Any regular Shark Tank viewer knows that entrepreneurs who refuse to listen to feedback are likely to walk away empty-handed as one ultra-wealthy investor after another declares, “I’m out.” While reality TV tends to amplify emotions and reactions a bit, new research suggests that both openness to feedback and passion are important to angel and venture capital investors.
A paper published in February in the Journal of Business Venturing found that VCs and angel investors value entrepreneurs’ passion for the sphere related to their products and for entrepreneurship. “An entrepreneur cannot be passionate in general,” they “must be passionate about some target in particular,” the authors write.
The authors also state that “investors find passion appealing,” and that “openness to feedback further elevates this appeal, presumably by mitigating investors’ concerns that unrestrained passion will manifest as entrepreneurial ego, rigidity, or resistance to necessary input from the investor, the market, and other key stakeholders.”
Reception to feedback is a crucial part of impressing investors. It may also be a more comprehensive form of entrepreneurial decision-making. “Our results demonstrate that passionate entrepreneurs can maximize their appeal to investing audiences if they communicate that they also possess humility and a willingness to be coached.”
These findings are the result of a survey-based experiment involving 62 venture capitalists and angel investors from the western United States. Each of these investors were presented with hypothetical entrepreneur profiles attached to intriguing venture opportunities. The investors showed a pattern of valuing “product passion” and “startup passion,” as well as a willingness to make changes based on feedback.
The authors conclude the survey by cautioning entrepreneurs not to take openness or passion to an extreme. Entrepreneurs who demonstrate excessive openness “may be perceived as lacking assertiveness or confidence in their own decisions.” There’s a happy middle that investors look for, and it’s a benchmark every entrepreneur should strive to meet.