My Number One Advice for Startups or VCs: Conviction > Consensus

I saw this Tweet recently by Scott Belsky, co-founder and CEO of Behance

conviction > consensus

— Scott Belsky (@scottbelsky) April 29, 2015

It spoke to me because it so resonates with my nearly daily advice to entrepreneurs and VCs alike. I went as far as to call it the best Tweet of 2015 so far because it encapsulated my advice so succinctly. He took two words where I take 1,000!

I am often asked how we make decisions on investments at Upfront Ventures. Every VC firm works differently but when asked about our process I always reply the same way,

We’re a “high conviction” shop

If a sponsoring partner is proposing a deal that is well within our strike zone in terms of check size, stage, tech sector and geography he our she will get the deal done if they have high conviction (and provided another partner doesn’t have super high-conviction in the opposite direction).

A typical investment discussion is not a bed of roses. A company presents. The sponsoring partner makes the case why they are in favor of the deal. The rest of our partners, principles, associates and EIRs can weigh in with commentary on their views of the quality of the entrepreneur, the market, the product, competition and so forth. The can be downright negative and we welcome dissent. I think newer associates are surprised by how blunt we are with each other but I’ll always remember the words of my mentor our founding partner, Yves Sisteron, who said, “reciprocity makes for terrible investment decisions.” In other words, just because you liked my last investment is no reason for me to be nice now.

When the partner hears all of the input he or she goes away to do more research, gather more information and get ready to face the doubters. Sometimes this feedback is sufficient to start to erode his confidence in pursuing the deal. Other times she comes back with even more conviction about the founders, market or products. It is then time for the sponsoring partner to pound the proverbial table because we’re looking for deep conviction. If you won’t pound the table for your deal I question your conviction.

If you pound the table on deals over a period of time and you’re consistently wrong it’s clear you won’t make a great long-term VC. But being wrong on some deals for the right reasons is ok. If every partner uniformly loves a deal I often question whether we’re challenging ourselves hard enough. If it’s such an obvious deal then won’t 10 other companies being doing this?

The same is true at startups. No answers are obvious or everybody would be doing these things. I am amazed at how some entrepreneurial teams dither. I watch founders who want to get “air cover” for hard decisions by getting too much input from their teams or boards. I watch management team hedge by building multiple products and spreading resources too thinly versus having strong conviction in their core ideas. Often I think this is because poor leaders are too worried about being loved. Respect > Love.

I watch CEOs who know they need to fire senior staff but avoid doing so instead convincing themselves that they need just 6 more months because this executive or that one is too valuable to lose. This drives me nuts. When decisions are clear — act. You’re a startup, not GE.

I want strong leaders. I want deciders — even in they don’t agree with me. I want “benevolent dictators.”

Don’t get me wrong, I believe that founders should seek lots of input. Then they need to take all the input they received, mix it up, apply a framework for how the information affects your decision and decide. All advice you receive is too generic to help you — you need to decide for yourself in your exact situation. I call this process “triangulation” and my advice is always, “Seek advice but in the end trust your own judgment.”

People who dither make decisions, too. They make “decisions by indecision” and it’s the worse form of decision at all. That senior exec you didn’t fire but who undermines your culture brings down the performance of his peers. Good people quit out of frustration. That hedge you made on product means that both of your product sets are weak because you didn’t have enough resource or enough conviction to make either work.

The best entrepreneurs make decisions quickly and are at best right 70% of the time but recover quickly when presented with new data. I’ll take a good decision now over a perfect decision in 6 months any day of the week in a startup. And what most startups don’t realize. There are far greater consequences for the decisions you fudge than the decisions you make.

I’m not a fan of co-CEOs. I’m not a believer in committee decisions. Not every decision will be right. But trust your gut and move forward. It takes a great leader to build a great business because if you make the tough calls and you’re wrong more than right you’re screwed. Frankly, if you’re right but LESS RIGHT than your competitors you’re also screwed. Great leaders are rare and competition for capital, people, press and customers can be brutal. Only the best survive.

It’s why I tell people that the single most important investment decision I make is my confidence level in the leadership skills of the founder & CEO. And it’s how you should decide which jobs to accept.

Conviction > consensus. Respect > Love.

And conviction from an excellent leader is priceless.