What do you think is the best way to pursue a career in venture capital?
Only with extreme commitment.
Venture capital can seem glamorous, but it’s a terrible career, for a few basic reasons:
- All that matters is if you can get into winners. Nothing else matters. It does not matter if you help. If you add value. If you are there for your colleagues and founders. If you are a good person. If your associate really sourced the deal. All that matters is you got into Facebook early.
- Power is concentrated in the hands of a very few managing partners, who have little incentive to cede control. Why share any more of the fees and the profits (carry) than you have to?
- It takes years and years to prove yourself. If you invest early, it can take 10+ years to prove yourself. And often, you won’t be given even a small checkbook to do deals for years in the beginning.
- There is no career path at most firms. Not really. There is no reason to “promote” folks to general partner, because usually there is no need for more general partners. If 3 general partners can deploy all the capital themselves — why add a 4th? The only reason is if she’s highly accretive, one way or another.
- You won’t get into most of the good deals. Why would Mark Zuckerberg pick you? If you can’t answer this question, you will fail. Having an investment thesis or strategy is necessary, but not sufficient.
- You have to hustle. Really hustle. Related to prior point. If you think it’s a “they’ll come to me and then I’ll pick” kind of gig, you will never source any good ones. There are 1000s of startups. But only a handful matter. You’ll have to hustle, one way or another, like crazy to get into them.
- You probably won’t make any money in a tiny fund. Hooray, you joined a $20m seed fund! Well, with only $400k to pay everyone’s salaries and expenses (2% of $20m a year), that won’t go too far. Turn that $20m into $60m over 10 years (i.e, 3x — which is Top 15% results), and all the partners get to keep 20% of the $40m gains. $8m is a lot, but over 10 years with say 3 partners, that’s really only $260k a year from carry each annualized IF you are a Top 15% Fund — and you won’t get most of that pay out for 10+ years!
So it’s really a quirky career choice. The jobs themselves are good-to-great, the cash comp is good in bigger firms … but as a career … boy. Think about it.
Then go do it only if you really want it.