Entrepreneurs form peer groups which provide a trusted circle of support and constructive criticism for each other. Often, this peer group is used as a sounding board for new ideas – sometimes bad ideas.

The protocol for providing critical, constructive criticism is an oft-overlooked aspect of being an active and valuable participant in entrepreneurial networks and is a delicate topic I want to tackle head-on in this post.

Sometimes telling your entrepreneurial colleague that their ‘baby is ugly’ is the best thing you can do for them. Time is the most valuable resource we possess and helping entrepreneurs figure out where best to spend their time is critical. When bad ideas come to light, honest, thoughtful criticism, delivered clearly and respectfully can be invaluable.

Delivering criticism is always a delicate art. These issues can make it even more difficult:

• If the entreprenuer has already committed time and/or money to the project
• If it is a labor of love, created from a some emotional personal experience
• If it is a close friend – or worse – family member
• If you are successful and they are not
• If they are successful and you are not (’success’ is of course relative)
• If your assessment turns out to be wrong

Be conscious of these issues, but when you’re asked, delivering your opinion is not just a favor, it’s the right thing to do. Here are my suggestions for handling the situation:

• Confirm they actually want feedback. Sometimes people are just floating ideas by and don’t really want feedback. Make sure you understand the inquiry and they really are asking for your feedback.
• Follow the basic rules of critical feedback:
  • Say something nice
  • Deliver the bad news
  • End on a high note
• Explain Your Position. Thoughtful feedback is 1000 times more useful than flat, terse criticism. If the idea is entering an already hyper-competitive market and has no competitive advantage, then ask questions to help illustrate the scale and complexity of the competitive landscape.
• Share Your Perspective. If you are a successful entrepreneur, there are probably more than a few critical attributes which you look for in new opportunities. Share them and discuss how they may be missing from the idea at hand.
• Suggest Next Steps. Great businesses rarely become successful in the same form they start out in. Sometimes an OK idea can lead to other more interesting opportunities, which can lead to a great insight, which can lead to the next YouTube, Google, or NetFlix. However, sometimes ideas are just bad. If you’re sure that the direction is wrong, be honest: ‘I think you should look for something else’
• You Don’t Know What You Don’t Know. If I was asked to provide feedback on a new company for an innovative automobile engine, I’d have to recuse myself from providing much feedback. I drive a car, I know there are lot’s of cars sold, but short of high level ‘market’ stuff – I’d be out of my league. Let people know when you don’t know what about the domain or market being discussed.

There is a time and a place for white-washed, head-nodding agreement, and avoiding conflict. Unfortunately, the circle of trust formed by entrepreneurial peer groups is not one of them. As a fellow entrepreneur, you have a responsibility to provide honest feedback, help educate other entrepreneurs and ensure that the Founder Class creates value and innovation and doesn’t waste time on poorly conceived ideas.