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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

Startups Venture Capital

Three Under-Appreciated Tips For Investors

By Rebecca Hinds

Investors perpetually grapple with how to adapt their investment strategies amidst changing business environments. When confronted with uncertainty and stress, it can be easy to lose sight of some of the more obvious, yet under-appreciated, ways to adapt. Here are three under-appreciated tips from experts that will help you get back to first principles and keep your investment strategies in perspective, no matter what the world around you looks like. 

1. Be empathetic

Oprah Winfrey once said, “Leadership is about empathy. It is about having the ability to relate to and connect with people for the purpose of inspiring and empowering their lives.” Empathy is especially important during difficult times. Venture capitalists who prioritize empathy will engender trust during these difficult times, boost their reputation, and position themselves well for follow-on investments. 

David Blumberg, founder and managing partner of Blumberg Capital—an early-stage venture capital firm—has emphasized the value of empathy during these times. He’s explained

Reach out to employees, colleagues, and investors on a personal level. In these unusual circumstances, people work best with structured processes, familiar routines, and when they truly feel connected, listened to, seen and supported.

How can investors effectively develop empathy during uncertain or challenging times? Esteemed author and researcher Brene Brown reminds us that empathy doesn’t need to mean embarking on conversations with concrete answers and solutions. She’s explained,

Empathy is simply listening, holding space, withholding judgment, emotionally connecting, and communicating that incredibly healing message of you’re not alone.

Blumberg advises venture capitalists who are looking to develop empathy with their portfolio companies to actively engage and utilize social enterprise tools such as Affinity. With Affinity, you can keep tabs on relationships and ensure that you’re maintaining strong relationships. Using Affinity notes, you can add context to your conversations and keep track of whether your conversations have been exclusively business-focused or more infused with empathy. 

2. Beware of “COVID-19 contortionists”

Entrepreneurs have long been celebrated for their ability to pivot and grasp new opportunities. However, pivoting should be strategic. It shouldn’t just be driven by the external landscape; it should also be oriented towards a startup’s internal capabilities. 

As the Covid-19 pandemic unfolded, several venture capitalists cautioned against investing in “COVID-19 contortionists”. At a panel entitled “Venture Versus the Virus”, the panelists—who included top investors—urged startups to beware of a “COVID-19 Contortionist” that “invents COVID-19 use cases” and moves away from its core positioning and business model. A recap article explained, 

VCs are not receptive to companies that pivot to a COVID-19 focus if what they’re doing lacks substance, differentiation and potential for success.

3. Prioritize mental health 

Entrepreneurs struggle with mental health challenges during the best of times. Investors have long recognized that entrepreneurs are especially susceptible to experiencing mental health conditions and committed to offering mental health resources and services as part of their offerings to their portfolio companies. 

While the focus has been geared towards entrepreneurs, investors, too, are susceptible to mental health challenges, especially during challenging times. Brad Feld, managing director at Foundry Group and co-founder Techstars has emphasized the importance of prioritizing mental health. While formal mental health treatment and resources can be transformative and are often necessary to incite meaningful change, less formal practices such as exercise and fresh air can also prove incredibly impactful. Feld explains, 

If I leave you with one thing today, it's to really pay attention to your own mental health and the mental health of the people around you. Go outside, breathe the air, be safe. Your mental health is critically important. 

Entrepreneurs count on their investors not only to help them navigate changing business environments but also to lead by example. The best investors know that sometimes they need to take a step back to first principles, keep their investment strategies in perspective, and prioritize the human aspects of investing. 
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