The Mind of a Venture Capitalist

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This is the first in a series of blog posts where we explore the common cognitive traits found in a variety of occupations.

Prophecy Sciences uses a neuroscience-based assessment to measure the cognitive factors that predict performance. Results are achieved through a combination of cognitive games, biometric signals, and machine learning algorithms. The data used in this graphic and blog post come from a sampling of VCs in Silicon Valley and San Francisco. Comparisons are made versus the rest of the data set, which is composed of elite performers at top tech companies, start-ups, media outlets, universities, athletic organizations, and more.

The future of many early-stage startups relies on the founders’ ability to raise venture capital. If you can make a convincing argument for the need, market, and innovation of your product, a VC may decide that funding your business is a worthy gamble. Because the fate of many fledgling companies lies in the hands of VCs, there’s a lot of mystique surrounding their role. Who are they, and how do you become one?

Although we’re not going to tackle that last question (John Greathouse covered it nicely here), we were intrigued by what we might find in our data if we looked for common cognitive traits amongst the VCs we’ve tested. Indeed, we identified several very strong and—we think—compelling characteristics.


Not-so-great memory

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With so many things competing for our attention throughout the day, it’s a challenge for anyone to keep the important things in our working memory and the unimportant things out. VCs appear to have even more difficulty with this filtering, with our data showing a 10% deficit in working memory compared to everyone else.

Our take

  • Maybe it’s because VCs get pitched all the time, but unfortunately for you, it may take extra effort to work your way into their memory. So don’t be afraid to follow up; that thank-you email is not only good manners, but may help solidify your place in the mind of the VC you just pitched.


Good with faces

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When asked to make judgments about people based solely on their faces (“Who’s a better mentor?”, “Who tells better jokes?”) we found that VCs are 75% more relaxed while doing so, according to their heart rate variability.

Our take

  • Being a VC means working with people and taking meetings—LOTS of meetings. So whether it’s through natural ability, lots of practice, or both, it seems that one key to being a good VC is being comfortable interacting with other people, including deducing characteristics based on facial cues.


Risk-seeking

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Not everyone has an appetite for risk, preferring instead to go for small, safe wins. The VCs in our dataset had no trouble going for the big, uncertain gambles, making risky choices 67% more often than others we tested.

Our take

  • Banking on the future of unproven companies is inherently risky. In fact, although the exact numbers vary, most venture-backed companies do fail. So whether the life of a venture capitalist simply appeals more to those of us who enjoy and even seek out risk, or it’s something one becomes more accustomed to in the role, uncertainty comes with the territory.


Calm & collected on big, safe bets

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Winning big is exciting, and for most of us, we show it. VCs on the other hand manage to keep calm and collected when they’ve made a big bet on a nearly-sure thing. According to their heart rate and skin conductance, we found that they’re 65% more likely to stay cool-headed when they’re about to hit the jackpot.

Our take

  • Despite the risk associated with funding early companies, knowing how to identify the likely winners reduces that risk. With this in mind, it could be that VCs are less excited leading up to their wins simply because they expected the win more than the rest of us.


[Probably] not a lawyer or a scientist

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In terms of cognitive traits, we found that VCs have the most in common with other finance professionals we’ve tested. This includes investment bankers, hedge fund traders, people in private equity, and more. On the flip side, VCs have the least in common with lawyers, scientists, and service professionals.

Our take

  • It’s not surprising that VCs would have a lot in common with other finance professionals, given the overlap in their roles.

  • Their dissimilarity to lawyers makes sense given that lawyers tend to be very risk averse whereas the world of investing capital in unproven companies is, by its nature, quite risky.

  • Does your product rely on complex scientific concepts? Take the time to break these down in your pitch if you want VCs to really understand what makes your company unique.

  • Although they can be tremendously helpful to entrepreneurs, VCs are not in the service industry. Don’t expect them to concern themselves with pleasantries. They’re there to get down to business, not to make you feel good about yourself.


Soc Sci degree (Y) / Math degree (N)

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There’s no educational path aimed at becoming a VC. That said, we found that amongst the VCs we tested, they were 154% more likely to have a degree in the social sciences than the average person in our database, and 64% less likely to have a degree in math.

Our take

  • Although successful investing requires some savvy with numbers, you can pick up the necessary quantitative skills without a degree in mathematics.

  • That said, it’s not only numbers that matter: skills that are not strictly quantitative appear to contribute to success as a VC. Among these, a focus in economics is particularly common.


Drives a hard bargain

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No one wants a bad deal, and it appears that VCs may be especially driven to get what they want out of a negotiation. Our data shows that VCs demand 21% more money, and are 62% more likely to turn down bad offers.

Our take

  • Negotiation is a skill that, like anything else, improves with practice. Since VCs are always practicing, they’re not scared to turn down offers that aren’t in their favor, and they’re comfortable asking for more.


Are you a VC or do you know VCs? Do you think this profile rings true? Let us know in the comments!

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