Top 5 Observations From My First Nine Months as a Venture Capitalist

After spending almost two decades as a hands-on marketer and the past two years as an active angel investor, it’s been almost nine months since I’ve officially made the leap to being a Venture Capitalist (VC) with Hyde Park Venture Partners (HPVP). The past few months have been a challenging and inspiring learning curve as I apply my CMO background to the venture space full-time. I’m thrilled to have joined the HPVP team, and I could not be more excited about what we are building here in the Midwest.

While the pace has been extremely fast, I’ve noticed a few key trends and common themes.

1. NEWTON’S LAW – IMPORTANCE OF MAINTAINING MOMENTUM

I’ve been using the term “Software Physics” to describe the importance of maintaining momentum at a start-up.  Objects in motion are the most likely objects to stay in motion (think of a boulder rolling down a hill). Conversely, objects that have lost their momentum can be very hard to get restarted. Momentum truly matters.

The tendency as a VC can be to spend too much time with financial statements and projections and not enough time to understand the people and culture. Often, culture can feel like a concept that is too fuzzy to quantify. Rather than pore over an income statement for a second time, I can gain very important insights by sitting in a company meeting for two hours observing the leadership, communication styles, energy and culture. These two hours tend to provide critical insights when considering the opportunity to invest in a start-up. Once you lose momentum, you rarely regain it. The most sustainable way to keep momentum, is to recruit and retain an outstanding team.

2. ENTREPRENEURS (AND VCs) CAN EXPERIENCE A DISCONNECT IN THE FUNDRAISING PROCESS

I always knew there was inherent inefficiency in the fundraising process, but I’m staggered how big the disconnect can be. Too often, VCs tend to play games and do not give a fast enough “yes/no” to an entrepreneur regarding their intentions to invest. I’ve seen the process take 3-6 months. If the answer is “no”, then tell the entrepreneur you don’t want to do it and why. Entrepreneurs typically appreciate this approach rather than no answer at all.  One of my biggest goals is to get to a fast yes or a fast no as often as possible.

In addition, I’ve come to learn that it’s much easier for entrepreneurs to raise money when they don’t need it. Starting the relationship building process with your potential funding partners (angels or VCs) early is key.  But, often the process becomes a shotgun wedding instead of a relationship built over several months. My input to entrepreneurs is to start building relationships as early as possible. Often this may mean simply asking for advice vs money.

3. PATTERN RECOGNITION BUILDS OVER TIME

I’ve probably looked at 100 companies in the past 100 days. Seeing the same issue multiple times across multiple companies makes it easier to quickly identify core issues or potential trends (i.e. – “it’s a slow quarter across the board for everybody”, or “the wires are crossed between marketing and sales”). I now spend almost all of my time working “on the business” instead of “in the business”. While it was a struggle at first to not want to just jump in and do the work myself, I now take great satisfaction in identifying issues, helping to drive focus, and bringing in top talent to solve the problems. We had a Hall of Fame worthy Board of Directors at ExactTarget comprised of Scott Dorsey, Rory O’Driscoll of Scale Ventures, Dave Yuan of Technology Crossover Ventures, Michael Brown of Battery Ventures, Scott Maxwell of OpenView, Tim Maudlin, and Matt Ferguson CEO of Career Builder. As a CMO, it always amazed me how our board members at ExactTarget knew to ask THAT particular question – and now I know part of the reason why – their massive experience in the space.

4. BOARD WORK LEVERAGES OPERATIONAL SKILLS

While I miss aspects of an operating role, I’m doing my best to quickly learn the craft of being a great board member and advisor.  As an operator, I always viewed boards as the “ivory tower” – experts who would come in and lob suggestions or recommendations for a few hours before going on their merry way. I was wrong. Now, I realize how much time was spent on hiring, evaluating talent, being a sounding board, matching entrepreneurs with the right people (potential partnership opportunities/customers/etc). The commitment is much more hands on than I anticipated, and it helps to satisfy my operator itch.

5. WORLD-CLASS TEAMS MAKE ALL THE DIFFERENCE

Nothing beats the satisfaction of working with a world-class team of advisors, entrepreneurs, portfolio companies and partners. I find incredible fulfillment in working with people who are the very best at what they do and who I truly enjoy doing business with together. Picking the right team and the perfect set of companies to add value to while working with like-minded, quality, tenacious entrepreneurs is an absolute blast. Our objective at Hyde Park Venture Partners is to make a lasting impact in the Midwest and beyond. This simple truth seems too obvious, but it’s clearer to me than ever, who you work with is as important as who you’re working for.

Tell me what you think in the comments below – thanks for reading.

Please note: I reserve the right to delete comments that are offensive or off-topic.

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