Think Like a VC, Act Like An Entrepreneur

Getting employees to adopt both an entrepeneur's bias for action and a venture capitalist's talent for hard-nosed analysis is a challenge. But no one said excellence was easy

By Jeffrey Bussgang

All corporations have the challenge of trying to infuse an entrepreneurial spirit into their workforce. As the theory goes, when employees act like entrepreneurs, they put themselves in the mind-set of business owners with a bias for action, which results in good decisions and good outcomes.

To get employees to act like entrepreneurs, then, companies have often taken a structural approach. For example, Google and Microsoft organize into small units of 50 to 100 employees to maintain a sense of entrepreneurial spirit and eliminate bureaucracy. The trade-off is that small groups can create silos across units, leading to duplication of efforts and squelching synergy. But if a company chooses to organize to achieve maxim efficiency and scale, it risks creating behemoth departments that crush the natural entrepreneurial spirit that lies within its employees.

After a career as both an entrepreneur and a venture capitalist, I have come to conclude that creating an entrepreneurial spirit within the corporation is only half the battle. I have seen too many situations where acting like an entrepreneur was not a business panacea: Unbridled, unfocused entrepreneurial energy can easily be squandered and misdirected. In my last six years as a VC, I developed an appreciation for the attitude and vantage point that VCs have when sifting through business proposals and allocating scarce capital to the best opportunities.

Through these two career experiences, I have come to realize that the true question corporations need to ask is: "How do I get my employees to think like VCs but act like entrepreneurs?" In other words: What's the best way to impose the challenge of complex, competing priorities on employees who must, in effect, be adroit at living with split personalities? This new frame of mind requires the corporate manager to extract the best from both worlds—entrepreneurs with a bias for action, and VCs with a bias for analysis. Elements of both are required.

The VC industry is a small, arcane field that isn't well known to many outside of the mere hundreds of professionals who practice it every day. So let me explain a bit more what I mean when I promote this way of thinking for the corporate manager.

In short, VCs are trained to:

• Survey and network with smart people to find the best ideas out there (what's known in industry parlance as deal flow).

Corporate managers, in turn, should be encouraged to spend time networking with outside experts who can expose them to a broader range of ideas than what might emerge from within the walls of their corporation.

• Be notorious cynics who swiftly reject hundreds of these ideas, setting a high bar before something is deemed worthy of their attention.

Once they've attracted numerous wacky and credible ideas to transform their business, managers need to follow the VC model of being a pessimistic cynic, challenging every assumption and having a sensitive "BS" detector that allows them to dismiss the majority of suggestions as unworthy of further consideration.