The similarities between venture capitalists and social workers

I had an interesting call this morning with an entrepreneur who had been up until the wee hours of the morning reviewing legal documents for a big strategic partnership.   He apologized about his state of mind which wasn't exactly calm and cool, and we proceeded to discuss the issues and parse out the major ones from the minor details.  As I reminded him of a conversation I had with my wife several years ago, we all had a good laugh.  When my wife and I first met, she asked me what a venture capitalist does.  Sure, there was the usual answer of we look for great people building great companies, invest in them, and help them through strategic discussions and introductions.  However, there was a subtler more nuanced answer in that a big part of being a venture capitalist was similar to being a social worker.  Our business is a people business and part of that means not only knowing who we are dealing with but also understanding what makes them tick and helping them through both the good and tough times.  We are part coach, part mentor, and part social worker.  We need to understand the psychological state of the entrepreneurs we work with and the management teams they build.  When an entrepreneur is on the ledge, looking down, and ready to jump, our job as a VC is to pull them off and help calm them down.  When an entrepreneur is too cocky or overconfident, we show them the ledge, have them look down, and then pull them off.  So in many ways, being a good venture capitalist is dependent on our ability to understand what drives the people we work with, how to constantly challenge them and motivate them, pat them on the back when they need it, and push them harder if they are slowing down.  For that matter, these are some of the more nuanced and subtle traits that entrepreneurs need to exhibit when dealing with their employees, constantly taking the pulse of the company and key individuals, and massaging the various personalities and egos to help them stay hungry and excited to perform at their best.  As much as some would like to think that being a VC is about the technology or numbers, it is all about the people.  Anyway, at the end of the call my colleague and I were able to walk our CEO off the ledge and help get him prepared for his next battle.  He never thought of us as also playing the role of social worker in our frequent interactions, but he certainly agreed as he thought more about it.

UPDATE-there are lots of different types of social workers but in this context think counselor or sounding board.  My comparison with social workers was not meant to make all entrepreneurs sound like they have serious issues-the point is that sometimes the daily bump and grind of operating a business can get to you and having a VC who knows your business and who is part counselor/part sounding board can be an invaluable resource.

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5 Responses to “The similarities between venture capitalists and social workers”

  1. Charlie Crystle Dec 20, 2006 at 8:14 pm #

    “social worker” is a poor term for what you describe, because it implies something about your entrepreneurs that isn’t altogether positive. I think you mean something like a psychologist. The thing is, venture capitalists in general are not predisposed to being good counselors–you’re not objective, you’re not dispassionate, and you’re not necessarily empathtic. I know what you’re trying to say, but I think this is a bit over the top. If you have issues with an entrepreneurs, you would serve both your interst and theirs by recommending an executive coach.

    Just an opinion from a guy who’s been on the ledge, over the ledge, and down in the hole.

  2. Ed Sim Dec 21, 2006 at 6:11 am #

    Charlie-you raise some fair points. I should have clarified my use of the word social work as it can be quite broad. There are typically two kinds of social workers, one that works with clients that are disadvantaged and the other kind which typically has a private practice and provides counseling like a psychologist. I obviously meant the latter. In fact, my wife used to be a social worker and my mother-in-law currently has a private practice where she is more sounding board than anything else.

    Secondly, as for your comment on objectivity, while VCs may not be 100% objective, I do view our job as sounding board to be critical in our daily work with management teams. Having the ability to bounce off an idea with someone who knows your business, who is not as tied in emotionally and in the trenches battling it out every day, and one who has worked with a number of different companies, can be an invaluable resource.

  3. Charlie Crystle Dec 21, 2006 at 12:15 pm #

    Thanks for the clarification–I totally agree about serving as a sounding board, and I know you’re a good guy with good intentions, as many vc are. I get a ton of value speaking with people on my board of advisors, and I agree that part of the value add of a good VC is giving input and advice. There is, of course, a point at which you have a conflict of interest, which entrepreneurs who are taking venture capital should really understand. When I say that, it’s not to imply any bad intent or manipulation, just that there’s a point in the relationship because of businesses issues and, potentially (likely), diverging interests, where it’s no longer objective.

    Hope you’re doing well, btw. Just had a great talk with your friend Scott Maxwell–great guy.

  4. Alex Dec 27, 2006 at 10:10 am #

    The difference in compensation between a VC and a social worker renders any comparison between the fields tenuous.

  5. krish Feb 3, 2007 at 11:38 am #

    Ed’s posts are so hard boiled that I’ve often thought would this guy ever allow himself a joke. With this one, he truly did.

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