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So yes, I did take two years of Latin.
But no, I had no idea what this phrase meant until I ran into it in an in-flight magazine article.
It means "Hear the other side" and is attributed to St. Augustine.
Where it struck home to me is how often entrepreneurs are tone
deaf to hearing about the holes in their strategy or plans, and yet how
as venture capitalists we are paid to poke those holes not only before
we invest, but afterward as Board members. Therein lies all the makings
of a communications gap, when it should be opportunity for both sides to
hear each other and learn.
By definition, entrepreneurs have to be driven to believe in
their vision, beyond the point of logic. Because logic says that by far
the most probable outcome is you will fail, and fail badly. That's
just a reflection of how hard it is to start and grow a successful
enterprise. Every start-up has to essentially say to itself (or
ignoring reality not even think about) that while "thousands of other
equally bright, equally driven and passionate people have traveled this
road before and died along the way, that won't happen to me." So it is
with all explorers, and start-up founders are the explorers of the
business world.
For venture capitalists, the reverse is true. We know that after
sorting through literally hundreds of business plans and smart teams,
and doing countless hours of diligence on a new deal, the default answer
on yours is we should pass - because history says that if we invest at
least two out of three times we are either somewhat wrong, or completely
- totally - embarrassingly wrong. So, as part of our diligence, we are
looking for all the reasons the new enterprise might fail, and then
trying to see if the risk of failure is maybe just a little less than
normal and the rewards if successful are maybe more than just a little
better than normal. This, in the face of data that tells us no matter
what we think the most likely outcome is to die along the road, too. We
are the explorers of the investing world.
So, what can we learn from each other? How do we audi partem alteram?
First, start-ups need to recognize that we VCs have the advantage
of pattern recognition. We have seen many thousands of potential
deals, have done (at least in our case) well over a hundred, and so have
our pattern recognition engines loaded with case studies that form our
collective judgment. We are far from always right (see the 2 out of 3
misses above), but we are way better than average (versus about 1-2%
success rate for all start-ups). Therefore, when we hit you with
questions and concerns, accept them as perhaps the best free consulting
you'll ever get. We are asking you questions you need to be asking
yourself. If you can hear our side, go back and then return with good
answers to most of our "objections", you will head down the perilous
road with a far higher chance to survive - whether you take our money or
not.
But VCs need to hear the other side, too. It is very easy in
our line of work to end up jaundiced. We see failure so often we get
numb to it. Sometimes, we forget the power of a high-performance team,
operating with intensity, and how much a small set of people can
accomplish when driven by a shared goal where they must succeed to
survive. Sometimes, we can temporarily forget that our investors have
paid us to suck it up and take those leaps of faith along with the
entrepreneur. It's more than OK for you to not just tell the story, but
share your passion for it. In fact, one of the best ways to get a
polite "no" from a VC is to show up with a polished PowerPoint, but an
uninspired delivery. Make sure we hear not only what you plan to do,
but why and why it matters to you, personally.
Hearing the other side comes from a fundamental belief that none
of us has all the answers. And that hearing the other side, as annoying
as it may be at times, is the best vaccine against preventable
mistakes. It is why smart executives know to reward those who come to
them with bad news, rather than shooting the messenger. It is why smart
entrepreneurs and VCs know that often the best gift they can get from
each other is a well-reasoned argument.
Finally, I'll leave you with my favorite "Latin" expression.
After all the deep analysis is said and done, it describes the keys to success in start-up business.
Veritas per intestinem intuitionem
(Truth through gut feel)
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