you have one reputation – use it wisely

Posted by in Investing, Opinions

Despite the title of this blog sounding like a quote from Yoda, it is something I think merits a little air-time. Fundamentally investing and working with investors is a relationship/people industry and not a ‘financial product’ industry – an oft used excuse to completely ignore the fact that people are involved.

For me ‘reputation’ is a big picture concept.  It’s not built in a moment but rather as a result of a series of multiple individual events that coalesce into an overall aggregated opinion that people/a community/an industry has of you. Very hard to win and build, ironically super easy to lose and to let slip.

So what’s the relevance of the blog post to investing?

Well, purely that I am consistently astonished about how little attention multiple participants in the venture capital/private equity (and wider) industry pay to medium to long-term reputation. Mainly through a short-sighted view that it is a financial services industry and today’s action will have no effect on tomorrow’s success.

The absolute truth is that it is a pretty small community, people talk and bad news or negative outlooks on an individual or company spread 10x faster than the good news.

Yet still you see entrepreneurs, VCs, advisors, lawyers etc…. taking short-term views on situations.

Sure that short-term action in itself is unlikely to substantially rock the boat. In many cases the short-term gain through a short-term view may be greater than that which could be reached with a more rounded or holisitic view on life. But it ignores the fact that:

–          Successful entrepreneurs are likely to ‘go round again’

–          Unsuccessful, but committed, entrepreneurs are likely to ‘go round again’

–          The best entrepreneurs have oft failed before they succeed

–          Entrepreneurs know entrepreneurs who know investors

–          Investors know entrepreneurs who know investors

–          Investors know investors who know entrepreneurs

–          Today’s sell-side advisor might be on the buy-side next time

–          And so on and so on and so on

My linked-in stats show this to be true. I share connections with lots of people from all walks of the investment community who share 50+ similar connections with me.

I believe that too little time is given to that ‘step back and think about the medium term’ before giving the short-term response. It’s a few simple things that make the difference:

–          If you’re saying ‘no’ take the time to explain why (this is a core belief of mine)

–          If you’re saying ‘no’ try and give direction as to where to maybe go for a ‘yes’

–          Very little in business life should require you to be rude

–          If you don’t care about a topic, consider that the entrepreneur/individual presenting probably does

–          Your time is no more or less valuable than the next person’s

I’ve said it before and I’ll say it again. The entrepreneurial world and the investment community are relationship/people based businesses and are not ‘financial services’ businesses at their heart. Sure finance is involved, but it is not a product, it is a service, service means people and people talk. People talking builds reputation and destroys it. Nobody’s perfect but ironically it is often those that think themselves most perfect that have the poorest reputation.