The Business of Venture Capital. Mahendra Ramsinghani

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       Emotions versus logic. In any investment decisions, practitioners create elaborate logical labyrinths to minimize risk or justify actions — but as human beings, we have equal parts emotion. Or mostly emotions, if you start to scratch beneath the surface. We have a tendency to ignore odds in our favor and often rely on gut feelings. Snap judgments. Love at first sight. You had me at hello… . we could go on and on. At work, we do stuff because we like someone. We want to earn points or be liked. Or we want to reciprocate, to feel good about ourselves. Research shows that when it comes to identifying risk, our brains are hardwired to respond from the gut. Investor Chris Sacca one said, “Never forget that underneath all the math and the MBA bullshit talk, we are all still emotionally driven human beings. We want to attach ourselves to narratives. We don't act because of equations. We follow our beliefs. We get behind leaders who stir our feelings. If you find someone diving too deep into the numbers, that means they are struggling to find a reason to deeply care about you.”⁷What Makes a Good Investor?A Good TherapistThe part that is really overlooked is that a VC needs to be a good therapist. Any CEO will tell you that it's the loneliest job in the world. You have to lead, be upbeat and confident … every CEO has doubts of hitting the next milestone, the next customer or the next capital raise. A good VC is someone who can host an open, transparent discussion and even give them a pep talk. At times, the founders get at each other's throats. It's very easy for VCs to get prescriptive and that's not helpful — what is helpful is giving them the tools to manage the issues and become stronger.⁵—Rob Hayes, managing partner, First Round CapitalYou've got to be a good listener. I find if the venture capitalist does all the talking, he doesn't learn very much about the people he's thinking about investing in. Very important to listen … and judge who looks and feels like they have the makings to be a real company. Eventually it becomes instinct if you do it often enough.⁶—Paul “Pete” Bancroft, former CEO of Bessemer Securities, former chairman of National Venture Capital AssociationIn his book How We Decide, Author Jonah Lehrer points out that “our best decisions are a finely tuned blend of both feeling and reason — and the precise mix depends on the situation.” Now, there is nothing wrong in healthy emotions but as students of human behavior, we need to recognize that sometimes, it's not necessarily logic that's at work. Without emotion, it becomes incredibly difficult to settle on any one opinion. We would endlessly pore over variables and weigh the pros and cons in an endless cycle of computations, writes McRaney.⁸ Thus, in any situation where the decisions don't add up, know that emotions, not logic, may be at work.

       Reciprocation, obligations and indebtedness. In a classic book on human psychology, Influence — Science and Practice, author Robert Cialdini writes that reciprocity is one of the most widespread and basic norms of human culture. Quite simply put, reciprocity is exchange — if someone wishes you well on your birthday, you do the same on theirs. Holiday cards, dinner invitations, horse-trading where politicians vote on bills just because the other politician supported their bill. Lobbyists play this game pretty well. Pharmaceutical companies are especially notorious, and curry favors at the cost of innocent patients — leading doctors snag “consulting agreements” or paid vacations to Hawaii, where they are gently reminded to prescribe more medication. It even extends to international aid. So why is this relevant to venture capital investments?Most venture capitalists have relationships — professional investors who are often aligned philosophically, intellectually. Such investors often syndicate investments, and may have made (or lost) money, standing СКАЧАТЬ