the Reality of the VC life
There are times when I think about the VC life and this one line keeps playing over and over in my head which is “What A Long Strange Trip It’s Been” although I’m pretty sure the Grateful Dead was not thinking about the investment world when they came up with that name for their album.
The reality is I have been entrenched in the VC world for 30 years from the vantage point of listening and watching Fred operate. I have seen and heard businesses fail, businesses exit, founders be replaced, new management come in, finances get restructured, existing investors get crammed down, an IPO, an acquisition, a shitty co-investor, a death of a founder and more. It is a vantage point that I have leveraged my behind the scenes education into being an angel investor with our own capital.
There are few opportunities to learn how to be a VC. Few firms bring in apprentices. One of the main reasons is that to truly opt into a deal and understand it, you have to do your own work, you can’t parcel it out to someone. The few who have found an entry in the world of investment have been successful entrepreneurs, early employees of startup companies that grew to be huge or just lucky. What is so intriguing about the business of investing in start-ups isn’t as much about the upside but the excitement of building businesses from scratch. It always feels amazing to see a company have a positive exit because everyone wins but there is more to it. The investment business is addictive, I have been referring to it as “crack”. I want to keep doing it because it is great to be in it and have your finger on the pulse of the future but it is mentally exhausting.
Jerry Neumann directed me to read a piece from Steve Schlafman called Venture Investments Are Not Bets. It is a great read and anyone who has been in the Venture World for only the past decade should read. It is a long haul in the world of venture capital. There are ups, there are downs and as Steve wrote, it is about being active and supporting a company over the long haul. And that road is extremely long, much longer than most realize.
Comments (Archived):
From the Steve Schlafman link:My job as a venture investor is to actively partner with and serve founders. There is nothing passive about this. Professional venture investing shouldn’t be confused with gambling even though a lot luck and a little bit of skill are required for success. Essentially, betting implies gambling and investing implies taking calculated risks. After a founder has trusted me to serve his or her company and the investment closes, I do not passively wait for and expect a positive outcome.(My emphasis).What I always wonder about is how much effort can any individual investor or firm (vc or angel) make in a company that has multiple investors? Not only are there time constraint but I would think there would be (would have to be) reluctance to putting in a great deal of effort if the other investors are just gambling and are passive and doing nothing. Human nature. This is like parenting but it’s not like parenting.Then there is most likely the constant frustration of not having your advice followed.My conclusion is that most VC’s step back because over time the industry has discovered that that is the best use of their time. Helping out (in a big way) is not serving the low hanging fruit of opportunity. [1][1] Although I am absolutely sure that there are cases that depart from this and are successful.
There are few opportunities to learn how to be a VC. Few firms bring in apprentices.This is a classic situation (like dating) where ‘you only need one’. So it’s not a sale a day or a sale a week. Or raising an investment round. You only have to find a single VC or angel not 5.If I was a young person and wanted to get into VC I would simply go out and offer to be the personal assistant (even part time) at no charge for someone in the business. Hard to believe that with thousands of targets someone won’t take up the offer assuming someone had baseline qualifications and drive. Think there are legal or personnel reasons this can’t be done? There aren’t. Easy to get around. [1]If it’s not obvious the idea is not to go after firms or people after they have already posted an opening. The idea is to go after people who haven’t posted an opening or job where you have no competition. That is the single biggest mistake that I see people doing with job searches. No need to line yourself up and be compared.[1] Not saying this gets you the training or experience you need either. That isn’t the idea.
Its rare that an investor can mix intellectual honesty with true respect for a founder.Grateful to have your support on this journey where it can get like a roomful of school children..On the flip side no matter how much an investor *serves* a founder, no founder can gain an investors respect if they do not DO THEIR OWN work to the limit before approaching Investors for help // And have kept the investor updated on all issues transparently.
if they do not DO THEIR OWN work to the limit before approaching Investors for helpExactly. And I have found that the act of simply formulating a question for someone else very often leads to the path of the answer and no need to ask the question. (And I am not trying to sound profound by stating it that way either.)
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