What makes a successful venture investment?

I've spent the last 2 years sitting on the investment side of the venture investment table. What I've found is a real disconnect between domain and business expertise. As hard as I have seen my colleagues try it is impossible for one individual to be a domain expert across all investment areas. Entrepreneurs walk in the door having spent the last 10 years of their life in a specific technology and the last 5 in a specific space and they know their market better then most if not all of their potential financial backers. After the market crash every investment vehicle and strategy has rightfully been questioned from the transparency of FOF holdings to the process for identifying early stage venture investments. So what makes the venture community so different?... The relationship with the business. Investing at such an early stage provides an opportunity to help shape and grow a business. The challenge, or should I say hurdle, is the willingness of the entrepreneur to accept guidance and assistance from someone with more business but less domain expertise. As a money manager you can't step too far into any one business without losing site of the entire portfolio performance picture but you must know enough about the business and market to understand if, when and why a company is under-performing. The reason why so few venture investments provide returns, in my opinion, is a combination of three things

1. Incomplete due diligence. Not knowing or learning enough about the team or the market prior to making an investment.
2. The inability to proactively monitor company performance. Real monitoring on revenues and expenses or performing milestone trend analysis to understand where, why and how many times a business has missed key milestones. Entrepreneurs are so resistant to this... IMO, people who are resistant to disclosing basic information have something to hide.
3. The inability to effect real-time change when it is needed from leadership to product or sales strategies.

What I have witnessed is that venture investments fail primarily due to entrepreneurial stubbornness. I have been there, you know your market better than everyone else, you have traffic, customers and revenues... so why should you listen to someone who only gives your business part time attention?...

Make no mistake, it is very difficult to be a startup CEO. CEO's of new ventures must wear many hats, often being forced to neglect some core business functions. The difficult decision is what gets the majority of their attention?... The market? Money management? The product? Marketing? Fundraising? Strategic relationships? ... I repeat... Why should you listen to someone who only gives your business part time attention?... Because great decisions come from the collection and analysis of information and input. Listening doesn't mean taking orders, it means being a real CEO... so know what you know, know what you don't know and always be open to listening and learning from others.