A few weeks back, Albert Wenger wrote a short article on the value VCs bring, notably in focusing on the “big picture”.
Albert’s article led to an interesting discussion on the best and worst kinds of VCs, and specifically how important it is for a VC to have real, hands-on, operating experience. My personal view has always been that, while there are rare exceptions, every investor and Board member should have had real-world, hands-on experience before having influence or control at a strategic level over a company.
It isn’t just about knowing the right thing to do; it is far more than that. It is:
- Knowing that theory only goes so far, and the real-world works differently than expected.
- Understanding that many decisions may look correct, and it is about selecting from different viewpoints.
- Recognizing that good advice poorly given is worse than advice not given at all.
- Having enough humility to know that your advice is just that, advice, and you have as much chance of being wrong as right.
- Sensing the stress of an executive whose decisions affect his/her livelihood and that of his/her employees.
Andy Idsinga, quoting Tom Magliozzi, summarized the key point in my favourite way, a short phrase that captures it all: “reality often astonishes theory.”
But Andy went on to add a point of his own that is crucial:
“Even if they’re not building “BIG” things they should building *something*”
It is not the size of the thing you have built that gives you the experience, although knowing how to scale helps. Nor is it the particular field, although domain expertise also helps. It is about having actually struggled with, built and sold (for cash or usage or other reason), something. All of the above human traits of giving advice correctly and knowing when not to, recognizing the stress, learning humility, understanding how reality bites theory in the rear, all come from the real-world experience of having built – and often, along the way, failed to build – something, however big or small.