Editor’s Note: This post was originally published on Seattle 2.0, and imported to GeekWire as part of our acquisition of Seattle 2.0 and its archival content. For more background, see this post.
By Gerry Langeler
So yes, I did take two years of Latin.
But no, I had no idea what this phrase meant until I ran into it in an in-flight magazine article.
It means “Hear the other side” and is attributed to St. Augustine.
Where it struck home to me is how often entrepreneurs are tone deaf to hearing about the holes in their strategy or plans, and yet how as venture capitalists we are paid to poke those holes not only before we invest, but afterward as Board members. Therein lies all the makings of a communications gap, when it should be opportunity for both sides to hear each other and learn.
By definition, entrepreneurs have to be driven to believe in their vision, beyond the point of logic. Because logic says that by far the most probable outcome is you will fail, and fail badly. That’s just a reflection of how hard it is to start and grow a successful enterprise. Every start-up has to essentially say to itself (or ignoring reality not even think about) that while “thousands of other equally bright, equally driven and passionate people have traveled this road before and died along the way, that won’t happen to me.” So it is with all explorers, and start-up founders are the explorers of the business world.
For venture capitalists, the reverse is true. We know that after sorting through literally hundreds of business plans and smart teams, and doing countless hours of diligence on a new deal, the default answer on yours is we should pass – because history says that if we invest at least two out of three times we are either somewhat wrong, or completely – totally – embarrassingly wrong. So, as part of our diligence, we are looking for all the reasons the new enterprise might fail, and then trying to see if the risk of failure is maybe just a little less than normal and the rewards if successful are maybe more than just a little better than normal. This, in the face of data that tells us no matter what we think the most likely outcome is to die along the road, too. We are the explorers of the investing world.
So, what can we learn from each other? How do we audi partem alteram?
First, start-ups need to recognize that we VCs have the advantage of pattern recognition. We have seen many thousands of potential deals, have done (at least in our case) well over a hundred, and so have our pattern recognition engines loaded with case studies that form our collective judgment. We are far from always right (see the 2 out of 3 misses above), but we are way better than average (versus about 1-2% success rate for all start-ups). Therefore, when we hit you with questions and concerns, accept them as perhaps the best free consulting you’ll ever get. We are asking you questions you need to be asking yourself. If you can hear our side, go back and then return with good answers to most of our “objections”, you will head down the perilous road with a far higher chance to survive – whether you take our money or not.
But VCs need to hear the other side, too. It is very easy in our line of work to end up jaundiced. We see failure so often we get numb to it. Sometimes, we forget the power of a high-performance team, operating with intensity, and how much a small set of people can accomplish when driven by a shared goal where they must succeed to survive. Sometimes, we can temporarily forget that our investors have paid us to suck it up and take those leaps of faith along with the entrepreneur. It’s more than OK for you to not just tell the story, but share your passion for it. In fact, one of the best ways to get a polite “no” from a VC is to show up with a polished PowerPoint, but an uninspired delivery. Make sure we hear not only what you plan to do, but why and why it matters to you, personally.
Hearing the other side comes from a fundamental belief that none of us has all the answers. And that hearing the other side, as annoying as it may be at times, is the best vaccine against preventable mistakes. It is why smart executives know to reward those who come to them with bad news, rather than shooting the messenger. It is why smart entrepreneurs and VCs know that often the best gift they can get from each other is a well-reasoned argument.
Finally, I’ll leave you with my favorite “Latin” expression.
After all the deep analysis is said and done, it describes the keys to success in start-up business.
Veritas per intestinem intuitionem
(Truth through gut feel)
