Managing like a Venture Capitalist

What if was your money?

Often you’ll hear the advice to manage within your company as if you were the owner.  As if the decisions you make would affect your own pocketbook. Which, of course they do, even if indirectly.

I have never been a venture capitalist.  I have never been part of a big private equity outfit.

I have started and sold a company.  I have been on the management team of another venture backed company taken through a sale.  I have worked closely with venture capitalists.  I like working with them because they are bright, empowered people for the most part and adversaries of the status quo.

A myth we have is that venture money invests in ‘great ideas’.  Certainly the quality and uniqueness of the idea is one of the weighting factors, but maybe not as important as you think.  What the venture capitalist really invest in are people.

It turns out that there is a surfeit of brilliant ideas in the business world.  Good ideas are a dime a dozen.  The best ideas don’t always win.  The best ideas don’t always make money.  The best ideas are only worthwhile if they have good people driving them.

Venture capitalists don’t see themselves as idea brokers.  They see themselves as company builders.  And companies are built one hire at a time.  They are not investing so much in your idea, but your ability to drive that idea to success.  They are investing in your capacity vis-à-vis the good idea.

You still need a viable idea.  But it is the amalgam of your team and the idea that is the thing worth investing in.  Not the idea.

That’s the company building competency; taking that viable idea and wrapping the right team around it to make it successful.  If it’s a good enough idea the challenge is finding the right team.

Part of that is, of course, your competency in the area of domain expertise that your idea lives.  Part of that is your track record of having done it before with another idea.  A big part of it is your unreasonable and irrational passion about the idea.

That passion manifests in you telling a story with a glow in your eyes that touches fire in the souls of the audience.  The pitch.  If your pitch can fire their souls then maybe it can fire the market.  That’s how founders get funded.

This is the amount of single minded focus that will be needed to stay the course against all obstacles as you drive your company to success.  That’s where passion mixes with grit to fuel execution.  Can you be that person who steadfastly charges forward when everything is on fire?

As the company grows the venture capitalists, as stewards of that growth, will begin adapting the team to fuel the growth.  Often this means swapping out some of the earlier passion driven talent with more steady-handed, process-based managers.

What you can learn from this within your own company is that you are that venture capitalist.  Your product is only going to get you so much success.  You need to hire passionate people to drive the growth and success.  Or you need to take the people you have and drive them, lead them, to be passionate about a result.

Think like a venture capitalist.  Build an organization of driven, passionate people who will create the company you want, not to fill holes in the company as it stands today.

One of the classic management mistakes is to start with the people you already have and try to design an organization around those skill sets.  Instead design the organization you need to succeed and then find the people who can make it go.  They may not be the people you have now.  They probably won’t be.

If you have an idea and you are looking for capital stop worrying over the idea and start working on your story and your passion.  What are examples of where you have used your passion to push through and seize victory?  Get good at telling that story.

People will pay for passion.

If you’re looking to work at a venture backed company bring that passion to the dinner or breakfast interview.  Bring that pitch, that story and even if you don’t get the job you will have made an impression.

You get the meeting based on your background and domain expertise, you get the money or the job based on your passion and your ability to tell that story well.

Money and talent is attracted by the irrational gravity of passion.

Careers and companies succeed or fail one interaction at a time.  Those interactions start because of product, knowledge, and experience and domain expertise.  Those interactions, those moments of truth, close because of the passion you bring to your story.

Entrepreneurs craft reality from nothingness using passion.