The VC’s conceit

Inspired by reading @Pv double post on Engineer’s conceit and Marketer’s conceit, I tweeted

This is the venture capitalist’s conceit. We often throw up an array of stats, facts, and extrapolations of founder statements in order to coax ourselves out of our quicksand trough of conviction and manufacture courage where there is none to move to a funding decision.

Our conceit is not asking founders to bend the future to their will, it is asking them to handcuff that conviction with certainty.

In all honesty (and thanks to @Om for clarifying it), the only things we need to be moved by is:

  • Is the idea big enough that it will change how adjacent technologies/products/markets behave?
  • Is the market big enough that it will contort itself to pay for it?
  • Is the founder’s conviction big enough that they must do this or the idea will die, and  that they can and will recruit the very best team possible to deliver on the idea?

Beyond these realizations, we can argue financial projections, models, and hiring plans forever and will not get a shred of certainty. Yet we ask for it…. and more. And most founders partake in this ritual habitual by supplying ‘data’ riding on powerpoint in response. This is the founder’s conceit.

This kabuki back and forth produces incremental decisions, incremental innovation, and incremental startups. Condemned to inconsequential creation of moribund value, a change of pockets for some dollars, and more than a flesh wound from time’s arrow.

I thought I was better than this.

  • http://cynthiaschames.tumblr.com/ Cynthia Schames

    This is a fantastic post. I think the bigger question is: how are you (VCs) and we (entrepreneurs) going to go about changing the broken paradigm?

    • rohit_mod

      thank you Cynthia. I think the only way we break this cycle of mutual abuse is with honesty on both sides of the table. Admit to uncertainty and focus on the path to getting certainty.

      • Chander

        Makes sense but obviously this is very difficult or lese we would be doing it..

      • http://cynthiaschames.tumblr.com/ Cynthia Schames

        Totally agree that transparency is imperative.
        Recently I’ve been actually beginning conversations with a version of: “this is the truth, the whole truth as we know it so far, and I commit to always telling the truth. Can we agree to meet on those terms?”.
        If they visibly squirm, I know we aren’t right for one another.

  • Kshitij

    Rohit. I think asking for honesty from both sides is a bit tough in the real world. Several entrepreneurs have their own agendas. Sometimes the definition of honesty is also debatable. The entrepreneur may believe he/she is honest whereas a VC might feel otherwise.

    • rohit_mod

      Kshitij,

      Not asking for honesty or expecting it is a quick downwards spiral in to mediocrity.

      rohit

  • Nat Scientist

    Like the ratings agencies, the risk of kicking the tires too hard, directly hurts the few players at the table, leaving out the customers of course. As long as the agencies and VCs abide the lie for syndication dreams, there is no blame before their exit/goal line. Goods are goods in the rag trade and the paper trade.

    • rohit_mod

      if we dont get it right, everyone hurts. need to never ‘abide the lie’ – well said.

  • Jonas

    Silicon Valley is all about kabuki theatre! Negotiations are kabuki, presentations are kabuki.

    The real decisions are made based on personal connections / affinity, and then justified with whatever latest fad is (now numbers / data).

    • rohit_mod

      some times – yes.

  • Ema Hussain

    Very interesting, and agree that conceit is an outcome of a lack of conviction. I feel this is super important for founders to recognize this when fundraising. I wrote about it from a founders perspective after reading Eghosa’s post: http://2x2playbook.tumblr.com/post/58818313677/the-most-crucial-part-of-fundraising-validating-vc

    • rohit_mod

      Agree, Conviction – when lacking – turns toxic for founders after raising as well.