Venture capitalists can be a fabulous resource to get you on your feet when you're starting your business, not only because they can offer financial help, but because they're often genuinely interested in your industry and want to be influencers. But Shanna Tellerman, CEO and founder of Modsy, says venture capitalists and entrepreneurs have totally different ways of thinking. And she ought to know from her experience on both sides of the table--she served as a VC for Google Ventures but also has raised $10.75M for Modsy to date. If you want to catch a venture capitalist's eye, you have to grasp these differences and tailor what you say based on their perspective.
These are the top five biggest splits, according to Tellerman:
1. Potential versus risk
"An entrepreneur thinks about the potential and opportunity for their business first. [They take a giant leap of faith that they can solve a problem they see and that it will result in a business model that works (the believer mindset).] A venture capitalist thinks about the biggest risks for their business first. [They are like detectives, searching for clues and staying neutral until they have built up enough data to form a strong point of view.]"
2. Optimism versus skepticism
"An entrepreneur is naturally optimistic (sometimes to a fault) about the future because of their believer's mindset. A venture capitalist looks forward with a healthy dose of skepticism because they understand that costs, roadblocks and time required likely will be higher than an entrepreneur anticipates."
3. Edge versus outcome
"An entrepreneur's mind centers around their team, product, customers, growth, and maintaining a competitive edge most days. A venture capitalist focuses on the speed of learning, progress, financials and the potential outcome most days."
4. Deep understanding versus broad view
"An entrepreneur has a deep and focused understanding of their industry vertical and the stage of their company, focusing on developing a detailed strategy to reach success. A venture capitalist has a broad view of various industries and stages of companies, focusing on the macro patterns and behaviors that lead to success."
5. Deep emotion versus grounded
"An entrepreneur is all-in on one business. They live and breathe this business daily and it can mean a deeply emotional connection to what's happening in the business. A venture capitalist has a portfolio of companies they support and they expect that only one to two of their investments will be a breakout success. Because of this, a venture capitalist maintains a more surface level and less emotional connection to the business, which can sometimes bring a more grounded point of view at critical moments."
So here's your real target
Given that venture capitalists are more skeptical and have risks at the front of their mind, your job as an entrepreneur isn't truly to wow them with impressive figures, but rather to show them how you plan to keep everything safe and minimize problems.
"Take a look at your business from the skeptic's lens," Tellerman says. "[...] List out all of the risks in detail and then spend time de-risking each with facts, supporting data and industry research. Once you have the full list, identify the top [glaring and likely risks] that you're concerned about and that others ask you about often. [...] You will want to address these head on when speaking to investors and show them that you've not only done your homework, but that you have a solid plan, backed up by data, to overcome potential risks."
Embrace what's different
Even though entrepreneurs and venture capitalists can seem worlds apart, Tellerman claims that looking at your business through the venture capitalist or investor lens can ensure your business grows strong.
"Consider what the biggest risks are at any given time and what milestones, progress and data you need to de-risk this opportunity," Tellerman advises. "You should be building your roadmap based on these key milestones. Specifically, you should constantly ask yourself whether you have proven that you're going after a real problem, that you have the right solution and that your business model will lead to a very big opportunity. Whatever the weakest points are to each answer is where you will need to focus."
Ultimately, you and venture capitalists have the same goal--creating an outstanding company. Recognizing that they want the same success you do can help you understand their cautiousness and handle it appropriately. Let them ground you, and be patient. After all, the best deals don't happen overnight.