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Five portfolio management tips from venture capital veterans

Venture capital is often referred to as an apprenticeship business because so much important learning comes from day-to-day experiences. Yet, as an article published by the Business Development Bank of Canada (BDC) explains, you can shortcut the learning process by learning from experts: “Your learning curve can be shorter—and your results better—if you learn from pros who’ve already mastered key … ... read more

Venture Capital Relationship Intelligence

4 Most Underrated Skills That'll Make You a Rockstar in Venture Capital

By Rebecca Hinds

There are seismic shifts occurring left, right, and center in the venture capital industry. Deal numbers and dollar volumes are breaking records and the industry is becoming even more competitive. Venture capitalists are eagerly searching for new ways to differentiate from the masses.  

No longer can venture capitalists survive merely be writing big checks. In fact, according to research by Wharton management professor David Hsu, less than half of startups accept the best financial offer when raising capital. In order to differentiate themselves, venture capitalists have doubled down on acquiring new skills and fostering their existing relationships to grow their network. To attract and recruit the most lucrative talent, venture capitalists will need to acquire a new skill set, one that might not be entirely intuitive.

1. A Brand Creator

According to venture capital powerhouse 8VC, one of the most important skills a venture capitalist can possess is the ability to be a brand creator. The most successful venture capitalists are vigilant about building a brand and a community that welcomes new and existing portfolio companies. This community must involve scores of non-monetary value-added services. For firms like First Round Capital, these services include access to design and content professionals that help portfolio companies boost their chances of raising money and recruiters to help with the hiring process. The most critical value-added service is a venture capitalist's extended community which, according to 8VC, must include customer relevant networks, advisors, talent, internal operations, and a venture capitalists’ general brand.

To create a strong brand, venture capitalists must clearly articulate a compelling mission, a strong sense of core values, and an attracting explanation of why their firm is different from the masses. As 8VC explains, “Today, the most impactful brands inside the technology world are created more with substance and success than through media. And clearly, this skill is related to a VC’s ability to build a relevant community achieve numbers four and five above for the company, as well.”

2. A Super-Connector

Effective brand creators need to be good networkers and builders of strong communities. But a venture capitalist needs to be more than just a good networker. They need to be a super-connector. They need to be able to strategically use the network they’ve developed to open doors for their firm and portfolio companies.

The most effective venture capitalists embrace contrarian viewpoints. They think outside of the box and connect dots. By leveraging relationship intelligence and drawing connections between the various members of their network—including sales, customers service, business development, and industry experts—they’re able to exploit untapped opportunities and spur innovative results.

3. Access to high quality deal flow

Even as your VC's brand grows, working to attract high quality & high velocity deal flow is increasingly important to continue finding the right deals. Because the you can't expect the next big deal to fall on your doorstep, investment in a "global platform" has become a growing phenomenon. Building a global community and staying in touch with them with tools like Affinity, your firm's outreach efforts can be easily automated, documented, and your quality deal flow can be maintained - even as you continue to scale. 

4. Emotionally Intelligent

Emotional intelligence (EQ) will continue to widen the gap between the winners and the losers of venture capital. EQ, defined as one’s ability to manage his or her own emotions, as well as the emotions of others, has been identified as one of the strongest predictors of workplace performance. It’s also a key predictor of venture capital success.

EQ enables venture capitalists to evaluate the emotional states of their portfolio companies. It allows them to read between the lines and identify the true motivations, values, and motivations of their founding teams. And it empowers them to develop strong levels of trust and effectively act as advisors.

According to Jon Callaghan, Founder and Managing Partner at True Ventures, venture capitalists need EQ now more than ever. Through its research, True Ventures discovered that EQ is at the top of the list in terms of founders’ needs. Callaghan explains that EQ is in high-demand among founders because “starting a company is a deeply personal endeavor, and venture capitalists can either empower and support you to achieve your greatness, or get in your way and propagate fear.” Callaghan urges venture capitalists to ditch the ego. He adds, “Now is the time for those of us in the strong center of our industry to stand up and lead. The tide will turn to decent and humane, people-first venture capital. For this to happen, all need higher awareness and higher EQ.”

In 2011, Steve Blank wrote an article that outlined seven essential venture capital skills. The first three skills on the list?

● People skills

● People skills

● People skills

Contrary to popular belief, the most successful venture capitalists do not differentiate themselves by deep financial knowledge or market knowledge. While these are desirable traits, they pale in comparison to the softer skills. To succeed, venture capitalists need to be brand creators, super-connectors, and exude high levels of emotional intelligence.

Venture Capital Relationship Intelligence