Beyond Basic VC Knowledge
As most people know, intelligence quotient – or ‘IQ’ for short – is a score derived from a set of standardized tests designed to assess human intelligence. It’s an indicator of how smart you are.
Less well known is a measure called emotional intelligence quotient (EQ). It’s a gauge of human emotions, especially how people emotionally understand and interact with one another in social situations and the workplace. EQ is an indicator of how well you can read and work the room.
Some people have high IQs and/or EQs; others have low IQs and/or EQs.
Once limited to the domain of academics, it’s now mainstream to talk about these topics.
There’s another quotient that I have observed recently. It’s what I refer to as ‘Venture Quotient’ or VQ.
There are no standardized tests for determining a person’s ability to first be an entrepreneur and at the same time, understand the VC and VC ecosystem. Despite the lack of a quantifiable measurement, it’s clear to me that many startup CEOs, executives – especially CFOs – and BoD members (particularly independent ones) – have a medium- to high-VQs.
In another blog post, someday, I will more fully address the subject of IQs, EQs and VQs of startup executives and board members. This post is for openers.
VQ includes knowledge of many of the elements that comprise the founding and management of a new entity – the ‘early days’ work. But the VQ score also encompasses familiarity with later activities and phases, including growth, finance, operations, sales and marketing, legal and Board of Directors activities and governance that crop up in the process of transitioning from being a startup to an emerging company, and finally, to an established firm.
More specially, VQ also encompasses the ability to execute and transact the following well-known hallmarks of startup life:
How to bring in the first institutional money,
How to become a “hot” deal and maintain your company’s allure,
Forming a unique new venture and with an A+ team (see last week’s blog post),
Funding dynamics from zero-stage to seed, through IPO, including, especially, syndicate funding dynamics,
Exit dynamics from the same stages mentioned above, as well as in later stages,
The ability to smartly, judiciously and concretely interact with the VC startup ecosystem,
The ability to intelligently and shrewdly interact and socialize with the VC in the wild, and
Many more.
One proof reader commented (and I had to add it in here): “No wonder it’s so hard to be a successful founder/CEO and get VC funding.” (Thanks, bro.)
I find that the entrepreneurs with the highest VQ make the quickest and most adroit adjustments to VCs during meetings and in raising money by taking in real-time, partner-level information. They easily and comfortably do things like sharing new VC org changes, funding activities and market insights – not offhandedly, but judiciously and strategically. It’s part of how they create (either selectively or in combination with a forcing function) a fear of missing out (FOMO) and auction-like pressure. These three attributes – especially in combination – are practiced by the highest-level VQ-ers.)
Interestingly, the best CEOs, IMHO, combine high EQ and VQ – not necessarily high IQ and VQ. For illustration, HR is a big part of the CEO job and obviously, EQ is a big part of HR. Compensation, recognition, morale, conflict resolution, personnel actions, policies, etc. constitute the day-to-day HR job. But those things are often part of the CEOs job, too, especially as the company grows and matures, and there are more employees in various geographies.
The downfall of CEOs with high IQ and VQ is, of course, culture- and people-related issues. That is not to say that EQ can’t be worked on. Most CEOs have coaches who work with them mostly on EQ-related issues, as well as VQ challenges.
In the end, it’s the business that matters. A successful company can be supported by leaders and people with high IQs, emotional awareness and VC knowledge. But having high quotients in two out of the three, or better yet three out of the three, surely helps.