Exploring VC Irrationality [Authors @ Mashable]

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Thanks all for the comments and emails about your experiences with irrationality. A common theme that turns up is the moment right after we make the wrong decision, and how we hit ourselves over the head: “Why did I just do that?”

What’s interesting to me also are times when we think we’re making the perfectly rational decision, when we think we’re making the decision for all the right reasons—but we’re not. One of the research studies we look at in Sway has to do with how venture capitalists assess their investments.

You’d think that, of all people, VCs would evaluate an investment based on its return. Makes money=good. Loses money=bad. But it turned out that the most important factor for VCs was actually how frequently the entrepreneur they were funding kept in touch.

Entrepreneurs who stayed in frequent communication—no matter what they actually talked about—made the VCs happier with the investment. Now, the tendency is to put our nose to the grindstone and actually work as opposed to chatting with funders. And when the news is bad, we especially want to hide and avoid the VC.

But it turns out that VCs really, really want to have their voices heard, to feel that they’re a part of the process. So by all means pick up the phone and chat with your favorite (or even not-so-favorite) funders. Listen to them. Make them feel involved.