I read a fantastic memo titled "Dare to be Great" recently by Howard Marks of tier-1 hedge fund OakTree. In it, he quotes Barton Biggs who lists the following shortcomings of committees:
1. Collective rationalization of share illusions generally believed
2. Negative stereotypes of out-of-favor groups, techniques and individuals
3. Unwarranted confidence in chosen approaches
4. Unanimity, suppression of doubts and pressure on dissenters
5. Docility on the part of individual members
6. Free-floating conversations during meetings, and
7. Non-adherence to standardized methodologies.
This is interesting stuff. The power of a venture capital partnership draws largely on its collective wisdom. But, this very nature of group decision making can cause a reversion to mean behavior and stamp out the scary bits of excellence which could yield outsized investment returns. For a great example, look at the Bessemer Venture Partners' courageous self-mockery of deals that were too scary for them to invest in that formed the anti-portfolio: http://www.bvp.com/port/anti.asp
One example: eBay
"Stamps? Coins? Comic books? You've GOT to be kidding," thought Cowan. "No-brainer pass."
How best can a venture firm "Dare to be great" while still leveraging the power of the partnership? Perhaps each partner should be given one bullet per fund (ever 3 years) in which he or she can proceed with an investment even if its gets voted down by the partnership? I don't know the answer, but I think it is a darned important question for venture investors and for entrepreneurs of excellent but unconventional businesses, like eBay, Skype, etc.
By the way, I LOVE the phrase "Dare to be great." When I worked at elite M&A advisory firm Lazard in the mid-1990s, our Chairman Michel David-Weill used to give a great Dare to be Great speech to the captains of businesses who were on the cusp of tackling transformational deals. It had a powerful effect. Few things are more inspiring that a call to arms to achieve excellence. Think of JFK's "Ask not" speech for example, or MLK's "I have a dream."
It is what I love about working with entrepreneurs, their dare-to-be-greatness. It is part of what America so great, that we have so many people daring to be great. Let's encourage that...