Leap of Faith Required

Career progress depends on being unreasonable

The previous Venture Upward post was a cautionary tale about shortsighted focus on “getting a deal done” at all costs, being nearly blind to the actual merits of the investment opportunity if you can push it through your partnership’s process in order to put early proverbial points on the board. This post is an examination of the flip side of the coin - the leap of faith which is required for any new venture investment.

Critical evaluation of new investments is conducted with the head, gathering a multitude of information to distill it through mental frameworks to hopefully yield insight and direction.  However, ultimately, all final decisions from a venture investor eventually come from the heart.  Given all of the knowledge which has been accumulated during the diligence process in understanding the market and spending time with the entrepreneur, am I ready to act based on the gut emotion of what I believe will work?  For the best venture capital investors certainly aren’t the ones who run the most comprehensive diligence processes in the business, but rather those who can put together a narrative of “what could be” if the team and the market align at just the right angle to create an unstoppable wave.   

I once had an advisor mentor pull me aside to tell me that I can’t be afraid as a young VC.  That I was absolutely never ever going to have full certainty going into any new investment, so that isn’t the purpose of the pursuit.  He shared this advice in such a gruff voice, and so I first thought that he was trying to push me in the then-current specific situation.  But in fact, I’ve come to learn that he was trying to convey a more universal truth.

In common parlance, a leap of faith is an act of believing something outside the boundaries of reason.  Almost by definition most venture investments wouldn’t be called reasonable given their failure rate.  What’s interesting is that the implications of “taking a leap of faith” can either carry positive or negative connotations in different contexts in everyday language, as sometimes it is a virtue to be able to believe in something without absolute evidence, while other times it is no doubt foolhardy.  Must one become a fool to be a great VC?  Your vocation implores you to find situations where you believe in something where most others do not.  Certainly that must be a recipe for foolishness.  It’s often a good sign when I tell peers about my latest investment and they respond with blank stares and head scratching.

Whenever I do make a new investment, I ask myself not will this venture absolutely succeed, but does it have the capacity to be great if it really does?  And do I have the willingness and interest to spend time with this team and the problem-space to work through the details if and when it does not thrive?

In venture, there is no complete reasonable certainty about the inputs nor the outputs, only the process in between.  Fear of mistakes holds back many non-partner VCs, but eventually you must attempt to jump or you will never leave the ground.