The Secret Ingredient to Being a Great VC

August 22, 2014 by

The Secret Ingredient to Being a Great VC | OpenView Blog

A lot of people ask me what it takes to be successful as a VC. I hear it from peers and from candidates interviewing to work at OpenView. People want to know the secret “pro tip” for aspiring or newly-minted VCs that will guarantee their success.

In today’s lifehack-glorifying world, it’s not surprising to me that people are looking a career Game Genie. Do I need an MBA? Do I need to be an “operator” first, by working at or founding a startup? Or do I need to be an investment banker first? What books should I read? What blogs should I read? Should I take a class on financial modeling? Do I need to learn to code? How should I manage my time as a VC analyst or associate? Is the secret being “first to arrive, last to leave” in my office?

While these are all good questions, I don’t see any of these things as the silver bullet. You could do all these things and not succeed. You could do none of these things and achieve wild success.

I actually do believe there is a silver bullet. It’s not based on educational background, work experience, or reading material. It’s something softer and more innate – I call it intellectual curiosity. It can be summed up in one word: “why”.

To me, “why” means “say more” or “help me understand.” It’s built on a foundation of healthy skepticism, cautious optimism, data-driven problem solving, and continuous improvement. Brad Feld calls people locked and loaded with this silver bullet “learning machines”.

The Secret Ingredient to Being a Great VC (or Entrepreneur): Intellectual Curiosity

Intellectual curiosity doesn’t accept things at face value. If someone boldly claims, “The rising craft coffee trend is going to kill Starbucks, and Blue Bottle is leading the pack,” the intellectually curious person doesn’t just say, “Oh cool. I like Blue Bottle. I read that article about them recently.” Their response instead looks more like a series of rapid-fire questions: Why is Starbucks so broken? What do players in the “craft coffee” set do differently compared to Starbucks? When and where did the craft coffee trend start? Who are the leading players today? Where are they from and what is each one known for? You like Blue Bottle — why is it objectively superior to Stumptown or Intelligentsia or Philz or La Colombe or the next upstart roaster/shop? Will anyone except urban hipsters ever care enough for this trend to go mainstream? And so on.

This kind of intellectually curious knee-jerk reaction can appear to border on incredulity, but really it’s just a passionate desire to gather, catalogue, and understand data and its relationship to other data. Reid Hoffman calls the strategy “follow up and probe” in his book, The Start-Up of You. He says that entrepreneurially-wired people (regardless of vocation) have a “mind on fire” that brims with curiosity.

How does this translate to being a VC? For starters, much of a VC’s time is spent meeting with people who all make big, hairy, heavily-biased claims. It is the VC’s job to discern between which claims are valid and which are bogus. Taking everyone at face value is recipe for disaster — competitors bash their rivals, startups minimize the threat of an incumbent, executives inflate their departments’ achievements, and customers can be over-eager early adopters on one hand or stubborn hold-outs on the other. You can’t trust anyone! Or at least you can’t give them the benefit of the doubt. You must ask “why” over and over until you have enough dots to connect.

I’m starting to think that maybe the best feeder program for VC may be the FBI or the CIA. Seriously. A good agent has to talk to everyone, turn over every stone, cultivate valuable but potentially resistant informants, connect previously unconnected dots, maintain a healthy skepticism, and ultimately put together a compelling & actionable case amid very high stakes.

Do you want to become a VC or are you looking for tips on how to succeed as a VC? Start asking “Why?” My colleague Baiyin Zhou wrote a great post with recommendations for folks trying to break into venture capital, which embodies intellectual curiosity. Or you could always join the FBI…

Image courtesy of Markus Spiske

  • Just wondering

    What is your overall IRR? That determines how successful you are as a VC.

    • Blake Bartlett

      @disqus_qHSfwaaTHP:disqus great point, however that’s the output or the yardstick. I find the key *input* to be intellectual curiosity, but certainly there are many others along with it.

  • Brian Heller

    Such a great point. I’m curious, how did you come to that realization?… ;) Seriously, thought, very true! Thanks.

  • http://www.burkefranklin.com/ Burke Franklin

    When I used to get F’s on my papers, my ancient history professor would write, in red ink, all over them, “What do you mean by that?” “Give me an example!” “Show me!” “Prove it!” “Dates?” “Names?” “What are you talking about?” I sure couldn’t BS my way through a paper! By providing answers to those questions ahead of time in all my papers was how I got A’s. nnnnit seems like many business plan these days are merely an extension of those college BS papers! You really can’t BS your way through a business plan. I’ve been helping people with business plans for 25+ years and I’ve applied these principles to those plans. I still hear my professor’s voice in my head! In our business plan software, BizPlanBuilder (http://www.jian.com), we anticipate many of your questions. nnnnIdeally, an entrepreneur will pitch you, with the answers baked in, and be prepared with the answers and facts you’re looking for. There is a delicate balance between making a big, hairy, audacious claims, and backing them up with a believable story, reasonable numbers, and a good case for success.

  • greg

    $850 billion / year spent on muscle and bone injuries. More than cancer and heart disease – combined. nnnMuscle overuse injuries can be treated by use of high pressure – deep tissue massage with the proper tool. Curious? gzurbay@yahoo.

  • http://www.yvcblog.com/ Jonathan Friedman

    As you question every point, it’s important to do so with a respectful, open minded mentality. Otherwise, at times this can make VCs come across as arrogant know-it alls