Do not listen to gossips, do your homework, talk to the entrepreneurs that know him/her personally: both failed investments and successful ones will give you the best reading on your potential future investor. Do not be concerned to ask very direct questions. The best investors will give you very direct answers.

In conclusion, I do however believe that to be an early stage investor you must be a structural optimist. You need to be aware of the struggle but like a ball be able to bounce around and every time higher and above any struggle. If you do not have a similar attitude please change job: we are here to change the world ☺

As an entrepreneur, now you have a bit more insights about the psychology of a venture capitalist. Either you are soon going out to raise money, or you want to improve the quality of your interactions with your existing investors, use the tips above and keep thinking about the symmetric dimension of the struggle.



Roberto Bonanzinga
Entrepreneurship at Work - InReach Ventures Publication

InReach Ventures and formerly @Balderton (Benchmark Europe) PORTFOLIO: @wooga @vivino @banjo @SaatchiArt @contentful @depopmarket @lifecake @marvelapp etc.