- Successful entrepreneurship comes down to overconfidence, says Andreessen Horowitz managing partner Scott Kupor.
- That's why Andreessen Horowitz used to say they looked for "egomaniacal" founders, who won't even consider quitting.
- Science backs them up. Psychologist Daniel Kahneman says you probably can't be wildly successful unless you're optimistic and overconfident, but those traits generally backfire.
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When Marc Andreessen and Ben Horowitz founded the legendary venture capital turned financial-services firm Andreessen Horowitz, they knew exactly what type of founder they wanted to back.
In the pitch deck for their first round of funding, they described this ideal candidate in a single word: "egomaniacal."
Andreessen Horowitz managing partner Scott Kupor remembers exactly how that went over. He told Business Insider, "The LPs would look at that and they said, 'That's crazy. How could that be a positive characteristic of who you want to invest in?'"
So the firm changed the wording.
But Kupor said the principle hasn't changed at all in the past decade. He said, "We wanted people who were so confident in themselves that they were literally willing to quit their jobs and start over from scratch and walk through walls and do something that everybody has told them to their face is a waste of time or can never happen."
It appears they're onto something. Andreessen Horowitz has made a name for itself through a series of high-profile tech investments, including Facebook, Airbnb, and Lyft.
In his new book, "Secrets of Sand Hill Road: Venture Capital and How to Get It" (the title refers to the street in Silicon Valley where Andreessen Horowitz and many other VC firms are located), Kupor explains that these traits are part of the founder's broader leadership abilities. Like most VC firms, Andreessen Horowitz looks closely at a founder's leadership skills when determining whether to invest.
Kupor lists some of the questions that are always top of mind for VCs: "Will the founder be able to explain her vision in a way that causes others to want to join her on this mission? And will she walk through walls when the going gets tough - which it inevitably will in nearly all startups - and simply refuse to even consider quitting?"
VCs want - and need - to back delusional founders
Kupor's observations recall insights from Daniel Kahneman, the Nobel Prize-winning psychologist who wrote "Thinking, Fast and Slow."
Kahneman has spoken about a "paradox" of success: You probably can't be wildly successful - i.e., Jeff Bezos or Elon Musk level successful - unless you're optimistic and overconfident about your chances.
But generally speaking, optimism (the belief that you're less likely than others to experience bad events and more likely to experience positive events) and overconfidence (an inflated sense of accuracy or ability in a specific area) are career saboteurs.
From the VC's perspective, it's a numbers game. The VC knows most of her investments won't pan out. But if she manages to find the next Bezos or Musk, that doesn't matter. So she invests in a bunch of "egomaniacal" and "partly delusional" founders (to use Kupor's language), hoping and assuming that one of them will make it big.
To be sure, Kupor said the best entrepreneurs are eventually "able to soften [their overconfidence] to the point where you can attract employees. You can work with business partners."
He added, "The really successful entrepreneurs are able to willfully suspend disbelief, but then also figure out a way to not make themselves impossible to deal with."