The Best VCs are “Listeners”

by Eric Tobias - Partner

The more I’m around entrepreneurs, the more I realize the special one’s are all great listeners. Listening to customers, employees, partners, and investors is all part of the job. Listening is such an important part of communication because it gives us a chance to understand what someone else thinks, believes, desires, and takes action on. In an organization like a business, listening is the first step in being able to triangulate and synthesize information to effectively make decisions. An effective executive realizes the gathering of the right information is absolutely critical to running an efficient organization. After listening, the entrepreneur can use the information gathered to build the strategy and action plan.

Venture Capital is a competitive market, that involves a lot of the same mechanics as being an entrepreneur. In order to find success in the market, you have to be able to build a brand and cut through the noise to get into the best deals — basically you have to have the mentality of a marketer. Accordingly, it can seem like today’s most noteable VCs are more famous for their blogs than they are for their deals, when the opposite should be true.

So what does this have to do with listening? As a VC, your primary job is to predict the future — through the identification of new ideas, talent, and markets that will change the world. I’ve found it critical to triangulate information from a number of sources as I develop an opinion on a given opportunity, market, or team. Having a strong point of view on how the world works and will move is an important part of the job — which inherently forces VCs to talk more than listen. But the more I continue my journey as an investor, the more I believe the best investors are listeners first.

As marketers, VCs often need to broadcast information publically — things like their investments, their “theses,” and other meaningful information in order to build that following or brand, but very rarely do VCs stray from their established identities based on what they’re hearing. It creates this syndrome of self-selecting out of certain deals and investments based on having a pre-disposed opinion on certain matters. Startups have this issue as well. We often see young companies fail to listen to what the market and their prospects are telling them. Instead, they go straight to marketing their product or service and then are surprised when it doesn’t resonate with their targets. This is a classic product-market fit issue but it results from not being insanely focused on listening.

It seems to me the best VCs often listen deeply to how the markets are moving and how the entrepreneurs that serve those markets are reacting. VC’s are highly opportunistic. In fact, a lot of Tech VCs find success investing outside of their thesis. These investors don’t trade-off their listening skills for their marketing penchant, but keep them in balance — evangelizing their point of view and getting access to the great deals, but also knowing when to pivot. The biggest, most successful businesses often start as non obvious concepts so this ability to listen and react is so critical.

When we started High Alpha, we were careful to construct a business model that enabled us to listen to markets, entrepreneurs, customers, and partners more deeply than more traditional investors. As part of our venture studio, we are co-founding businesses with great entrepreneurial leaders and serving in an operating capacity in the early days of the business. In addition to creating new companies, we invest in both businesses that we create via our studio and in businesses created by great entrepreneurs outside our studio. This new model enables us to be opportunistic investors who remain in the entrepreneurial jet stream, attached to customers and markets, and always listening to what those customers and markets are telling us.