In any industry where individuals serve as professional fiduciaries, there are typically degree programs, mandated training, certification, continuing education, and oversight. This includes diverse fields like medicine, law, accounting, real estate, and so on.
But not so in venture capital and private equity, which remain a “Wild West” where rule-breaking is a foundational principle. This philosophy can have enormous psychological benefits to entrepreneurs, who are often trying to accomplish what can seem impossible. By liberating themselves from the idea that things must remain the way they have always been, entrepreneurs take risks, challenge the status quo, and can even change the world.
I remember seeing a prominent venture capitalist interview a prospective hire by playing sports together. At a volleyball game, the experienced VC established the rule that there were no rules. His goal was to see whether the candidate could adapt to an environment that challenged expectations and norms.
This mentality permeates Silicon Valley and is a source of pride for venture capitalists.
A potential negative consequence to this culture is the notion that rules simply don’t apply in our industry. And because there is little to no oversight or regulation in venture capital, it’s easy for a healthy approach to challenging business assumptions to follow a slippery slope into potential fraud, sexual harassment, or other illegal behaviors that have come to light over the past several years.
An important way to apply checks and balances to this dangerous mentality is the institutionalization of rules, norms, and industry-specific best practices. While established in other professions, this is challenging in venture capital, because we are essentially starting from scratch.
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