It’s Hard to Become a Venture Capitalist. But What’s Really Hard is Becoming a Great One.

Q: Is it hard to become a venture capitalist?

It is hard to become a venture capitalist. It is very hard to become a successful one and make a lot of money. Why?
  • First, there aren’t that many VC firms. There are probably only 150 firms with > $250m. These are the ones that can train you and provide entry-level positions:
  • Second, most VC firms only have a few non-partner opportunities. So that’s maybe only a few hundreds jobs per year.
  • Third, tiny / micro VC funds don’t pay that well.  Yes, there are 100s and even 1000s of new “micro VC” funds of $2m-$20m in size.  But there are only so many fees to go around at these tiny funds.  Barely enough, often, to just pay the 1-2 core partners a base salary.
  • Fourth, most of the “carry” (or profits from investments) is reserved for partners — and it can take 5–10 years to make partner. That’s not the end of the world, but it takes time.
  • Fifth, very few non-partners get “promoted” to general partner. Most firms have enough partners already, absent generational change. It’s not a growth business. Many firms might hire a few associates every year or two — but only add a partner once every 5–10 years. Or maybe not ever.
  • Sixth, it’s a hits-driven business and you have to deliver. You have to hunt, find, convince, win and close unicorns-to-be. Can you do that? If not, you won’t make it.  Most VC funds underperform, and the main reason is partners that can’t source and close a unicorn … every single year.  Every year.

So there are probably only a few thousand entry-level positions, probably less, and only a portion of those slots are open each year. Not that many. And maybe 5% of non-partner VCs make it to general partner, one way or another. Perhaps less.

Will it be you? How badly do you want it?

More here: Why VCs Need Unicorns Just to Survive | SaaStr

Published on August 15, 2020

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