The Need For Intellectual Honesty

Posted on | June 24, 2010 | No Comments

Most venture capitalists will tell you that when they invest, they are investing as much in a management team as a business plan.  Nowhere is this more true than in the world of early stage investing, where management must possess both a commitment to vision and an ability to adapt to constantly changing circumstances.

When we make an early stage investment, we fully expect that, over time, if that investment is successful, there will be major changes in everything from product offering to strategy.  The changes can be driven by anything from customer feedback to the competitive landscape, but one thing is certain: the business world will not stand still while you build a company.

Being able to step back from day to day operations, assess the need for change, and implement the right strategic shift is difficult for many reasons.  It is difficult because the life of a start up CEO is incredibly hectic.  Taking the time to lift one’s head up at all is a challenge.  It is also difficult because the direction and strategy of the business are usually based on the original entrepreneurial vision of the founder/CEO.  For an entrepreneur to admit the need for change, whether to the team, the investors, or to himself, can feel like admitting failure.  Finally, change just flat out takes work. It usually means tough decisions, tough conversations and operating outside of the comfort zone.

A recent episode of the Techstars program “The Founders” addresses this very issue.  They call it the need for intellectual honesty (see video below).  In the video, Toby Murdock, the CEO of Grogger (where we have made a seed investment) talks about the feedback they have received from the market and the changes they are making as a result (the dreaded “pivot”). It is worth watching, and another example of why Techstars is such a great resource for early stage entrepreneurs.

Category: Portfolio Companies, Venture Capital

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