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Exploring VC Irrationality [Authors @ Mashable]July 18th, 2008 at 2:03 pmSource:Mashable! This is the second guest post written by Ori Brafman, co-author of the New York Times bestseller ‘Sway,’ for Mashable’s new series Authors@Mashable. You can find Brafman’s first post here. For more information on Ori and Rom Brafman and ‘Sway’ be sure to visit our Authors@Mashable page. Thanks all for the comments and emails about your experiences with irrationality. A common theme that turns up is the moment right after we make the wrong decision, and how we hit ourselves over the head: “Why did I just do that?” What’s interesting to me also are times when we think we’re making the perfectly rational decision, when we think we’re making the decision for all the right reasons—but we’re not. One of the research studies we look at in Sway has to do with how venture capitalists assess their investments. You’d think that, of all people, VCs would evaluate an investment based on its return. Makes money=good. Loses money=bad. But it turned out that the most important factor for VCs was actually how frequently the entrepreneur they were funding kept in touch. Entrepreneurs who stayed in frequent communication—no matter what they actually talked about—made the VCs happier with the investment. Now, the tendency is to put our nose to the grindstone and actually work as opposed to chatting with funders. And when the news is bad, we especially want to hide and avoid the VC. But it turns out that VCs really, really want to have their voices heard, to feel that they’re a part of the process. So by all means pick up the phone and chat with your favorite (or even not-so-favorite) funders. Listen to them. Make them feel involved. What are your experiences with funder irrationality? Do you think that venture capitalists and entrepreneurs are becoming more or less rational? —Related Articles at Mashable! - The Social Networking Blog:Flagr - Real-World Social BookmarkingPlanetOut is Down and Out: Looking to SellLive Blog: What Google Knows about SpamSergey Brin To Conquer The Final FrontierNews Corp’s Jamba Loses CEOWine Library TV Moving to Revision3Is Ask.com’s Deal with Google Dead?
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