For me, investing in seed stage companies has never been about making money: it has been about passion. Passion for the mission. Passion for the founders. Passion for those in and around the company. Yes, making money is always the hope but not the objective function I’m solving for. In my experience if I get the passion right, the money often (but not always) follows. I can honestly say that I haven’t invested in a company for which I did not have passion. “This founder’s great and it’s sure to be a money-maker but I hate what they do” are not words that have ever passed through my mind or over my lips. Being partnered with founders and helping them build their businesses is simply too difficult and too emotional for it to be a clinical exercise. Without passion, being a venture capitalist would an absolute nightmare, at least for this investor.
But one of the hardest things I have to do is to distinguish between passion and performance, and to provide real guidance and support when it is required. It is a very fine line between being helpful and being domineering, and it is also important to balance the company’s needs with the skills, abilities and interests of its founders and employees. This is particularly challenging as companies scale. Sometimes founders can rise to the challenge of ramping an organization and all it entails, while other times they are better suited to narrower roles that play better to their strengths. Even while this might be the right thing for the company, it is still often an emotional transition and one that needs to be handled with thought and care by the founders, other members of senior management and the Board. Falling in love with a company and its founders can be dangerous if challenging, honest conversations can’t be had and difficult but necessary management changes can’t be made. The most important thing for a fiduciary to remember - be they outside investors, independent Board members or founders - is the focus on doing the best thing for all shareholders. Bringing everything back to this core principle helps focus everyone’s attention while making the difficult decisions a little bit more straight-forward.
That all said, it is still hard as hell to provide painful feedback to people whom you care deeply about but who simply need to do better job or else shift roles. Just because it may be the right thing to do doesn’t make it any easier, and passion for both the people and the companies makes this important task even more challenging. But as a partner to management I owe it to the founders and to other shareholders to step up and have the necessary “tough love” conversations. Because if not me, then who?