VCs Invest When They Feel Ignorant and Uncomfortable
Investors analyze a variety of factors about the team, product, traction and market before investing. But in early stage investing, there’s really one quality that trumps all: self-awareness.
Well-informed on every aspect of the business, self-aware founders portray confidence and reliability, that make investors feel impressed and helpless.
I love feeling ignorant and it is addictive!
Great team trumps almost any other consideration since the whole company is established around the core vision and culture of the founding team. Best entrepreneurs build self-aware organizations that make well-grounded decisions on every step of the businesses, mitigating risk levels and increasing the chances for success.
Investors feel excited but incompetent when they encounter sophisticated entrepreneurs well-informed about their industry. This feeling of inadequacy and admiration is a key driver of the investment decision and it is addictive.
If this VC is having such a hard time (feeling uncomfortable), there’s something there. I need to meet with that founder. — Jason Calacanis
Spray and Pray on Self-Aware Entrepreneurs
Self-awareness builds the key entrepreneurial traits that impacts the overall trajectory of the business on every level. Fully aware of the market dynamics and the opportunities, great founders are driven by their passion to gather thriving teams and try turning an industry on its head.
Start with a purpose to change
Self-aware entrepreneurs align their vision and company purpose even before starting the venture. Motivated to transform their industry and impact lives, they set the fundamental values of the company early on.
Driven with purpose, these changemakers envisage a future built on their ideals and have the diligence to take every step necessary to get there. This devotion gets VCs enthusiastic to jump on board.
Anything shy of passion will fade away, leaving the entrepreneur or the Venture Investor vulnerable to fatigue. Passion, however, will transcend the challenges. — David Hornik, August Capital
Stay hungry, stay foolish (to learn)
In the quest for awareness, entrepreneurs have an inner curiosity and desire to learn that stimulates personal growth.
Aware of the blind spots in the thinking patterns, strong entrepreneurs regularly ask for constructive feedback that will cut through any self-deceit or one-dimensional views. This progressive culture becomes the backbone of the organization.
The hunger to learn is important at early stage investing since startups are all about transitioning to different job titles and duties as the company grows rapidly. Continuous self-development is the only way to fulfill the ever-changing responsibilities and not let any out-of-control actions lead to downfall.
The business depends on the team’s understanding of their strengths and weaknesses. Conscious entrepreneurs have the ability to perceive these accurately and align their team strengths with the business’ core competencies — essential while building the core team.
Individuals don’t build great companies, teams do — Mark Suster, Upfront Ventures
Understand the market to shoot for PMF
Mismanagement and poor decisions due to lack of sufficient market know-how and analysis might lead to inability to keep the business sustainable. Great entrepreneurs know the bottom-line mechanics of a business and its absolute market dynamics.
Examining the entire value chain, these entrepreneurs figure out what market dictates and determines the product positioning and strategy accordingly.
Lose little battles to win the war
Conscious entrepreneurs feel the inner duty to assess every risk and reward associated with different strategies. This intellectual honesty brings a sense of certainty and efficiency in tough decision-making situations where the potential outcomes are already pre-calculated.
Entrepreneurial wisdom comes from being willing to lose little battles to win the war and to learn from mistakes in order to mitigate the risks. Successful decision makers become experts at knowing patterns of business and behavior, enabling them to take more risk with less loss.
VCs have a portfolio strategy to structurally mitigate risks and optimize for success. Founders that have a similar de-risking approach resonate with investors and are close to sealing the deal.
Success happens when preparation meets timing
Success requires a combination of strategy, realigning, striking out, losing and going back to the drawing board to start again. This continual climb to the top requires patience to help leaders look beyond and wait as the chips fall into place without lashing out impulsively in a negative way and destroying the opportunity.
Great entrepreneurs frequently test the market and prepare for the battle with small hits, only to strike harder when they get early signs of right timing.
This passion and stubbornness gives the investor confidence that the company will be best positioned when the right time comes to change an entire industry.
The trait that i look for foremost is self-awareness… entrepreneurs that are playing mental ping pong with you, will bring that awareness to their work, team and company. If the founder is so terrifyingly smart, that is always a great predictor of future greatness. — Max Levchin, Paypal, Affirm, SciFi VC
Just tell VCs what they want to hear
Self-aware entrepreneurs run data driven organizations that enable them to make superior and fact-based decisions since they’re measuring every component of the value offering separately. On top of their data, they are well aware of their struggles and metrics they have to work on improving. This deep knowledge on customer behaviour patterns ensures the founder’s ability to embrace the customer needs and deliver it.
Attention to details around the company and the market, sometimes at an obsessive level, reassures the investor that the entrepreneur is fixated to know everything concerning his business and is potent to be steps ahead of every other player
These believers talk about their biggest struggles and over emphasize the business risks and weaknesses, even before investors recognize them. Revealing the different strategies to overcome potential challenges, investors leave the meeting enlightened and impressed.