On getting advice from investors or giving advice to entrepreneurs. May 27, 2013Posted by bernardlunn in Uncategorized.
I posted this as a comment on Mark Suster’s blog, but had thought about it a lot so decided to keep it here as well.
Getting good advice is critical, but entrepreneurs can get that advice from many sources – friends, family, angels, advisers, VCs, blog posts, chance conversations in a coffee shop. The problem with advice from VCs and angels is that it becomes loaded with the issue of money.
98% of worthwhile advice is solicited. Ok I chose that 98% just to have fun with the thread, no data points! When I seek advice I really want it, I am a receptive vehicle, I am open to learning. The great advisers just answer that question and the response is not loaded in any way. I could ask “I totally screwed up, what should I do?” and get a useful response. Now try doing that with somebody who just wrote a big check. A few great entrepreneurs can do that and a few great investors can do that, but usually the relationship is too loaded and guarded.
Occasionally an investor may want to be proactive, to offer unsoliceted advice. The best understand that there are a very few teaching moments and you need to invest in the time to be there when those teaching moments arrive. You also need to have an honest relationship so that the recipient is receptive. Asking good questions that guide the advisee to make their own decision is ideal. This takes time and patience of course.
Occasionally as an investor you may decide that a CEO needs to be replaced. The Ivey research I linked to in an earlier comment shows that the willingness to do that early is key. It is tough and unpleasant but as entrepreneurs we all know that our biggest error is usually waiting too long to fire a non performer. But I think it has to be binary. A manager either has my 100% confidence or I have taken a decision to fire. A muddled decision, losing confidence so being constantly “all over like a cheap suit” does nobody any good. I recall one entrepreneur being totally frustrated with a VC offering continous unsolicited advice. I advised the entrepreneur to throw his car keys onto the boardroom table and say “OK, if you don’tike how I am driving, you drive”. Apparently it worked. On the other side of the table I offered that same entrepreneur some advice. History did prove me right, there was a big shift happening that required a strategic change, the entrepreneur ignored me, went through some tough time…and went on to great success with his chosen strategy with only a minor pivot.