Why Emotional Intelligence Matters in Venture Capital
By Jon Callaghan, July 11, 2017
Venture capital has traditionally been measured in exits. As an industry, we’ve grown to celebrate the success of a few in pursuit of big wins at all costs. We’ve witnessed the glorification of valuation (the unicorn), the shameless credit claiming by VCs and angels when an entrepreneur wins, the childish and harmful monoculture in tech, and, far more serious, as unmasked over the past few weeks, the blatant and shameful acts of exclusion and gender harassment that have occurred behind the scenes.
Venture capital and entrepreneurship have always been about the people behind the ideas – not the valuation or dollars raised, but the people who make a startup great. The truth is there are many paths to achieving entrepreneurial greatness, not just the bro-unicorn paths that have been glorified by the media.
Today, the job of our industry is to make sure the journey is open to all. At True, we’ve based our entire investment strategy on supporting and empowering people. And while, for over a decade, we’ve been the type of firm that has put actions before words, these past few weeks have shown how much words matter. That’s why we’ve been thinking hard about how to offer some very direct words of advice to the venture industry:
It’s time for the industry to truly support and empower its existing and future Founders. It’s time to call an end to the uneven playing field venture capital has built and make the entrepreneurial journey open to and fair for all…
It’s time to require investors to have higher emotional intelligence.
Our desire to approach the topic of emotional intelligence in venture capital is not solely driven by the recent news. This past winter, we conducted in-depth research to gather feedback from our customers: the Founders and team members within the True portfolio.
This research entailed interviews with Founders within our community, entrepreneurs who have accepted an investment from True and experienced our team, platform and services firsthand. We also interviewed Founders who did not take our capital, in order to get a broader sense for True’s brand perception and positioning.
These discussions validated what we have long believed and hoped: that our brand represents our firm’s values of putting people first, specifically Founders and their teams. When we started True a decade ago, the “Founders First” ethos was new. Most firms in our ecosystem have since embraced some form of this messaging, though not all live up to it.
So we kept pushing, and, through our research, discovered what today’s Founders need most from their investors: emotional intelligence (EQ). This is at the top of the list of Founder needs. Why? Because starting a company is a deeply personal endeavor, and venture capitalists can either empower and support you to achieve your greatness, or get in your way and propagate fear.
Replacing fear with safety and objectification with respect.
A venture investor can bring one of two things to the table: fear or safety. At True, we bring safety, safety to be your best self, take risks and dream big. Safety to win and fail. Fear and creativity don’t mix, and alignment and emotional intelligence are critical to empowering you and your team to be your best selves. Your venture firm should have your back in good times and bad, period. More than that, they should have the backs of your whole team.
Every company has a kill-the-company moment when the chips are down. Most companies have many. Consider an exit, a decision that can impact the life and well-being of your family for generations to come. What type of person will you look to for advice and trusted counsel? With whom will you feel safe when openly considering these matters?
Now is the time for those of us in the strong center of our industry to stand up and lead. The tide will turn to decent and humane, people-first venture capital. For this to happen, all need higher awareness and higher EQ. Here are a few ways we think VCs can kickstart a sea change and seed a more humane, emotionally intelligent industry:
1. Realize that this work is intensely personal.
When working with Founders and their teams, focus on the whole person. Invest in them both professionally and personally. The startup journey is brutally difficult on a personal level. Recognize this.
2. Use structural power for good.
Acknowledge that your role as an investor and/or board member puts you in a position of power and that there is a power disparity between you and the Founder. Name it for what it is, and use it for the good of the Founder: empowerment, equality, transparency and support.
3. Lift up those around you.
Public praise and private teachings go a long way in the Founder’s journey. Share your learnings with Founders in a way that makes them feel lifted up.
4. Be transparent with Founders, and gather feedback often.
Get feedback from Founders to help level the playing field. Learn about what they find helpful and want more of. An environment where both sides of the table are encouraged to share openly and honestly sets the stage for greatness.
5. Ditch the ego.
Board rooms, pitch rooms, and VC offices are no place for VCs’ personal bias, baggage or ego. Don’t allow your ego to make the Founder journey more difficult. Starting a company is hard enough as it is. You’re there to help.
6. Support the entirety of an entrepreneur’s journey.
Even beyond an IPO or exit, the Founder needs support from trusted advisors to continue to grow and flourish.
Venture and startups have always been only about the people. It’s time to put people first again.
For everyone within or along the perimeter of the VC community: let’s ditch the sexist and exclusionary culture of the bro founder and hero VC. Let’s call it out loudly when we see it, and make it a point of due diligence for LPs and VCs alike when we evaluate teams. Let’s use our strengths to enhance and empower diverse Founder journeys. And let’s hope that 2017 is the year of the awakening for EQ in VC.