“We are all smart, Jeremy.”

CIA Director: What do you think of the girl?
Jeremy: I think she’s fucking smart.
CIA Director: We’re all smart, Jeremy.

It has been interesting to be on the other side of the table as the Venture Capitalist versus being an entrepreneur especially when it comes to evaluating the entrepreneur themselves.  I got a kick out of the fact that in our investment committee meetings that the most frequent response to the question “What do you think of the entrepreneur” would be “She/he is smart.”.  After seeing Zero Dark Thirty, I realized that it really is a crappy comment because it lacks any insights on the entrepreneur.  “We’re all f-cking smart” is now our immediate response when someone comments that the entrepreneur is smart.

So if everyone is smart, what else should we be looking for to determine if the entrepreneur will be successful?  As part of our evaluation process, we usually ask the following questions about the entrepreneur:

1. How much experience do they have that is relevant to the business?  Experience is a big deal.  Why?  Because you make less mistakes and mistakes equals cash burn.  Whether it is experience as a previous entrepreneur or in functional expertise or industry expertise, we consider that major pluses as we evaluate the potential success of that entrepreneur.

2. Is the entrepreneur coachable?  We don’t believe you should do whatever we say.  In fact, we don’t think you should do most things we suggest.  However, we think great entrepreneurs are always striving to be better and looking to solve problems.  Often when we bring up issues or questions, the entrepreneur may get very defensive or argue a counter position right away.  The best entrepreneurs are those that listen and take time to process the suggestion or question raised and are not afraid to say they were wrong or “I am going to look into that.”.  As investors, we want to help and if we feel like we are constantly being deflected instead of being treated as a partner, it usually doesn’t end up well.

3. Would you work for them?  This may be the most important trait of them all – the entrepreneur’s ability to hire.  There are three main responsibilities as CEO.  The first, you need to set the Company Vision.  Second, you need to make sure there is money in the bank.   Third, you need to Hire and Retain great talent.  When we evaluate the entrepreneur, we know that the Company is not a one man show.  Its success is based on the people that work there and being able to recruit A talent is a necessity.  Our test is to just ask ourselves “Would I work for them?”.  When you find great entrepreneurs, they have a level of magnetism that compels you to the point where you can envision working for them.  It’s based on charisma, sense of trust and a feeling that the person is a shooting star and you want to grab the tail of that comet and go along for the ride.  When you see that, you know that the person will be able to build great teams.