Dear SaaStr: What Are The Unspoken Downsides of Being a VC or Angel Investor?
Look the downsides are small folks.
As a founder, you are often days away from total failure. This basically never happens for VCs, and even when it does, it happens over a decade+ (life of a fund).
But. Some non-obvious ones to outsiders, some downsides to being a VC:
- You’re just a number. As a founder, success matters, but on many levels. On how happy your customers are. Your team. Your impact on the market. As a VC, one number matters. Your returns.
- It’s kinda gossipy. Not a big deal if you are top decile. But there’s quite a bit of gossip around who can’t raise a fund, who did bad deals, etc. etc.
- Partner disalignment is unavoidable at most VC firms. At most bigger, older firms, the partners are a cumulative assemblage of individuals over many years that probably wouldn’t assemble this way today. It’s just a byproduct of layered partnerships and how VC firms come together over decades and source LP capital. It’s just … different. Than being co-founders.
- Power law behavior. Once a fund is much larger than $100m-$150m or so, you need Unicorns to make real money. More on why that is here: Why VCs Need Unicorns Just to Survive This sort of de-sensitizes you to startups that can’t become Unicorns, and to any of their sub-Unicorn concerns.
- It’s “small”. Most smaller VC firms just have a couple of investing professionals. Maybe even one. It’s not necessarily lonely, because you tend to co-invest with other investors and that can be a lot of fun, because it’s a share journey. But most VC firms are “smaller” than even the smallest start-ups.
- Lots and lots and lots and lots of meetings. This can be hard for founder/CEOs going into venture. Meeting with great founders is always great. But the other 20 meetings. Not so much.
- Harder to start your own firm than you’d think. There is a recent explosion of micro-VCs and new firms, but most of them, the principals already have strong track records and brands. It’s much harder to start even a very small new VC firm than you’d think. And the economic returns of very small funds aren’t always all that attractive.
- Deal flow is stressful, and weird. Almost every VC, even the very best, lacks a surplus of A++ level investment candidates. Every investor can meet with an infinite number of B+ start-ups, and even, plenty of A- ones. But the true A+’s … there are only so many. And if you don’t want to lower the bar just a smidge … it’s hard. And if you don’t have a strong brand AND source of founder intros … how do you really get the best ones? You know. You don’t. And even if you do. There aren’t enough of them. It’s sort of low-level, constant, semi-latent stress here. Not daily stress. But constant low-level stress.
Most of the top VCs I know sit in the lobby until the founder takes their term sheet. Sometimes for hours.
Or sit on the chair outside their desk or office and just wait until they will meet
Or wait in the parking lot
It's a business of hustle
— Jason ✨👾SaaStr 2025 is May 13-15✨ Lemkin (@jasonlk) March 31, 2025
Beyond all this, one thing to keep in mind. VC can look lucrative when you are a first-time founder without any savings in the bank. It did to me. And it can be lucrative, and at bigger VC firms, the salaries are high. More on that here: Why if You are a VC You Should be Insanely Rich
But … the very best founders, the very best ones … can make much more money. With a bigger and better team. And more control. And in the end, matter more. Change the world. Being founders.
