Pattern Matching

Gestalt

Gestalt - an organized whole in experience which explains psychological phenomena by their relationships to total forms rather than their parts.

What?

A Venture Capitalist friend of mine once told me that, “Venture Capital is really a game of pattern matching.” He noted that whenever he met an entrepreneur in search of funding, he did his best to match the person (and his team, as appropriate) to a ‘pattern’ he had seen before.

Typical patterns which Venture Capitalist look for include:

  • Technical Guy with a great idea, but no management experience
  • Sales Guy who can package the opportunity, but who has minimal technological skills
  • Visionary Founder who cannot properly delegate or appropriately accept input from other members of the Core Team (see “Founderitis")
  • Young Entrepreneur who is inexperienced, but has an interesting idea and is willing to learn from the Board and the Core Team (see “The Tribe”)
  • Corporate Executive who lacks entrepreneurial experience, but has proven his leadership capabilities at a Big Dumb Company

Each of these patterns entails positive and negative traits that both excite and alarm Venture Capitalists. In the instance of the Tech Guy, the Venture Capitalist would be concerned that he might focus too much on technology and potentially mishandle business issues. With the Sales Guy, the Venture Capitalist might extrapolate that he may over-promise the product’s technical capabilities and ultimately deliver a sub-standard product to market.

By anticipating such pattern matching, you can proactively address concerns that your ‘pattern’ might raise. Thus, the tech guy would be well served to emphasize his willingness to delegate business issues to more experienced team members, whereas the sales guy should be careful to not overly promote himself or the opportunity and to acknowledge his technological shortcomings.

Such Gestalt pattern matching is a defense mechanism. Given the thousands of business plans they review, and the hundreds of people they evaluate, Venture Capitalists have to adopt effective methods of quickly assessing if a person / opportunity is worth greater diligence. As such, the initial pattern matching filter that they apply may be somewhat capricious, but it is a pragmatic way to deal with the otherwise overwhelming data onslaught which they must process.

Armed with insight into this aspect of a Venture Capitalist’s evaluation process, you can increase your odds of making it through their pattern matching filter by keeping in mind that the initial evaluation is less about ‘you’ and more about ensuring that you properly position yourself such that they will associate you with a positive ‘pattern’.

Who I Be?

In order to properly manage the pattern matching phenomenon, you need a heavy dose of self-awareness. Unfortunately, this is often difficult for young entrepreneurs, as they do not have enough experiences to fully comprehend their place in the world.

The key to self-awareness is the ability to see yourself through the eyes of others, as described in the following exercise.

Ask a group of people that you trust to give you their ‘objective’ feedback regarding the people in their past that remind them of you. Select some people who know you well, and others who do not. For instance, a good sampling of people to include in this exercise would be a family member, a senior co-worker, and a teacher. In essence, you are asking them to perform the same sort of ‘pattern matching’ that a Venture Capitalist will perform. Although your friends and family will likely match you against different patterns, their responses are of value, as they will allow you to see yourself through the eyes of others, and thus enhance your level of self-awareness.

Once your trusted source of feedback has identified one or more people you remind them of, explore the specific aspects of your experiences, education, work style, passions, goals, etc. which are similar to the person(s) with whom they are ‘matching’ you to.

If you are at the early stage of your career on The Fringe, this exercise is best performed with someone who is older, and thus has a deeper base of current and prior relationships to draw upon.

Suggest a Pattern

It is also possible to proactively address the pattern matching phenomenon. In advance of speaking with a particular Venture Capitalist, research the deals they have funded, and identify one or more portfolio entrepreneurs who ‘fit your pattern’.

You can find patterns that the Venture Capitalist have already invested in by looking at the portfolio on their website, and then drilling down into the history of the Founding Team of each venture. You may not fit the pattern of the “MIT Professor with 50-patents”, but you might find that the Venture Capital firm has funded someone whose pattern is akin to yours.

When you speak with the Venture Capitalist, you will be in a position to guide them toward a pattern in which they have already invested. Make it clear that you share the positive aspects of the bankable pattern and detail how you will overcome any negative traits that might be associated with this pattern (e.g., additional training, finding a mentor, adding specific skills to your team, etc.).

Simply recognizing that Venture Capitalists will attempt to lump you into a known pattern is helpful. Venture Capitalists are always looking for a reason to say ‘no’, so be sure to avoid comments that will allow them to associate you with a negative pattern. Your goal is for the Venture Capitalist to say, “I have seen this movie before and I want to see it again, because the ending is great!”

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John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.


Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.





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