The Ellen Pao case has shined renewed light on gender disparity in the financing machine that fuels Silicon Valley’s innovation economy. Many say that the case itself will pave the way to get more women into tech venture capital and private equity. Programs like Andreessen Horowitz’ bootcamp to train women to be effective board members is another worthy initiative with the same goal.
In my mind, though, these event-driven initiatives must be coupled with “general training” to develop the traits required to be a great investor. So, the following are some tips for not just breaking into the profession, but excelling at it. They are what I aspire to daily as Co-founding Partner of Centerview Capital and are based on my “learning” from over 15 years of working with some of the truly best tech investors of all time.
- Develop judgment not just skills: In every job, there is one key thing you need to be really good at. John Doerr, one of the greatest technology investors ever, claims that the best VCs have developed the right “perspective” on which companies to invest in. “The hardest thing of all is to become a good judge of what makes a great entrepreneur or a great CEO.” In his opinion, the best way to develop this judgment is to actually work in the type of company that you want to eventually invest in. While you will never encounter every possible business scenario, you will learn the types of decisions that need to get made and the qualities necessary in leaders to make them. Indeed, I have found that, so far, my partners’ and my many years of operational experience have brought significant value, both in assessing potential investments and then in helping our portfolio companies actually accelerate their growth by guiding them effectively in situations we have been through before.A great way to hone judgment is to practice investing with real stakes at risk. If you want to be a VC someday, start investing now. It can be even small amounts in public market securities or AngelList syndicates. It will teach you the difference between analyzing investments and investing and will help you start to cultivate your overall judgment. But recognize that it takes time and is a journey that never really ends.
- Have a truly different perspective: There is evidence that gender diversity on corporate boards leads to better financial performance, and many argue that team diversity, in general, leads to better business outcomes. There seem to be three components to this. First, people with different perspectives may bring new and fresh ideas, some of which could be the result of one’s gender or race. But even more importantly, the mere presence of diversity triggers more careful information processing that is absent in homogeneous groups. Diversity in a group creates awkwardness, and the need to diffuse this tension leads to better group problem solving. Finally, diversity enhances creativity. It encourages the search for novel information and perspectives, leading to better decision making and problem solving.This is a great argument for having a more equal mix of female and male investors. But my suggestion is to not rely on the diversity you bring via your gender or race, or even your education and background. Actively and continuously form and cultivate your unique viewpoint by placing yourself in situations where diversity exists and challenging yourself to think out of the box. Welcome people who disagree with your views and either convince them to your side (great practice for pitching a deal to your future Investment Committee), or understand where the holes are in your argument and evolve. This is essential not just as a board member, but also when evaluating potential investments. Chasing the same deals as everyone else tends to just lead to price auctions. Discovering the “hidden gem” before others do is the real key to outsized returns and overall investment success.
- Help others: The value of networking is generally undisputed, but many think networking constitutes small talk with strangers at cocktail events or calls to friends-of-friends when you need something. And many feel reluctant to “network” as they think they are imposing on others in some way. However, as Ford Myers, president of career coaching firm Career Potential, says, “When done properly, networking is not about taking but giving.”In fact, I have found that the best way to form relationships with new, high quality people is to see how you can help them. Genuinely. For me, as an executive at Cisco and Skype, it was the essence of building long lasting customer relationships. When I started to think about everyone as a potential customer, it changed my agenda dramatically. It also helped me realize quickly whether someone was in fact the right person with whom to network.Just as a glowing customer reference is the best form of marketing, enthusiastic endorsements from those you have helped will build your reputation in the most positive way. People will want to know you, and, more importanrtly, you will scale your knowledge of more businesses and industry problems and how best to tackle them. This is great training in my mind for being a VC. Our job is all about helping our portfolio companies, even if that means simply knowing when you do not have the answer and should yourself ask for help. So, if you are serious about being an investor, stop focusing on your own goals and instead focus on serving others, discovering their needs and finding solutions to their problems.