Beware the Arrogant Venture Capitalist
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Early in my entrepreneurial career, I didn’t really know what to make of venture capitalists. All I heard was that they were scary people who wanted to take over your company and screw over entrepreneurs. In my first business, I deliberately stayed away from venture capitalists. Never in my wildest dreams did I imagine someday becoming one.
Much to my surprise, being a venture capitalist is a perfect role for me. While a number of the venture capitalists I know and work with are great, many aren’t. Their weaknesses vary, but there’s typically a common characteristic the not-great venture capitalists share: arrogance.
Arrogance shows up in several ways. The most easily identifiable one is Mr. Know-It-All–the venture capitalist who thinks he knows everything. He’s an easy guy to spot because everything he says is a directive about what to do. There’s never any dialogue; he says if you listen to him, everything will work out fine–yet, it rarely does.
Mr. Know-It-All’s first cousin is the young venture capitalist trying to show everyone how smart he is. This is especially annoying when he actually hasn’t done much of anything except go to business school and manage to land a job at a VC firm. If you find yourself working with this type, quickly enlist a great venture capitalist, either within the same firm or through one of the co-investors, to help you out.
Mr. Know-It-All’s second cousin is the experienced entrepreneur who is now a venture capitalist. Though many experienced entrepreneurs think they can comfortably play both roles, the roles of entrepreneur and venture capitalist are totally different. When I started investing as an angel investor, I often crossed the boundary between investor and entrepreneur. When I became a venture capitalist and started investing larger amounts in more companies, I continued to cross this boundary. It took a few years for this to catch up with me, but it finally smashed me over the head during the internet bubble, when I realized I couldn’t effectively play the role of both the investor and the entrepreneur. I had to pick one.
Once I chose the role of investor, I also determined it was my job to completely support CEOs or founders. If I lost confidence in them for any reason, my first task was to confront them about it. If we could reconcile this, I’d continue to support them 100 percent and work for them. If not, it was my job as an investor to address my concerns at the board level.
Arrogance is often a product of the inverse of this approach, where the venture capitalist thinks the CEOs or founders work for him. The great venture capitalists recognize that their existence is dependent on entrepreneurs. Even when the venture capitalists are incredibly experienced and knowledgeable, they know how to walk the line of “you work for me/I work for you” appropriately–and how to check their arrogance at the door.
Brad Feld has been an early-stage investor and entrepreneur for more than 20 years. He is a co-founder of Foundry Group (foundrygroup.com), an early-stage VC firm. Brad blogs at feld.com and askthevc.com, runs marathons and lives with his wife and two golden retrievers in Boulder, Colorado, and Homer, Alaska.