The challenges of self evaluation in Venture Capital

In my experience as a VC with Anthemis and now helping coach investors, evaluating the performance of venture capital (VC) teams is a complex challenge. Unlike traditional business environments, where feedback is direct and frequent, the venture world operates on a different timeline. Here are some of the unique difficulties that make assessing VC team performance challenging.

1. The Long Feedback Loop

One of the biggest challenges in venture capital is the length of time it takes to see performance outcomes. Investments made today might not reveal their success or failure for 7-10 years. Although interim indicators like early traction, revenue growth, or fundraising success can provide some insights, these signals are far from guarantees. The extended time horizon requires patience and resilience, often leaving a vacuum that can be filled with self-doubt. Interestingly, having minimal self-doubt can sometimes be an asset in VC, given the uncertainty inherent in the field.

2. The Challenge of Finding Neutral Benchmarks

Another challenge is that public perception in the venture capital space tends to focus on the positive stories—companies raising funds, expanding, or succeeding. However, the reality is that a significant amount of time post-investment is spent managing challenges. This contrast between public success stories and the day-to-day work can create a whiplash effect, making it harder to evaluate one's own performance and compare it objectively with peers.

3. The Individualistic Nature of Being a Partner

Being a partner in a venture firm can feel highly individualistic. Each partner is responsible for their own deals, networks, and reputation. This isolation can lead to blind spots and missed growth opportunities if the fund environment does not encourage active feedback. I’ve found that it can often be easier to discuss challenges and seek feedback from peers and mentors outside of the fund.

4. The Risk of Attribution Bias

In venture capital, it’s easy to attribute success or failure to the wrong factors. A successful exit often involves a mix of skill, timing, and luck (though sometimes that luck is manufactured). Conversely, a failed company might have faced external challenges beyond anyone's control. One of the keys to growth is maintaining a high level of self-awareness regarding the factors an investor can influence versus those that are purely external. It's as easy to overestimate your role and take undue credit or responsibility as it is to attribute too much to external factors like luck.

5. The Lack of Direct Feedback in Board Roles

Sitting on the boards of portfolio companies, I’ve found that board dynamics often don’t provide direct feedback about an investor’s performance. Founders may be reluctant to challenge investors, and board members tend to stay in their own lanes, with little reflection on board performance itself. Achieving a high level of trust is essential to ask for honest feedback from founders or fellow board members—if the context even allows for it.

What factors have you found most challenging in being able to assess your performance, any other factors that I have missed? Feel free to reach out if you are interested to share experiences on evaluating performance as an investor.