This isn't a how-to post. This is just a thought-stream on what I think constitutes empathy in my line of work and entrepreneurs and VCs building great relationships based on trust.
Before I get stuck into that, some of you may wonder what fuzzy touchy-feely concepts like trust and authenticity have to do with investments. Isn't making investments a hard-nosed affair that concerns itself with revenues, profits and cash flows? Does any of this fuzzy stuff belong in a blog about venture capital? Does any of this belong in venture capital? Sure it does. Yes, of course the financial aspects matter, but the people aspects of VC matter much more. If I didn't care about the people aspects of my business, I'd just buy Microsoft stock. Just kidding. Why would I ever buy Microsoft stock?! Ok, really, JUST KIDDING!
Back to empathy. What do I mean by building empathy?
My first step is doing my homework. If I know in advance that I'm meeting someone new and I don't know the first thing about what he does, I'm doing us both a disservice. So, homework.
Just doing homework isn't enough on its own -- that's just a "hygiene factor". The next component of the empathy-building process in my experience is understanding motivations.
Lastly, seek out those with common passions. Then talk about and explore those passions!
I've broken this down into three areas but I don't mean to imply that this is a scientific, logical, almost robotic process. To give you an idea, I've had conversations with entrepreneurs on topics as diverse as long-distance cycling, data analytics, theories of the self, strange attractors, politics, the problem of knowledge transfer, beer, hiking and more. (If you know me, you'll know that all these topics are close to my heart.)
This doesn't mean that the people I talk to always agree with me on every topic or even that we like each other. All it means is that we understand and acknowledge each other's humanness -- which means knowing that we each have strengths, failings, opinions, passions, fears, curiosity, and so on and so forth. Curiosity perhaps most of all. And that even if we disagree on one topic, some amount of soul-baring on another unrelated topic can engender trust: I'm not about to screw someone over -- or expect to be screwed over by someone -- who is a fellow soul-barer. At worst, I can expect that we may disagree on something and one of us will end up being wrong.And I don't only try to empathise with entrepreneurs. I also chat almost at random with children, athletes, waiters, retired people, musicians...
Lest this gives you the impression of me as a garrulous, gregarious sort, perish the thought. On thee inside, I'm still the same slightly introverted, logically minded engineer type I was as an awkward teen, just without the embarrassingly styled glasses. Empathy doesn't merely come from talking to people. The ultimate source of empathy is curiosity. About the world and about people.
Empathy comes from trying new things, reading across disciplines, following one's passions and recognizing that others have their own passions.
I've been on the Internet since the early 90s, been blogging since the late 90s (lost my pre-2004 blog archives), acquired paragliding and windsurfing licences before a driver's licence (though I admit I haven't done much since with either licence), helped launch about 7 or 8 new ventures (though none of my "own") outside of my current VC role...
Meaning what? Meaning curiosity. Curiosity is the first step towards getting an inkling of how others think. And having a deep understanding of how others think is practically the definition of empathy.
Developing empathy not only helps me understand entrepreneurs. It also helps me understand the entrepreneur's customers, employees and other constituents. How often do start-ups have investors who've never used their own investee company's products? I have worked with some great co-investors but my experience tells me that quite often, investors have never seen their investees' products in action.
Are these thoughts applicable only to the world of investments? Hardly. Quite the other way around, in fact. These are general life lessons that have applicability to the investment world.
Entrepreneurs wouldn’t (or shouldn’t) go with a firm they get a bad vibe from simply because they have someone in house who can help you hire people. They should go with a firm, because they trust that partner to stand by them and give them the unvarnished truth and material support in good times and bad.
Does any of this mean that I (and other VCs) know exactly what an entrepreneur goes through in their journey? Of course not. But can we share a common understanding? Yes.