I thought I’d repost and expand on part of my comment there as I thought it was complementary to his post. So how does one get on the path to becoming a VC?
Getting a job at a venture fund is one way to start your path to becoming a VC. But trying to work your way up through the ranks of a venture fund is tough and there aren’t that many jobs to go around.
Becoming an associate or principal is a great way to get introduced to the inner workings of a venture fund. However, your path to becoming a partner or someone of decision making power is very difficult – after all, most funds require their current partners to work on them for many years, including maintaining their control (ie. “we investors bet on this person’s skill for making great investments”) and incentives (ie. carry on the investments). It’s not likely that a partner is willing to give up any of that on their current funds, or even on future funds that they raise. More than likely you will have to work your way to becoming part of a team that raises a new fund in order for you to start gaining some independence and the incentives that come with it.
Some of the more effective ways are:
1) First angel invest and then raise money. In true startup fashion, you put up your own resources to make the bet that you’re on to something (your own skill as investor). Others notice you and then invest in you to invest their money. Putting up your own money, investing it, and making money proves more than anything you can do this work. Of course, losing it all is also in the cards so make sure this is not a substantial part of whatever wealth you have.
2) Get wealthy people to know and trust you. Investing is very much a trust based business. Who do you trust with your money? If you have connections and relationships with wealthy individuals and build their trust with respect to investing their money responsibly and with integrity, you could begin your venture career that way.
3) Start as an operator. The four big places I see this work are: CEO of a company, Corp Dev person, entrepreneur with big exit, and engineer at a “celebrity” firm like Google or FB. These positions can give you credibility to raise your own fund or get hired by an existing firm. More likely, the $ outcome results in you being able to start the path with step 1 above.
But given the lack of available positions, and the lessened ability to woo wealthy potential limited partners in today’s competitive and economic environment, you still have to exhibit something *really* special. There are too many people out there who are competing for that attention and their cash, and you really have to do better than “I want to become a VC”. More than ever, you have to answer “I am the best up and coming VC because….”
Also you’re going to have to let go of any arrogance about how great you are right now. I learned this back in 2006 when I tried to raise my own venture fund. I was just out of Yahoo and thought I had enough skills to pick companies and make money through investing in them. I had 9 years of work experience at Yahoo, 1.5 at frogdesign, and 3.5 at Apple before that, and a Stanford degree to boot. How could anyone NOT give me money to invest?
However, the investor community all said that my partner and I had great skills as operators, but they had no confidence in us to manage investments. After 4 months of raising, I got frustrated with hearing the same message over and over again. I stopped fund raising, set aside some personal funds and started angel investing to build up some investing track record. After 5 years of doing that, I realized I didn’t know diddly about venture investing back then and only now I’m starting to build some confidence that I know a little about what I’m doing. Through time and on multiple fronts, I’ve built some credibility as an investor in world full of investors who have a lot more celebrity and notoriety than I do (this alone is probably worth a post in itself). Thankfully, earlier this year, Launch Capital has taken a chance on me and I can begin learning more as an investor of someone elses money besides my own.
So even though I had that wonderful resume and education, about 14 years of work and a BS and MS from top schools, it has taken me 5 more years to *begin* to learn about a business I really knew nothing about, even though I thought I knew.
In the comment I left on Rob’s post, I mentioned talking people out of becoming a VC. I talk to them about my journey and all the really hard parts of the business underneath all the glamour and press. After I tell them all that, I look them in the eye and see what their reaction is, my intuition perking up to detect any sign of understanding or lack thereof. It’s usually at this point where I can see if they will *really* give it go and stick with it, or just quit in frustration because they couldn’t raise a fund fast enough.
Looking back on my path, it was a LOT harder and took a lot more time to build up to becoming a VC than I thought. There will always be people who happen to fall into it via luck or circumstance; awesome for them but they are definitely in the minority. Most of us have to spend a lot of time working at it AND proving that we actually can do this, and it will take a lot longer than you think.