I know what you’re thinking – ‘Another list of ten commandments? But fear not, this isn’t your typical sermon from the mount.
I’ve been in the world of startups for 20 years and an investor for the past 10 years, but I don’t pretend to be an expert. In the world of startups and investing, we’re all just explorers, trying not to fall into the next hole in the ground. All we can do is keep ourselves informed, learn from our mistakes (and occasional successes) and remember it’s the journey, not the destination, that counts.
So, without further ado, I present to you the Ten Commandments of Being a Great Venture Capital Investor.
1. Thou Shalt Not Worship False Prophets (or Projections): Remember, every startup’s financial projections are a work of fiction. Look beyond the spreadsheet and into the team, the product, and the market.
2. Honor Thy Founder and Their Vision: Respect the founder’s vision and passion. They are the ones in the trenches every day. Your role is to support and guide, not to command.
3. Thou Shalt Not Take the Name of ‘Exit Strategy’ in Vain: Always have an eye on the exit, but don’t let it dictate every decision. Building a great company takes time.
4. Remember the Due Diligence, to Keep It Holy: Never skip your due diligence. It’s your best defense against bad investments and your best tool for finding the hidden gems.
5. Thou Shalt Not Covet Thy Neighbor’s Deal Flow: It’s easy to get envious of other VCs’ deals. Focus on building your own unique investment thesis and network.
6. Thou Shalt Not Bear False Witness Against Thy Portfolio: Be honest about the performance of your investments. Every portfolio has its winners and losers, and that’s okay.
7. Thou Shalt Not Kill…Time: Time kills all deals. Be decisive, move quickly, and don’t leave founders hanging. While it’s easier said than done, quick decision making can be a huge source of competitive advantage.
8. Thou shalt be patient. Venture capital investing is a long-term game. Don’t expect to get rich quick. It takes time to build a successful company. Be patient and help the company grow organically.
9. Thou Shalt Not Commit Adultery…With Shiny New Trends: Don’t get distracted by every shiny new trend. Stick to your areas of expertise and investment thesis. I’ve been guilty of this myself, but VCs have to be optimists by default.
10. Thou Shalt Love Thy Limited Partners as Thyself: Treat your LPs with respect and transparency. They are more than just a source of capital; they are your partners in this journey.
Bonus #11: Thou shalt invest in teams, not ideas. The best companies are built on strong teams. When you invest in a company, you are investing in the team that is building it. Make sure you have confidence in the team’s ability to execute on its vision since the idea is likely to change along the way.
My best piece of advice is never stop learning – stay humble, curious and hungry.