Three rules for VC-entrepreneur engagement

By boris, September 26, 2017

Recently, someone asked me about my principles for engaging with my portfolio entrepreneurs. The question was a good trigger to think about what drives my interactions with entrepreneurs and how my relationships have evolved over time.

Three guiding principles provide the foundation for all my communications and engagement with entrepreneurs:

1. Listen and ask questions (because I don’t have all of the answers)

Like many investors, I came to VC after being an entrepreneur. Having the operational experience of launching and running a business is often very helpful as I can share my own experiences and help entrepreneurs avoid some common pitfalls.

But, at the same time, experience can lead one to think that he or she has all the answers. The truth is that every situation is unique – and the experiences and lessons from my former company won’t necessarily apply to every start-up and entrepreneur. And sometimes, the journey is just as important: people need to reach their own answers instead of being fed the outcome from the start. This is something I had to learn over the years as an investor.

2. Give honest and direct feedback

I’ve seen some investors say the most positive things to their entrepreneurs, only to complain about them and the company in private to their partners or fellow board members and investors.

As investors, we need to be both cheerleader and critic. It’s easy to say the good things, but we can’t hold back on the tough feedback when it’s necessary. I often decide on the best way to deliver the feedback (1:1 versus board meetings), but I try to never withhold that feedback. Investors need to be honest and empathetic!

3. Remember who is running the company

Last but not least, I must remember who runs the company. The ultimate decision always needs to be with the entrepreneur. As investors, we can help him or her reach that decision…but we should never be the one making it.

I’ll be the first to admit that it’s easier to give advice than to live by these rules on a day to day basis. There are times when I should have asked more questions or been more direct. However, I do keep these three rules in mind each day and am continually measuring myself against them as I grow.

  • Thanks for sharing this, these are very inspiring words Boris.

    What I find most difficult about persuasion is the communication time required to “inspire” change, rather than forcing it or expecting it. Each person has a different set of base principles, which justifies their thinking and decision making from their vantage point. Altering ones decision may sometimes requiring education on multiple principles that are the basis of that particular decision.

    People, investors included, have a tendency to underestimate how much communication/education is required to inspire a point of view. Theoretically, if you could communicate all your principles, they would decide like you, but this is not possible. I guess there is a correlation between the importance of the decision at the time investment to synchronizing our principles that we should follow to maximize unity when needed.

    At the end, the question is how much time are you willing to invest in communicating your base principles that would inspire that person to lean towards a particular decision, while doing it all without any expectations.

  • bwertz

    Great point! Ideally investors and entrepreneurs are aligned re vision for the company, how to build it & a core set of values so this communication task becomes less difficult.

  • Ana Paula Mofarrej

    Hi Boris. Thanks for sharing your thoughts in this tough engagement balance between VCs and entrepreneurs. Coincidentally, yesterday I read a decision-making article that Tomas Tunguz, VC at redpoint, also shared. It’s incredible how your article and his share the same guiding principle: listen and ask questions and let entrepreneurs reach their own answers by thinking through a new perspective. Great thoughts! Here is the article:

    Best regards, Ana

  • Vimarsh Karbhari

    Hey Boris,
    Great blog. Can you elaborate more on the process of “Give honest and Direct feedback”? I have seen way to many VC-entrepreneur relationships where even though folks are aware of this rule they fail to practice it effectively.

  • bwertz

    Agreed, Tomas puts out great blog posts and this is no exception.

  • bwertz

    Honest feed-back is never easy as people are often worried about how it is perceived. My take is that you can only change a situation when you try to put the facts on the table which might involve “tough feed-back” – what is however important is to give that feed-back in an appropriate forum (e.g. sometimes private feed-back through a 1:1 conversation is better than public feed-back in a board meeting) and to always remind the entrepreneur of rule #3 (the investor only gives feed-back, entrepreneur takes the final decision).

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