Every entrepreneur is a first-time entrepreneur once.
How do VCs, then, evaluate first-time entrepreneurs? How can they garner the confidence to place both their money and time in someone who hasn’t started a company before?
Of course, investors look at other past experiences as both a signal and substitute for an entrepreneurial endeavor.
A friend of mine at another firm told me that they also explicitly look for one intangible quality. For every entrepreneur who comes in to pitch they ask the question, “Does he know what he doesn’t know?”
Yes, entrepreneurs know the information that they know. It is this experience and comprehension that guides them, and gives them inspiration. But what about the information that they don’t know? Are they aware of their lack of knowledge in a certain area? Or are they (blissfully) ignorant of it?
“Knowing what you don’t know” means understanding where your knowledge-set is limited. If often suggests asking for help, guidance, and additional information when it is needed. This quality doesn’t preclude someone from being confident; quite the opposite, it demonstrates self-assurance to understand your own shortcomings and seeking assistance when appropriate rather than act upon a loose foundation of information.
Venture capitalists want to be assured that their money is in knowledgeable hands. But they also want to know that those hands will look to others when they aren’t fully capable. It is much better to admit that one doesn’t know something than to act blindly without it. And it takes a special person to even realize and perceive when an area of understanding is lacking.
You know what you know, but do you know what you don’t know?