Great venture capitalists have extensive networks built on top of meaningful relationships.
Is it really sustainable to do the right thing if you are in a cut-throat industry? It’s relatively easy to envision how micro-financing or teaching low-income students basic IT skills could offer both financial and social rewards. But what about the Venture Capital Industry? In an industry that is all about getting the best deal first and getting the biggest exit the fastest, is it really possible to do things differently and stay ahead of the curve in terms of returns?
David Hornick, a Midas List venture capitalist proves that success can come by doing the right thing! David has the honor of being the “giver” that introduces the concept that “givers finish first” in Adam Grant’s book Give and Take. I was intrigued that of all people Adam could have chosen, he chose someone from a profession that has a reputation as being ruthless.
Before unpacking David’s success, it is important to understand Adam Grants explanation as to why “Givers finish First.”
“Givers” do well according to Adam because most people want to help givers and punish takers. In any single transaction “takers” might do better, but in the long run “givers” will do better – not because of the people involved but because of the observers. In general, observers of any interaction will punish people who they have observed as “takers” and go out of their way to help people they perceive as consistent “givers.”
I had an opportunity to experience this for myself. On the surface, my real estate agent did an excellent job for us. He sold our house for almost 50% more than the previous high on the street. And yet – I would never use him again AND I actively discourage others from using him.
Why – Because we observed him basically bully his own buyer into paying far above the next highest offer. (In the spirit of transparency, I was not disturbed enough by this behavior to give back the extra $30,000.)
That “taking” behavior made me want to punish him – even though we actually did much better on the deal than we would otherwise.
In the short term our agent did well, yet he hurt himself in the long term. Not only will we not refer him, I have actively discouraged at least half a dozen people from using him.
The opposite is also true. When I meet people who are true givers, I actively look for ways I can support them in reaching their goals.
So what makes David Hornick so different that Adam Grant used him as a poster child for giving?
David operates differently from most other venture capitalists. From a monetary perspective, all VCs work the odds – investing in many companies hoping that one hits a home run quickly. It’s after the deal is done that David works differently. David sits on the Board of every company he invests in and will do whatever he can to help them be successful regardless of how much time it takes before an exit happens. One of his ventures took 14 years to exit – and David was there advising and contributing the whole time. Although every VC needs to play the numbers game to some extent, once you are in Hornick’s tent, you have access to his time and his resources.
The difference in approach is apparent in the YouTube debate between David Hornick and Dave McClure, CEO of 500 startups:
- During the debate David Hornick continually advocated for the importance of supporting all his entrepreneurs.
- Dave McClure was equally clear that his interest and support would disappear if a company was only moderately successful. In fact he called moderate success his worst nightmare.
(If you want to watch the whole video you can find it here. Pay attention to their styles – even the way they conduct themselves on the video suggests a difference in approach).
His reputation creates a great deal funnel.
One of the most critical factors in the success of Venture Capitalist is the quality of their opportunity funnel. You can’t deliver great returns if the high potential opportunities are gone before you get a look at them.
By investing in the success of ALL of his funded opportunities, David has created a reputation that will ensure he gets a look in at the best opportunities. Is it a coincidence that Travis Kalinick, co-founder of Uber came to David first — I don’t think so.
In the TV series Mad Men, Roger Sterling suggests that “Philanthropy is the gateway to power.” David Hornick is philanthropic with his time. In return, his contributions have resulted in a reputation of someone whose word can be trusted, who is both honest and fair, and as someone who will do whatever it takes to help you to be successful.
If you were a founder, who would be your first choice as an investor? I know who mine would be!
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