What are some challenges that new VCs face and how can they overcome them? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights.
In my experience as a venture capitalist, the hardest thing is to constantly say "no" to entrepreneurs. For a million varied reasons, you have to say "no" to 99 out of 100 investments you come across, and it feels terrible every single time.
As a VC you're speaking to entrepreneurs who are putting everything on the line, who wholeheartedly believe in their businesses and ideas, and you want to support them--it's why you got into VC in the first place. It's extremely difficult to say to such a passionate person that their idea isn't big enough or that you don't believe in their strategy, team, and so on.
I'd name two main reasons why saying "no" is especially hard for VCs.
It's no secret that VC's have egos. Especially when you're starting out, this little bit of ego makes you think that if you turn down an entrepreneur's idea, it will crush him or her. If you're feeling this way, you have to get over yourself. It's not about you. Entrepreneurs aren't interested in your feelings and they're not interested in avoiding awkward conversations. They just need you to be honest and up-front so they can move on and not waste their time. As a VC, it's way easier to give a "maybe"--to say "show us more data," "I'll run it by my partners," and so on. Giving that firm "no" is hard, whether it's your ego coming into play, or just that you really want to believe. But you have to be able to have those conversations. Any good entrepreneur would rather have a "no" than a "maybe."
Even today, years after I left VC to start, when I think back to the entrepreneurs I continue to have the best relationships with, it's the people to whom I quickly and respectfully said, "This isn't right for us; here's why; I'd love to keep in touch and see if I can be helpful in the future, but we're not moving forward with this."
A VC's job is to say "What if?"
At a higher level, it's difficult to say "no" because, in truth, your job as a VC is to say "what if"--to look for the reasons something can work, not why it can't. You get into the business to find the biggest innovations, the craziest ideas, and that can only happen when you suspend your disbelief, throw the rules out the window, and say "what if they can pull this off? What would the world look like?" Every day, you're looking at shells of ideas, and you have to imagine how they will develop and believe that they could become giant, world-changing companies.
Finding that balance between the mindsets of "no" and "what if?" is incredibly hard. If your default mode is "no," you're going to miss out on some of the most exciting innovations because you're resigned to thinking they'll never pull them off. But if you're too far on the "what if?" end of the spectrum, you're going to waste a lot of time and potentially make bad investments. I don't think there's an easy answer for how to overcome that challenge aside from being aware that it's there and learning how to strike the balance as you go.
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