February 1, 2024 | 5-minute read (840 words)
The journey from being a founder to a venture capitalist (VC) is thrilling and enriching at the same time. It symbolizes a shift from the hands-on management of a business to a more strategic role in transforming the future of new companies.
With the startup environment evolving at an increasing rate, founders turned VCs like Tom Hulme, Pete Flint, and more are becoming key pillars in promoting innovation and entrepreneurial spirit. They are reshaping industries with their creative mindsets and empowering individuals with their endless wisdom.
Learning from these motivational figures can represent a powerful merging of business and investment acumen.
4 Lessons from Entrepreneurs Turned Venture Capitalists
Here’s how their inspirational words can turn your aspirations into reality.
1. Learn from failures
Encountering failures in the business sector is inevitable. However, learning from them and leveraging those experiences makes you a pioneer.
As a seasoned entrepreneur and venture capitalist, Shaik Hamdan T.M. (Founder & CEO at NEXT) believes that by identifying your mistakes or areas of improvement, you can enhance efficiency and foster creativity within your firm.
Learning from mistakes also makes you more resilient. Adapting and growing from these experiences, you position yourself as a forward-thinking leader. You become an influential individual ready to overcome obstacles and drive innovation in the ever-changing business landscape.
Investor relations for VC funding entrepreneurs also believe embracing missteps is an opportunity, not a setback.
A simple step-by-step journey involves:
- Adopt a growth mindset
- Collect feedback
- Evaluate data
- Implement changes to celebrate all your triumphs and learnings
2. Use skepticism for data-driven investing
Head of Europe at Google Ventures, Tom Hulme, has an essential lesson for budding entrepreneurs ready to enter the world of VC. As an experienced venture capitalist and businessman, he believes that the skepticism towards depending solely on data-driven decision-making in VC is grounded in concerns about data reliability, especially during periods of significant regime change.
When there is a departure from historical norms, the observed challenges with machine learning systems often arise. Rather than depending exclusively on predictive models, a far more effective approach is followed in using data to identify and address biases inherent in decision-makers.
- Investors use data to inform and refine judgment by evaluating personal biases towards specific founder profiles, like technical expertise or prior entrepreneurial experience.
- Integrating data as a tool to augment human decision-making instead of replacing it entirely.
- Acknowledging that historical data on its own may not effectively capture nuanced factors.
3. Search for investors who give you more than just money
Former CEO & Founder of Trulia and General Partner at NFX, Pete Flint, emphasizes looking for investors who add more value than just money.
As a founder, when looking for investors for your business, it’s vital to look beyond just monetary support and prioritize those who offer more than that, i.e., an honest and sincere partnership.
The ideal investor decoded:
- A good investor actively engages with your business.
- Offers valuable assistance, availability, and empathy.
- Investors with operational experience are precious because of their detailed understanding of the highs and lows.
Another thing to remember is that empathy becomes a key factor in recognizing the challenges and uncertainties inherent in entrepreneurship. Founders benefit from investors who lend a helping hand during tough times and celebrate successes.
4. Making the right deal over the best deal
Founder & CEO of Foresight and a former VC, Taylor Davidson, has invested and taught about financial planning to investors and entrepreneurs globally. To help investors succeed, he recommends that doing the right deal is more integral than doing the best.
Practical terms to assessing a company:
- The assessment of a company should be considered within the context of financing, especially the price an investor pays to bring capital into the business.
- The importance of valuation decreases when viewed as a market-clearing determination compared to other companies, both private and public.
For VCs, the price of a deal matters to a certain extent. It is influenced by the company’s performance and the broader market climate for similar investment opportunities. Although a lower valuation generally benefits investors, the ultimate impact on financial returns is limited. This is because the outcomes for startups tend to follow a binary pattern, i.e., they either succeed or fail. In the case of success, early-round valuation has little impact. In the event of failure, the investment ends in zero returns, regardless of the initial price paid.
Founder-turned-VCs serve as beacons for aspiring investors and entrepreneurs globally. They transform businesses, shape industries, bring new trends, and empower individuals.
Understanding the lessons and learnings of these venture capital finance solutions can help budding entrepreneurs navigate the complexities of investments effectively. It will help them build robust strategies, make informed decisions, and boost their chances of securing funding for their startups.
Want to know more? Early Growth supports startups and small businesses in diverse industries and stages. Our essential business services include outsourced CFO and finance services, including risk management, equity management, and fund accounting. Talk to an expert today.