Why you want your VC to provide honest feedback

The new year is a time for reflection. By thinking about the events of the past year, we seek to learn from our experiences in the hope of a better future. The steps which we need to take to build this better future are traditionally articulated as new year’s resolutions. While each of our specific resolutions are different, they all share a common theme. We all write our new year’s resolutions with the goal of becoming a better person in an area of our life that is important to us.

As a venture capitalist, I was thinking about what a VC can do to adopt the values of a good person in their career. As I reviewed some recent interactions that I’ve had with entrepreneurs, it became clear that providing honest feedback is one of the cornerstones of being a good person in the VC industry.
Whether I’m working with an entrepreneur I’ve backed or am reviewing a new startup, I always pay careful attention to provide my honest thoughts. If I’m genuinely excited by what you’re doing, I’ll let you know. This is the easy part. All founders like to receive feedback which is aligned with their own thoughts and plans, so this makes it easy on VC’s to provide such positive feedback. The challenge is to be honest enough to provide negative feedback when necessary. In these cases, the easy approach is to avoid the issue altogether or point to a lesser evil as a scapegoat for the actual feedback that you want to give. For instance, if you try out a startup’s product but don’t like it, it’s much easier to say that the market is not ready for the product than to directly question the product’s quality.
Although it’s easier to avoid giving negative feedback, especially when you have yet to invest in a startup and therefore don’t have any money at stake, I simply don’t feel comfortable being insincere. The discomfort from avoiding the truth is much greater than the discomfort from getting a potentially adverse reaction from an entrepreneur. Most founders take negative feedback well because they understand that it is designed to help them address their weaknesses and improve in the future. Instead of sweeping issues under the rug, the intention is to deliver short-term pain for long-term gain. Most founders also take negative feedback with a grain of salt because they recognize that investors can be wrong, and in fact often are. If you don’t believe me, check out my earlier post on Venture capitalist misses and what they mean for entrepreneurs
However, some founders take negative feedback personally. This is despite the careful attention which I pay to focus my feedback only on what the startup is doing, not the people behind it. Although I understand this reaction as it can be hard to hear a newcomer criticize a product that you’ve spent months or maybe even years building, for a short while it makes you question your commitment to providing honest feedback. 
Ultimately, however, a VC’s role is to help entrepreneurs grow, not to keep them happy. The odds of a startup succeeding are already low enough. We don’t need to make them any lower by avoiding tough conversations. In fact, it’s our responsibility to increase the odds of success as much as possible. For every founder who gets angry upon hearing negative feedback, there will be another who uses that feedback to get even better. These are the entrepreneurs I want to be working with, so I’ll continue to provide honest feedback, in 2013 and beyond.