having some junior employee tell me why they couldn’t do something because of “how hard it was” didn’t get much sympathy from me. I knew how hard it was because I had done it myself. Startups are hard.
What running a company would do is give early-stage VC’s a benchmark for reality, something most newly-minted partners sorely lack. They would learn how a founding CEO turns their money into a company which becomes a learning, execution, and delivery engine. They would learn that a CEO does it through the people—the day-to-day of who is going to do what, how you hold people accountable, how teams communicate, and more importantly, who you hire, how you motivate and get people to accomplish the seemingly impossible. Further, they’d experience first hand how, in a startup, the devil is in the details of execution and deliverables.
My hypotheses is simple: what most VCs lack is not brains or rolodex or people skill, but hands-on experience as startup CEOs—knowing what it’s like trying to make a payroll while finding sufficient customers while you’re building the product. Sure, a year as a CEO won’t make them an expert, but it will change them quicker than 10 years in the boardroom.
Does it Matter?
There’s a school of thought that says the skill set of a great early-stage VC —awesome people skills, curiosity, likable, etc,— versus the attributes of a great entrepreneur—pattern recognition, tenacity, etc.—may not have much overlap. Early stage investing is not a spreadsheet, quantitatively driven exercise, nor is it about technology—it is a deal business and people drive the deals. And while having experience as a startup CEO may make you a better board member, it may not substantively contribute to your career as an early stage investor—which depend on many more important skills.
Steel in their Eyes
Ten years ago starting a company required millions of dollars and first customer ship took years. Now it’s possible to build a company, ship product and get tens of thousands of customers in a year with less than $500K. For venture firms who want to groom/grow associates or operating execs into partners (rather than hiring proven partners), here’s my suggestion:
- Have them start as an analyst (search for deal flow and people, due diligence)
- Then take a year as a product manager in a startup in the firm’s portfolio
- Then come back as an associate for a year—shadowing board and partner meetings
- Then take a year and $250-500K to start and run a mobile/Web/cloud company. See what it’s really like on the other side of that boardroom table
- Then return as a partner.
This process will create a new generation of venture capital partners, ones who have been battle tested in the trenches of a startup, hardened by hiring and firing, tempered by making a payroll and losing orders. They will never forget it’s all about the people.
These VCs would return to their firms with steel in their eyes. They’d be relentless about accountability from board meeting to board meeting with laser like focus on the one or two issues that matter. They would understand the CEO-VC-board dynamic in a way that few who hadn’t lived it could. They’d be ruthless in their choice of people and teams, looking for those few who have natural curiosity, a passion to win, and who won’t take no for answer.
Lessons Learned
- Venture capital is still a “craft business”
- Early stage VCs should have startup CEO experience
- It can now be gained cheaply and quickly
- It will give them perspective and edge that would take a decade to learn.
Author: Steve Blank
A prolific educator, thought leader and writer on Customer Development for Startups, Steve Blank is a retired serial entrepreneur who teaches, refines, writes and blogs on “Customer Development,” a rigorous methodology he developed to bring the “scientific method” to the typically chaotic, seemingly disorganized startup process. Now teaching entrepreneurship at three major universities, Blank co-founded his first of eight startups after several years repairing fighter plane electronics in Thailand during the Vietnam War, followed by several years of defense electronics work for U.S. intelligence agencies in “undisclosed locations.” Four Steps to the Epiphany, Blank’s fast-selling book, details the Customer Development process and is increasingly a “must read” among entrepreneurs, investors, and established companies alike, when the focus is optimizing a startup’s chances for scalability and success.
After 21 years driving 8 high technology startups, today Steve teaches entrepreneurship to both undergraduate and graduate students at U.C. Berkeley’s Haas School of Business, Stanford University’s School of Engineering and the Columbia/Berkeley Joint Executive MBA program. His “Customer Development” teaching and writing coalesce and codify his experiences and observations of entrepreneurs in action, including his own and those he advises. “Once removed from the day-to-day intensity of founding a startup, I was able to observe a pattern that distinguishes successful startups from failures,” Blank says. In 2009, he earned the Stanford University Undergraduate Teaching Award in Management Science and Engineering. The San Jose Mercury News listed him as one of the 10 Influencers in Silicon Valley. In 2010, he was earned the Earl F. Cheit Outstanding Teaching Award at U.C. Berkeley Haas School of Business. Despite these accolades, Steve says he might well have been voted “least likely to succeed” in his New York City high school class.
Steve Blank arrived in Silicon Valley in 1978, as boom times began. His early startups include two semiconductor companies, Zilog and MIPS Computers; Convergent Technologies; a consulting stint for Pixar; a supercomputer firm, Ardent; peripheral supplier, SuperMac; a military intelligence systems supplier, ESL; Rocket Science Games. Steve co-founded startup number eight, E.piphany, in his living room in 1996. In sum: two significant implosions, one massive “dot-com bubble” home run, several “base hits,” and immense learning leading to The Four Steps.
An avid reader in history, technology, and entrepreneurship who seldom cracks a novel, Steve has followed his curiosity about why entrepreneurship blossomed in Silicon Valley while stillborn elsewhere. It has made him an unofficial expert and frequent speaker on “The Secret History of Silicon Valley.”
Steve’s interest in combining conservation with best business practices had Governor Arnold Schwarzenegger appoint him a Commissioner of the California Coastal Commission, the public body which regulates land use and public access on the California coast. He also serves on the Expert Advisory Panel for the California Ocean Protection Council. Steve serves on the board of Audubon California, was its past chair, and spent several years on the Audubon National Board. A board member of Peninsula Open Space Land Trust (POST), Blank recently became a trustee of U.C. Santa Cruz and a Director of the California League of Conservation Voters (CLCV). Steve’s proudest startups are daughters Katie and Sara, co-developed with wife Alison Elliott. The Blanks live in Silicon Valley.
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