Even though I graduated from college (gasp) 18 years ago, I still think about the school season as my annual planning cycle rather than the calendar year.  Having three school age kids reinforces this life rhythm.

And so as I was thinking through my personal goals for this coming year, and discussing individual goals with each of my kids (a recently adopted ritual I highly recommend for any parent), this article from The Economist caught my eye.  The article's subtitle, tells it all:  "Depression may be linked to how willing someone is to give up his [or her] goals."  The article describes research published in the Journal of Personality and Social Psychology by Carsten Wrosch and Gregory Miller, where teenage girls who had strong "goal adjustment capacities" – the ability to disengage from unattainable goals and reset their attention onto new goals – avoid feeling down and depressed.  In contrast, girls who get stuck on their goals and can't reset are more susceptible to depression.  The implication is that if you aren't facile at adjusting your goals, and they're overly ambitious goals, it can lead to depression.

Applying this research to entrepreneurs is an interesting thought experiment.  As investors, we VCs are always attracted to entrepreneurs who set big, hairy audacious goals (BHAGs).  Who wants to invest in an entrepreneur whose pitch is, "I'm going to make a nice living in a small niche," as opposed to, "I aspire to achieve world domination"?  Yet are those entrepreneurs more susceptible to depression and defeatism when they're unable to achieve those outrageous BHAGs?

To reconcile these two views I am reminded of an excellent book I recently read by renowned Stanford psychologist Carol Dweck, called Mindset.  Dweck's research shows that successful people in business, sports and life have "growth mindsets" rather than "fixed mindsets".  The "growth mindset" is one in which a person believes that one's world view is less about ability and more about lifelong learning.  "Growth mindset" individuals feel they can always learn from experiences (failures and successes) and develop resilience because they're focused on personal growth rather than achievement tied to rigid objectives.  When a "growth mindset" individual faces adversity, they focus on the learnings and the self-improvement opportunities that come from adversity.

I have seen in my own work that the best entrepreneurs do set BHAGs, sometimes outrageous and unattainable ones (create a $100 million company in 5 years from scratch?  Is that really possible?), and push themselves to achieve excellence.  But the ones that really distinguish themselves are the ones who embrace the "growth mindset".  They embrace life long learning, no matter how great their achievements, and allow themselves to occasionally hit the reset button and adjust their goals without breaking stride when reality intrudes (such as, say, the greatest financial crisis since the Great Depression) are the ones that can blend the best of both worlds.

What kind of mindset have you seen work best?

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One of the things I continue to struggle with as a VC is the unfortunate fact that I am in the business of saying "no" all the time.

Saying "no" in the context of how you invest your time is one thing – fellow VC blogger Brad Feld did a good blog post on this topic in the context of time management a few weeks ago as did Y-Combinator's Paul Graham.  But I really struggle with saying "no" to entrepreneurs.  Entrepreneurs pour their hearts, souls and dreams into their start-up ventures and to summarily dismiss them remains the hardest thing about the job.  One of my entrepreneur buddies asks me whenever I see him:  "So – did you crush any entrepreneurs' dreams today?"  Very funny.  Ha ha.

One of the reasons for this dynamic is that VCs are in the business of trying to see everything (i.e., learn about and meet with all the best deals out there) but do nearly nothing (i.e., invest in only one or two companies a year).  My blog post on this topic a year ago was a bit tongue in cheek (VCs and Deal Flow), but only a bit.

My dilemma becomes more acute when I try to explain why I am saying "no".  In particular, how do you say no when the reason for turning down the investment opportunity is the team?  It's easier to say no when you have concerns about the market, the business model or the price.  The entrepreneurial team is great, you would enjoy working with them, you think they are money-makers, but there's something in the general model that prevents you from pulling the trigger.  Those are the easy ones.

The hard ones are when you are saying no because of the team.  Successful start-ups typically follow Thomas Edison's genius formula:  10% inspiration (in start-up land, the vision or idea), 90% perspiration (in start-up land, the execution).  Whether you like the idea or not is irrelevant if you don't believe the team has the wherewithal to execute it successfully.  Sure, a team can evolve over time and new leaders can be brought in, but very few VCs invest behind teams they don't believe in.

One curmudgeonly VC I know used to say to entrepreneurs:  "I don't think is an opportunity that suits you." At Flybridge Capital, we try our best to be direct and honest in providing feedback to entrepreneurs to help them with their ventures and perhaps we should have the courage to give it to people between the eyes.  I'm just not sure this blunt feedback would pass the decency and respectfulness test.  After all, who am I to project such an unfair judgment based on a 45-60 minute meeting?  VCs need to "Blink" and make snap judgements after those 45-60 minutes in order to filter and prioritize how they spend their time, but why be mean about it?  So in the end, I often settle for a polite "it's just not a fit for us".  Is that the right approach?  Let me know what you think.  What's the meanest turn down you've ever received from a VC?