Being a Mountain Guide and being a Venture Capitalist is the same thing
I have been investing in startups since 1985, and guiding since 1976. After 60 portfolio company investments from 11 different venture funds that I’ve managed, and after guiding hundreds of clients in the mountains of Colorado, Canada, and Europe over the past 40 years on skis and on rock, I’ve come to this conclusion.
A mountain guide is faced with three factors that determine the success or failure of his objective: the Client, the Weather, and the Route.
The Client is always the most important factor. To know a client’s true abilities and limitations, a guide must spend time with her in the field. Over the years, through multiple, progressively harder routes, the client and guide form a relationship that drives the likelihood of their shared success on the next objective.
Clients choose their guides because of their extensive local knowledge of the terrain, and because the guide has climbed a route the client has never done many times. While achieving the summit depends on a successful partnership, that likelihood is higher with an experienced guide, and the possibility of injury or death is dramatically reduced. Experienced guides have seen all the failure modes that clients will encounter on the route, and they know how to avoid them.
The Weather in the mountains is constantly changing, but an experienced guide can accurately forecast his local weather and anticipate the best days. Some objectives are possible even in bad weather, and a good guide has these in his pocket when the client’s schedule can only work on specific dates.
The Route is the trade of the guide, and the place where his expertise is most apparent. Many guides spend their professional careers guiding one route: the Hornli Ridge of the Matterhorn; the West Buttress of Denali; the South Col of Everest; the Nose of El Cap. These guides have a narrow focus on a single objective, but their skill and judgment is unmatched.
Other guides devote themselves to ski guiding a range, or climbing all the routes in a single area. Their expertise is broader, and they are able to serve a wider array of clients. Some guides take their clients on adventures around the world, but whatever the approach, mountain guides must have the experience and durability to take their clients up the route, and safely down again.
In venture capital, the Client is the entrepreneur; the Weather is the market environment; and the Route is the portfolio company. The VC is the mountain guide.
People think that VCs spend all day picking entrepreneurs, but it’s not true. Great entrepreneurs choose the VCs they work with to build their startup, and these talented clients only pick guides with whom they have the highest chance of success.
Experienced mountain guides know that their climbing days are limited, and want to work with clients who demand the biggest routes. Likewise, experienced VCs will only devote their limited time to entrepreneurs with their sights set on game-changing companies.
A VC must be attuned to the market environment throughout the investment cycle of her entrepreneur’s startup. Faced with adverse conditions or unexpected client limitations, great guides know when to fold, and live to climb another day — so it is true among venture capitalists.
Whether VCs focus their expertise on specific industries or on a specific geography, they must attract the best entrepreneurs to enjoy success. In stormy seasons or bright sunshine, great VCs can avoid the hazards that could result in failure, and find a path to success with their entrepreneurs.