Post-investment support that pays dividends
About a half a decade ago when I was bought in from the private sector to work in a central government technology portfolio, I was gripped by how many really smart people were doing really dumb things. Their behaviour was not only damaging to the performance of the team and the reputation of the programme, but they were also destroying their relationships and careers.
I was in the turnaround team, a team of consultants responsible for creating, communicating and engaging people on the strategy for a new high-technology product that would transform UK border security. We had the business plan, a product, a target operating model and all other artefacts of a successful transformation programme. The framework was in place, but something was off. The leadership were at loggerheads over the direction, there was in-fighting amongst managers, staff were confused, milestones were being missed, and there was a sea of red all over the risk register. It was often called a ‘head case’ by consultants or ‘toxic’ by onlookers, which made for an interesting story. There was so much was riding on the programme, so much had already been invested, expectations were high, so the show had to go on.
This wasn’t the first time I’d witnessed so much internal chaos. I have spent the last 18 years observing leaders and teams in different environments watching similar symptoms play out. I’ve seen this type of behaviour in SMEs, startups, large corporates in on the frontline in healthcare and so I knew it wasn’t a symptom of working in a programme team.
At the time, I was writing a research paper on change management, questioning why so many well-scaffolded change programmes or startups failed. This line of enquiry led me to understand the micro-factors of change. What actually goes on in the minds of the people during rapidly changing conditions that cause people to underperform and programmes or ventures to fail. Something was emerging from my observations. Then it was apparent, put simply I discovered it was about how resilient leaders, people and teams are and the underlying thinking they have that drives their, often entirely unhelpful, reactive behaviour when they lose their footing.
What is resilience?
When I was working for the Cabinet Office, I recall sitting in on a Mental Health Awareness breakfast meeting chaired by John Manzoni, Chief Executive of the Civil Service. The topic of resiliency came up, and I listened to other people’s stories expressing how they overcame stressful working periods with cold showers, meditation, medication, healthy eating and lots of running. I looked with curiosity to see what comments the experts on the panel would make to these methods, but there were just a few nodding heads in the room. And so I raised my hand, and I asked the panel a question “Is resilience a muscle you have to train or is resilience already built-in to our system?”. The response I gained was the one I was dreading, the consensus was that it is a muscle — use it or you lose it. My issue with this is that you have a room of 60 or so people, now thinking they have to work at building this muscle, which apart from breeding more misunderstanding into office, it sends the message “you’re not …[fill in the blank] enough”.
Resiliency is often described as having a toughness to recover quickly, or an elasticity to bounce back to shape, my argument to both is that we are not made of osmium metal or of nylon. And in fact, it’s not even about just getting over it and moving on, that just fills up the pressure until one day everything collapses, instead, it is a lot more straight forward, it’s an uncovering of resilience in leaders and teams and clearing up the misunderstanding that gets in the way of realising it.
How is this relevant to VCs?
During my investigative studies, I started to explore where else the misunderstanding of resilience and resulting unhelpful, reactive behaviours show up. The two places where I’ve seen it most magnified is in programmes and startup environments. Technology programmes and tech startups share similar characteristics, whether the team is rolling out a new digital product to tens of thousands of staff or mass marketing a product across new territories to reach new customers. The pressure is on to hit metrics and meet milestones to release the next round of funding. Once the venture gets to a particular stage and investors and other key stakeholders are involved, things begin to look serious.
The endless pursuit of hitting milestones is both an art and a science and leaders who haven’t developed their leadership tend to be the ones who use a reactive, controlling force, pressure and urgency to drive results. Done to induce stress in people to perform is a poor motivational strategy that often kills performance, and only results in burnout and failure.
Where there is a constant change (everywhere in current times), resilience and effective leadership is critical! In my experience, leaders who misunderstand resilience demonstrate more reactive behaviours that focus more on how they are doing rather than how collectively as a group they are performing, as outlined below.
These reactive behaviours limit or block change, growth, undermine collective effectiveness and sub-optimise performance. If they are showing up in your team or in one of the companies in your portfolio, you’d be better off addressing this promptly before it starts to impact results.
Post-investment support
When I started writing this post, I set out with the intention to explain that founders not only need to be supported with business, technical and industry know-how, they also need to be helped to grow and develop as a leader with the venture. Uncovering their resiliency alone is not enough, it’s an essential building block they need to build exceptional leadership skills on.
The best VCs don’t only understand the needs of the venture. They deeply understand the needs of their founders. Ultimately you know scaling a business is a very different game from starting one and founders trust you to provide the support and develop the skills they need when the venture reaches a new stage of growth.
Just like there are development stages of company growth, founders also need to be more aware of their development gaps to ensure they hit their growth milestones as the venture scales, so they don’t get left behind. If left unattended, something as seemingly minor a founder’s personality quirk might get overlooked in the early days, but as the venture grows this quirk can quickly escalate into unhelpful behaviours that cause issues in the leadership team which ripples down the company, infecting the culture and ultimately performance.
You might make the assumption that if you invest in experienced founders, they will be better at dealing with the uncertainty of scaling and leading a company. But unfortunately, in my experience, this has not been the case, I’ve worked with very experienced leaders who tend to be experienced in the process but hold back the performance of the programme or company because of issues that have not been addressed.
Data-driven insights
A key determiner of success is to be able to predict your founders’ leadership potential and resilience to handle change. In my experience, we do not have the superpowers to make this judgement as often our opinions are proven wrong in that we often over or underestimate someone’s potential. In reality, whether you are an investor or a programme director, you are incentivised to yield a return on investment in the short-term. Not all companies or programmes deliver or provide the performance you expected, so ultimately, you will want to make sure you are investing your time working on real attributes of growth.
This is not pseudoscience. The best approach is to gain real data and insights that can determine these attributes and allow you to more accurately support your founders’ needs. Fundamental to a venture’s success is the founder’s ability to adapt to changing conditions, use new data to make decisions under pressure and tap into their resourcefulness.
With more data and a more data-driven approach to post-investment support, you can establish the attributes that contribute to founder performance while being able to provide the post-investment support that will maximise venture performance. This will also address “safe betting” by investing in what you see as lower risk founders who have been successful in the past to understanding “what” combination of attributes made them successful.
About
FastCEO partners with ecosystem builders who invest in founders of high-growth potential technology ventures by decreasing high-risk factors associated with early-stage investment and new first-time founding teams. We provide post-investment support, which includes assessment, mentoring, coaching and development.
We begin by offering founders and key players a data-driven 360 assessment to assess competencies as part of the due diligence process or to prepare them for the next phase of growth. Our 360 goes beyond measuring behavioural skills; it also uncovers invisible barriers to productive relationships and achieving results by measuring behaviour and assumptions simultaneously. It then goes one step further to show you what might impact leadership effectiveness and venture performance by correlating the different leadership competencies with business performance measures.
