Why doesn’t everybody become a venture capitalist since you get paid well and don’t have to build anything or risk your own money? It sounds like the best job in the world.
Well, a few reasons:
- There are very, very few partnership slots.
- Venture capital is a tiny industry.
- There is no point in adding a partner that isn’t accretive. So the odds of you making partner are very low. Possibly zero.
- It is brutally competitive to get into hot deals.
- At most firms, there is no clear promotion path and a non-GP slot usually lasts 2 years or so.
- Firms are super-hierarchical, and patronizing. She or he with the hot hands rules it all.
- Often, the partners can’t stand each other.
- The skills you learn aren’t very portable to other jobs.
- Yes, you do have to risk your own money, as a general partner at least. It varies, but often 2% of the fund comes from partners. That can be a lot.
- In a big firm, often one person makes all the decisions. Forever.
- You are just a number.
- You will likely do nothing enduring, nor will you change the world in any way.
- If you like to work on a team, it’s not a team sport.
- Many non-GPs are pretty jaded.
- At seed and very small firms, the salaries actually can be pretty terrible. A $20m fund might have $400,000 in fees per year to pay everyone — all the staff, rent, salaries, expenses, travel, etc.
- Even if you do happen to be any good at it — and you probably won’t be — your boss likely will take credit for whatever great deals you do source.
- The world does not need another venture capitalist.
So do it if you have true passion for it, and are willing to break through the odds — and can truly, somehow, hustle into the very best deals.
Otherwise maybe do something else.
Published on January 12, 2018