Ask an entrepreneur actively working on building a syndicate for a round what they are looking for in an investor and typically the most important items listed include someone who can help them with customer development, someone with prior operating experience, somebody with domain expertise, somebody with a track record as an impactful board member.
Ask that same question of a VC and typically the most important items listed are related to fund size (specifically the investors ability to write a meaningful check in this round and their ability follow-on in the future), whether or not the investor is someone they enjoy spending time with and whether they admit it or not the brand name of the firm.
Comparing these two answers, what sticks out to me is that the entrepreneurs are focused on finding an investor they can learn from over the long-term while the VCs are focused on short-term goals of getting a deal done with somebody that thinks like them and looks good on paper.
I think the VC way of thinking is super dangerous and somewhat arrogant.
A massive part of my own personal development as a VC over the last three years has been learning from other VCs I’ve invested with.
This learning hasn’t come from 1:1 meetings or coaching, it comes purely from listening and observation.
Through listening to their answers to questions from founders you get to learn about best practices of other companies within their portfolio. Whats worked, what hasn’t. When is the right time to do things like make key hires, change pricing, change branding, fire a troubled employee, etc.
Its not that their answers are right for every situation, but just listening closely to them can provide a lot of data points you would have never otherwise had access to.
Through observation you get to see how they interact with founders, what their board room demeanor is, how they react to tough situations, how they react to big victories, how much attention they give companies, etc.
Its not that you need to mimic their actions, but just observing them can provide guidance to you on your own style and how that may or may not resonate with founders.
VCs I’ve learned the most from have often had fund sizes that are very different from ours (both smaller and bigger), more investing experience than us, make investments in markets that we don’t, aren’t the ‘face’ of their own firm and I didn’t have an existing relationship with them.
I think investors, especially relatively new VCs, should focus more on finding other investors they think they can learn from vs. the path to least resistance on getting an investment funded.
Sometimes I feel guilty about how much I learn from other VCs in our investments, thinking I should be the one delivering the value not taking it.
But the reality is, I hope I’ll feel this way for my entire career.
And for entrepreneurs, I’d make sure that when building your syndicate that you focus on what you want, not your investors.