Peter Loukianoff, Managing partner of Almaz Capital Partners, tells the participants of our Club about his strongest leadership trait - the empathy to the entrepreneur. We talk whether it's necessary to know the tiniest details of the business and how Almaz Capital Partners choose the companies to invest.
1. What is the strongest leadership competency you possess?
I think it's the empathy to the entrepreneur, and from business standpoint of Almaz Venture Capital it's having been in the shoes of the entrepreneur. Having been a founder of the company myself I understand how difficult and how hard it is. And having this empathy and having gone through that experience is very important from our leadership prospective. The other part of it is understanding, what problems entrepreneurs are trying to solve and helping them to come up with creative solutions to help them to think about their business differently. Because often entrepreneurs are so focused on their own business, they don't see the forest through the trees, so providing them with a different perspective is important from our management perspective in our venture capital firm.
2. How would you explain this empathy in more details?
One concrete example from my own experience is outside of Almaz. In my prior firm we had a situation where we had second and third tries of our business model. It was a very interesting technology but it hadn't found its market yet. And it had some real challenges in terms of finding the right space and finding the right customer base, and I was thinking about the company on the weekend and I came to the company with the concept of a direction we can take with the company. He and I started white boarding and came up with the technologies with the leverage that the company had had before but it was in a completely interesting and different direction. And now this company is a leading one on a very exciting market for mobile advertising. And this feeling and understanding of the entrepreneur is one part together with the understanding of the business and the technology well enough to have an impact. And it's also about having that entrepreneurial spirit of not giving up, that if you haven't figured it out yet, you will figure it out in the future, and it's work with the entrepreneur, not against the entrepreneur. I think that's a very important trait for a venture capitalist, because very often in our business you have people who don't understand it and sometimes venture capitals don't have good reputation because of that.
3. What does for you mean to understand the business of the entrepreneur?
I think it's hard for a manager and a CEO to scale the business, if they are too detailed, I think you need to have a strong team that you believe in and you trust and allow them to develop that detail in the detailed plans. I think it's important to have a good understanding of the mechanics of the business, but not necessarily the details of it. For that reason, I think it's just a scalability issue.
4. Do you agree that people you work with should try to understand the core of the problem as well as you do?
Generally I would disagree with that, certainly you should have a good handle of the numbers, on the financials, on the technology on the broad scale, but everybody has their strength and weaknesses. I'm not a technologist, but I'm an engineer and I know enough about technology, and I can make an impact. The other thing is about where you're spending your time. For me spending my time digging into the things that I can entrust to somebody else, and they can do it better than I do - it's not good. There is a better solution. That will allow me to go and spend time in more strategic things that are more important for the business. So I think, it's a time management issue, it's a priority issue, and trust issue as well - do you have the right people around you to make you better. These are the people who will cover your weaknesses and allow you to focus on your strengths.
5. How do you solve the problem of choosing the right company to invest to?
Empathy and being disciplined about it, and also we have a fiduciary responsibilities to our investors to produce the best returns we can. So the part of the bigger mission of building of a very reputable firm - one of our goals is to create the situation where we have serial entrepreneurs. That we have people who would come back to us time and time again because we've treated them well, because we've helped them and because we mutually made money together. When that happens it's not clear, if we say "no" for the first time, but help them to go to the different direction, we have the example of that - one of our portfolio companies Appolo, whom we met two years ago, and recently invested, but we've helped them all along the path. We said "no" at that time because it didn't fit our criteria. The other very important point is that you need to be clear in terms of your expectations, and sometimes we're not clear what our expectation are and what we do, and if possible we have to tell people what we expect and what our criteria is, and you can say "no" when you're consistent with this criteria. I always try to steer the entrepreneur to the right direction because it may be a situation when we don't invest in this round but we can view the company as a candidate in the next round. We don't do this consciously as a test, but sometimes it is a test from our entrepreneur's prospective, whether they are able to take the rejection, will they work with us and not against us. And if they work with us and develop the relationship, even if we say "no", there's an opportunity to invest in the future with the same people in that same company, and not necessarily in the other company. In such a way we build the entrepreneurial community within Almaz.
