Mentor Capital: Another Form of Investment
It may seem like a radical concept, but growing companies need mentor capital as much as they need financial capital. Why? Because money doesn’t do much good without the right strategy, effective tactics and an ability to execute.
Investors are great at funding innovation and helping companies grow. But investing in the innovators and developing their experience and wisdom isn’t always on the radar. Yet we all know that poor leadership is the biggest reason companies fail.
Many entrepreneurs lack sufficient experience to handle business situations they encounter as they grow their enterprises. They have many great ideas, but often have difficulty making decisions because they think that so many are worth pursuing. These struggles, and many others, can keep them from focusing, from being strong leaders and from leading strong companies.
Certainly, most VCs are experienced and wise people, well versed in the challenges startups face and able to provide valuable counsel. But they often focus their advice and guidance on bottom-line issues, not whether the founder needs help figuring out how to balance work and life, or wants to brainstorm about ways to improve productivity. In fact, investors often don’t think their management teams need any help beyond what their colleagues can provide — or advice about how they to replace them.
Yet providing this sort of mentoring is where the true opportunity for building a sustainable enterprise and ensuring a long-term return on investment lies.
Enter the mentor capitalist (MC), an experienced successful businessperson or entrepreneur who invests in developing the newly funded innovator by lending their experience and insight to improve execution. Since an MC isn’t an investor, s/he has a different perspective. Rather than growing companies, an MC grows the people who lead them.
Here’s an example: I’m working with a founder who has many great ideas, but he can’t focus long enough of any of them to get anything accomplished. We worked together to create a vision of the result he wants to achieve and then we worked backwards from there to define the near-term tasks and to make the right choices about executing them efficiently and economically. To reduce his mental overload and improve his focus, we identified common threads among all his ideas and settled quickly on a few important operational goals. Then we prioritized what needed to be done so he could take consistent, positive steps to reach his goals without getting derailed.
After our initial planning meetings, we confer regularly via e-mail or phone, and meet in person once or twice a month to make sure he’s staying focused and getting things done. He also knows that he can contact me any time he’s got a question or when something unexpected pops up out of nowhere.
But our work together isn’t just about business. We also talk about his fears and frustrations—things he might not say to an investor, his shareholder, his boss. And this may be the most valuable service of the MC—getting into the heart and mind of the innovator and members of the management team to work through issues that often stymie success even when all the business factors seem right.
Ironically, though most entrepreneurs know they need this kind of support, few ask for it because they don’t want to seem inexperienced, disorganized, or weak. To increase the likelihood of long-term success, however, both entrepreneurs and investors need to acknowledge that building successful companies is an art not a science.
Entrepreneurs need to find mentors who they trust and respect, and who have experience in their businesses/industries
Investors need to encourage the entrepreneurs they fund to get the support they need to perform effectively.
And both parties need to remember that most successful ventures are the product of investments in both innovation and innovator.
Experienced successful businesspersons and entrepreneurs who invest in developing the entrepreneurs by lending our experience and insight
Rather than growing companies, mentor capitalists grow the people who lead them