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
What The Most Successful Venture Capitalists Do Right, According to a Partner at Lightspeed Ventures
Over the course of his 9-year tenure as a venture capitalist, first as a partner at Highland Capital and currently as a partner at Lightspeed Venture Partners, Alex Taussig has witnessed firsthand the power of relationships. We recently sat down with Taussig to chat about the importance of relationship building in the venture capital arena.
When Taussig considers the many types of relationships he needs to build, few are as important as the relationships with other Lightspeed partners.
“The culture of a venture capital firm is defined by the interpersonal relationships of the partners.”
At Lightspeed, it starts with culture. There is an unspoken willingness among partners to freely disagree with each other, and a shared understanding that conflict is healthy and productive.
"Conflict, when healthy, is a feature, not a bug."
There is a high degree of cohesiveness, collaboration, and trust among partners. There is an expectation that partners will hand off prospective companies to other partners who may be more specialized or familiar with a particular technology or industry. The partners work collaboratively to build a joint network that is more powerful and far-reaching than any one single partner working alone could construct.
Finding The Needle In The Hackstack
Attractive investment opportunities often transpire as a result of serendipitous connections. Taussig explains that, oftentimes, it’s a casual unsuspecting encounter (at, for example, a meeting in line at a coffee shop or being introduced to a fellow parent at a child's birthday party) that culminates in a promising investment opportunity.
"I've seen great deals come out of left field."
Because venture capitalists never know where their next great deal may surface, it’s important to view relationship building as a long-term endeavor–as a marathon, not a sprint. Taussig frequently leverages relationships he first developed several years prior.
Taussig recounted a time when he invested in a company that ultimately failed. While the business went sour, his relationship with the executive team remained strong. Several years later, Taussig learned about a promising new venture in an entirely different industry.
After some digging, he discovered that an executive at the failed venture he'd previously funded was an executive at the new venture that was showing promise. Because the relationship between the two had remained intact and strong, the executive was more than willing to engage in discussions about potential funding.
When a business is faltering and when many emotions inevitably are at play, it is easy for relationships to wane. This need not–and often should not–be the case. Taussig recognizes the countless reasons businesses fail, some of which are outside an entrepreneur’s control.
While not all of Taussig’s portfolio companies will be “home runs”, it doesn’t mean that relationships can’t remain strong. Investors never know which relationships will be critical to their business–or when.
“Investors must continually invest in their relationships.”
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