Steve Blank Discusses the Skills Required to Be an Effective Venture Capitalist - Page 2
Steve goes on to note that Chuck Eesley, one of his Stanford compatriots, has performed quantitative studies of the VC industry, finding that firms which have operationally experienced partners tend to generate superior financial results.
Yet, even though Steve acknowledges that all senior operating roles at a startup facilitate a venture capitalist’s ability to succeed, he concludes his remarks by underscoring the significant distinction between his first-hand experiences as a VP and as a CEO.
“…in my eight startups, I was CEO and Founder once, meaning the buck stopped with me unequivocally…the role of the CEO is so different than the role of an operating exec, they’re not even on the same planet. I had been a VP of Marketing a couple of times in a startup…but until you are the CEO having the Board yelling at you in one ear and running out of money… and the Engineering VP just quit, you don’t have a clue about what it is like running a company until the buck all stops with you. So I wanted to distinguish running the company from the other jobs at a startup.”
Relevancy Is Relevant
Few people will argue that operational experience is an unimportant component to becoming an effective venture capitalist. However, the relative value of such experience diminishes considerably as the investment domain diverges from the investor’s area of operational expertise.
For instance, while discussing this topic, a venture capitalist (who asked to remain anonymous) recently shared the following: “I once had a life sciences guy, a brainy medical academic, on the board of a tech company. He was worse than useless as his frame of reference seldom synced up with my portfolio company. He kept trying to use a screwdriver as a hammer.” Similarly, a former CEO of a Big Dumb Company might be ill suited to invest in lean startups. Operational experience is additive, but its relative impact is predicated on how germane it is to the investor’s area(s) of focus.
The Alchemy Of A Great Venture Capitalist
Steve notes that venture capital is still a “craft industry” and thus there are a variety of career paths which lead to Venture Partner. According to Steve, “If I had to come up with an academic-specific view of how to build great venture capitalists, it was hire people… to be an Analyst out of engineering or MBA school. Let them…understand how to analyze deals. Throw them out and make them be product managers or something in a startup to get a feel of a company.Continued on the next page