A solid background in startup experience is crucial for VCs. Understanding what it takes to grow a startup from scratch can help them identify promising investment opportunities. A genuine curiosity about different markets and consumer trends is also essential. VCs must be willing to take risks and understand that good ideas can sometimes look bad on paper.
Ability to See the Big Picture
A good VC, for instance, Scott Sandell Daughter, should be able to see the big picture and be creative. Whether developing strategies for the portfolio startups or helping them develop, they need to think strategically and understand what needs to be done. They also need to be able to assess a startup and give feedback quickly. They should be able to tell by the end of the meeting if a startup will succeed or fail, and they should be able to give good reasons for their decision. Finally, they should have excellent networking skills. VCs need to be able to find promising entrepreneurs and build strong relationships with them. This is especially important when evaluating potential investments and looking for opportunities.
Ability to Think Outside the Box
When you think outside the box, you take a creative approach to solving a problem. Creative solutions may seem unconventional and even silly, but the best ones often defy conventional wisdom. Investors who think outside the box and be creative can produce outsized returns for their funds. They can uncover new opportunities that other investors miss. They can find companies that have the potential to become the next Uber or Airbnb. This is the quality that distinguishes VCs from other types of investors. It allows them to avoid following a pattern that may not work in the long run. The great VCs have an excellent sense of situational awareness honed by years of experience.
Ability to See the Future
A successful VC can see where the industry and the world are headed. They can also look at a startup and picture where it might be in ten years. They must be creative to imagine all the possibilities, and if there are multiple outcomes, they should have a good sense of which ones could produce the best results. This requires a broad knowledge base but a deep understanding of emerging technologies and product trends. A great VC has to love startups and have the ability to sell. They must be able to negotiate fairly and competitively, and they have to be willing to take a little bit of risk to reap big rewards. They aren’t afraid to fail but know when to move on.
Ability to Negotiate
A good VC has an excellent understanding of business. They can negotiate and be successful with the founders of their portfolio startups. They are non-emotional and can take constructive criticism. An extensive network across the startup ecosystem is a must for any VC. This is crucial to acquiring new deals and supporting their portfolio startups. VCs also have a strong track record of following on their investments. This is a crucial differentiator between VCs who can succeed and those that do not. It is a difficult task that requires sound judgment and pattern recognition skills, especially when faced with the sunk cost fallacy of pouring more money into a loser, hoping it turns around. The best VCs can make this decision in a few minutes of thoughtful consideration.
Ability to Lead
Being a VC looks exciting, but it’s exhausting. Meeting with multiple startup founders daily takes a lot of energy and making good decisions while staying focused, discerning, and positive. VCs must also be non-emotional and capable of saying no to startups that aren’t performing. While some people think that first-hand experience as a business owner or CEO is the only thing that separates top venture capitalists from others, the truth is that it’s not as much of a differentiator as it once was. What matters most is having a great character and quality investment experience.