Aram Attar

Making judgments under uncertainty is bound to breed cognitive biases. Taking inventory of one’s biases is the first step toward avoiding errors of commission (losing money on an investment) but, above all, errors of omission (not making money on an opportunity you passed). Using lessons from the late Daniel Kahneman and other top psychologists, I wrote a dozen analyses of the various biases VCs fall prey to, including: - confirmation bias - projection bias - representativeness and availability heuristics - escalation of commitment - loss aversion - sunk cost fallacy … and many more. My conclusion: VC is 10% analysis and 90% psychoanalysis. Elite Investors are conscious of these biases and try to eliminate them.

VC is an experienced-based job, so online courses, books, podcasts, etc. will only marginally help Investors accelerate their career. What active Venture Capitalists need is a blend of theory and a practical approach to put the newly-acquired knowledge into action. They also want to discuss ongoing investment opportunities in confidentiality, and ask the questions they often don’t dare to ask to their more experienced colleagues. It took me five years to build the VC Career Accelerator, an ultra-mentoring experience based on a top MBA course I’ve been teaching for years, adapted for busy professionals who are on the field all day. The sessions span 8 weeks and cover the whole breadth of the VC cycle.

No amount of money can accelerate product-market fit (PMF), which is why most VC firms will not invest large sums before the startup reaches that stage. PMF is steeped in constant iteration with market feedback. Founders who succeed in reaching this fundamental growth stage are “promotion-focused”: they play to win, not not to lose. They are avid of customer feedback and don’t feel rejected or down if the first iteration of their product does not convince masses.

I’m reflecting on why LinkedIn’s algorithm picked me to talk about internships. My last ended in June 2001 🤔 I’m sure a lot has changed since then (!), so I’ll tell a story. A few weeks into one internship, I received feedback that I asked too much of my supervisor, who was very busy. He refused to talk to me more than once a day, forcing me to pick the most crucial topic to bring to him. At first, I felt rejected and unfairly treated. But he taught me two lessons that stayed with me for 13 years as an employee: prioritize your tasks and be as low-maintenance as possible.

A frequent error many Founders make is to keep issues to themselves for fear of upsetting their VCs. It is a terrible way to handle problems. They will surface at some point, and trust is gone. At the other extreme, some Founders solicit their VCs for minor issues they should be able to resolve. It’s not good for the Investor’s confidence in your entrepreneurial skills. When you learn about a significant issue—a top client leaves, an employee sues, etc.—work diligently to find options. Then call your Investor(s), be open and transparent with them, and lay out your options. Call an emergency Board to discuss them. If you have the right partners, they’ll support you and help you find the optimal way to deal with the issue.

Too many Founders don’t conduct thorough due diligence on the VC firms they take money from. Here are three points to consider: 1/ Which fund will the money come out of, and how invested is it? > VCs have less time to exit if the fund is already 60-70% invested or past the middle of its investment period 2/ How are investment decisions made, and who sits on the investment committee (IC)? > Research shows that IC voting rules impact decision-making 3/ Talk to former and current Founders the VC firm has backed. Go beyond the website and try to find those that were taken out. You’ll have a better perspective. More on each topic on my blog at The VC Factory.