an entrepreneur is not a spreadsheet
The spirit of the entrepreneur is the greatest asset of any startup, especially in the very early stages. During the critical first stages it is essential that all funders and strategic partners protect and manage this valuable asset like the treasure it is.
So many entrepreneurs walk through our doors with preconceived ideas of how Venture Funding works. We recently saw an entrepreneur who came in and immediately offered us various types of security, which included 100% of the share capital of the company and assets in his personal capacity. The more we tried to explain to him that this is not how we work, the more agitated he became as he thought that we were trying to negotiate. The light suddenly came on and he had to rework his entire pitch towards growth, rather than security.
This episode made me realise that entrepreneurs are conditioned by the investor market, which is vigorously focused on security. In my view, an investor who invests for security is constantly focusing on the downside of an investment. This negative outlook is transferred to the entrepreneur and ultimately becomes destiny.
If we had to invest for the security that entrepreneurs are able to provide, it would be better to look at property or infrastructure. I would much rather invest in aspirations and growth than the small amount of security I can get from an entrepreneur.
The direct effect of investors who measure the probable success of an entrepreneur with spreadsheets (that can be changed with the click of a button), is a dehumanization of the transaction. In my opinion it is impossible to take the human factor out of a startup. I know this as I most probably spend 50% of my time being a psychologist and motivator to the CEO’s of our portfolio companies.
I have not found a quantitative method to measure this, but I can certainly see a direct correlation between the positivity of entrepreneurs and the progress of their startups.
As an investor you can do, among other, the following to ensure that the spirit of the entrepreneur is healthy and high:
Be a positive contributor during interactions
If you do not have a suggested solution to a problem, do not mention it. Find a solution first (together with the entrepreneur if possible) and then suggest this solution to the entrepreneur as soon as possible
Provide support to the entrepreneur during difficult times
One of the biggest challenges of any entrepreneur is the acquisition of talent. More often than not, the first or second employee is not ideal and might cause a constant negativity in the office. As an investor, I would suggest that you support the entrepreneur in relieving this negative person of their duties as soon as possible at all costs. One incorrect appointment can cause a startup to fail much faster than you think.
Stay away from security
Most entrepreneurs are free spirits. As soon as you bog them down with security, especially in their personal capacities, you weaken their creativity and boldness. Ask yourself: “Is the security I am requesting really worth the opportunity cost of having a free spirited entrepreneur?”
Praise her in public
The entrepreneur is really pouring her life into this venture. Make sure to praise her, in public, for any actions that take the company forward within the strategy of the board.
These are some of the small actions I can suggest from experience, but would really appreciate any further suggestions in the comments section.
The spirit of an entrepreneur is a treasure that will bring riches to all who guard it with the care and respect it deserves.
By D’Niel Strauss, director of Stocks & Strauss Venture Capital – @dniel_strauss