“VC Brain”—Dissecting Investor Behavior

Why do so many Venture Capitalists act like assholes? They don’t respond to your email, even though they promised to. When they do, it’s incredibly terse and lacking in punctuation and capitalization (turns out, they only like one type of “capitalization”, the one that sits on tables). Sometimes they ghost you. If you pitch them, they might be very rude. I’ve an investor put his feet up on a table and start browsing his phone—straight out of Silicon Valley. Sometimes they don’t even show up for scheduled meetings.

In reality, some VCs are assholes. But many are not. I’ve been on both sides of the fundraising table, as both an angel investor and as an entrepreneur (usually I’m the entrepreneur, and so I identify more as such). I have many friends who are VCs of all shapes and sizes. Most of them are really nice, down-to-earth people. For a select few, that carries over into their work. But for the majority, interacting with them as VCs exposes you to their “VC Brain”.

Why do reasonably nice, down-to-earth people act like assholes, even if they are not? I think there are a few reasons. It’s not just that they are “busy” (that is definitely part of it, but when a VC and an entrepreneur interact, I’d argue the entrepreneur is probably just as busy as the VC). The very life and social interactions a VC is exposed to trigger some sort of change to their brain.

Balance of Power

VCs have entrepreneurs vying to get in front of them, to pitch them. Then the pitch itself is an attempt to get the VC to give them money. And if they do invest, they become a shareholder and possibly a board member, advising (but also supervising) the business. So VCs are usually in a favorable position when it comes to balance of power.

Of course, every VC occasionally gets exposed to a deal that’s so hot that the balance of power is inverted, and they are the ones that have to jump through hoops to get into the deal. And of course, VCs go through a period where they are fundraising themselves from Limited Partners. But that happens every few years, and the switch turns off again pretty quickly and the favorable position is restored.

Power affects your brain (some studies have indicated that power can even cause brain damage). So constant micro-interactions where you have the upper hand cause you to lose empathy, and to normalize the state where you have the upper hand and can act with perceived impunity.

Context Switching

Another thing that can alter your brain’s biology is frequent context switching. In fact, some studies have shown that the affect can be worse than that of marijuana.

A VCs typical day might include the following:

  • A constant barrage of emails, texts, and tweets.
  • Listening to pitches from entrepreneurs.
  • Doing diligence / conducting reference calls.
  • Corresponding with lawyers.
  • Talking to portfolio companies to get updates and/or help with whatever issue they’re dealing with.
  • Buying sweater vests.

This goes beyond just being busy. We’re all busy. Entrepreneurs are busy as hell, and honestly, we context switch too. But even when we context switch, we usually have a singular goal—making our business successful. VCs are switching between very different tasks.

Transactional Social Interactions

Venture Capital is a relationship business. VCs build relationships with other investors, entrepreneurs, and talent. Many of these relationships can be very deep and long-term.

But day-to-day, VCs also have a lot of more shallow, transactional interactions (see context switching above). This “social context switching” also takes a toll, because it normalizes these types of interactions. And so these interactions might seem shallow or abrupt to you, but they might be a lot more normal for a VC.

Procrastination

We all procrastinate, but we tend to do it more when a task makes us uncomfortable. When I’m on the investing side of things, I dread having to send rejection emails to entrepreneurs, because I know how it feels to get those. So it’s all too easy to put it off. You come up with narratives to justify it, of course. You tell yourself “I want to write a thoughtful email, but that will take time, so I’ll find time later”. The end result is procrastination.

More Empathy

You might read this and think that I’m a VC apologist. Or you might read it and feel like I’m over-generalizing VCs and being critical of them. I don’t know.

But I think a little empathy goes a long way, for both investors and entrepreneurs. Entrepreneurs can do better when interacting with VCs if they are more aware of the world VCs live in. In general, entrepreneurs (myself included) can also be very defensive and insecure about our “babies”, and we can get overly sensitive to any behavior that seems dismissive or disrespectful. We can build thicker skin by understanding that it’s not personal, and not always coming from a place of disrespect.

And, of course, VCs can also do right by entrepreneurs by understanding the types of behaviors they are prone to that might come across negatively. No matter what your day-to-day looks like, a little thoughtfulness and empathy will go a long way. There’s a bare minimum here that can go a long way. Respond to people in a timely manner, even if you’re not interested. Show up for meetings when you schedule them. Be aware that people have poured their blood, sweat, and tears into their businesses. Remind yourself, periodically, of what it’s like to be on the other side of the table.

One thought on ““VC Brain”—Dissecting Investor Behavior

  1. This is great. Empathy goes a long way to understand the position of those on the other side of the table. This goes for interviewing & hiring processes as well and so many other situations entrepreneurs deal with.

    Like

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