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September 29, 2015

Do VCs need to be "good" guys to succeed?

Y-Combinator founder Paul Graham thinks so. Citing the example of uber angel investor Ron Conway (Google, Facebook, Twitter), he explains why in his recent blog post (emphasis mine):
The startup world became more transparent and more unpredictable. Both make it harder to seem good without actually being good.  It's obvious why transparency has that effect. When an investor maltreats a founder now, it gets out. Maybe not all the way to the press, but other founders hear about it, and that means that investor starts to lose deals. 
The effect of unpredictability is more subtle. It increases the work of being inconsistent. If you're going to be two-faced, you have to know who you should be nice to and who you can get away with being nasty to. In the startup world, things change so rapidly that you can't tell. The random college kid you talk to today might in a couple years be the CEO of the hottest startup in the Valley. If you can't tell who to be nice to, you have to be nice to everyone. And probably the only people who can manage that are the people who are genuinely good. In a sufficiently connected and unpredictable world, you can't seem good without being good. 
...Good does not mean being a pushover. I would not want to face an angry Ronco. But if Ron's angry at you, it's because you did something wrong. Ron is so old school he's Old Testament. He will smite you in his just wrath, but there's no malice in it.
The post also reminded me of a term that's gaining currency recently: Reputation Capital.

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