What makes a VC

A recent conversation with an HEC MBA candidate led me to rethink the grand question of "what makes a VC".

The enormous success of lean startups has ushered in an age where we see an unprecedented amount money poured into venture investments via either venture capital firms or corporate ventures. As a result, we are seeing more and more new VCs — yours included — as we are seeing all kinds of new startups. More VC firms and more VC money under management mean more employments at the associate level or even at the analyst level, which is usually non-existent except in the largest firms.

Slowly there's a topic emerging on the best strategy to get a VC job and start one's VC career, especially in the business schools where career switchers are aiming at better-paid and hopefully more glamorous jobs in life after MBA.

I agree that today there seems to be some systematic methodologies that could help a smart person make VC investment decisions. 500 Startups famously uses KPIs to screen and track lean startup investments. Rocket Internet focuses on executions after they start companies based on ideas from Silicon Valley. Given these lean-inspired methodologies, it's entirely imaginable that smart people without prior entrepreneurial experiences could be hired to do the job.

However, I feel that this trend will not last and at the end of the day there's no such thing as "how to get a VC job" and one should definitely avoid any articles or books even remotely talking about "how to become a VC".

Despite the tangible wave of lean startups, the fact remains that a true VC has to attempt to predict what happens in 10 years, find the entrepreneurs that have both the vision and ability to make it happen, sponsor the entrepreneurs with a combination of hard and soft skills, accompany the startup in the ensuing rounds by involving other value-adding VCs and eventually see through an IPO or a sales exit.

Separately any of the tasks mentioned above could be done by non entrepreneurial people.

There is no shortage of super long-term fortune tellers in the journalism, where a prediction of the future 10 years from now won't even earn the nod of the Editor in Chief. Large startup conferences such as TechCrunch Disrupt and Le Web allow anyone to meet more quirky entrepreneurs in one day than he or she would prefer to know in person for the whole life. Investment bankers know how to capital sponsor an investment (while protecting their asses perfectly). Consultants talk freely about market strategies and international expansions (and then send you a big bill for that). In every country there are various fundraising experts — read, brokers — who claim to allow the entrepreneurs to outsource this key part of their business and "focus on innovations". And when it's time for an exit all kinds of investment bankers will be lining up at your doorstep fighting for the deal, assuming you have just founded Box 9 years ago.

Separately these are all specialized jobs that could be done by respective experts. The problem is: a true VC has to combine all of these skills into one dynamic package and throw on top of them some differentiating philosophies. Excelling in any of these realms is not really the point here. Being able to beat into form a whole package while remaining flexible and open to changes is what makes or breaks a VC.

As a result, true VCs are a very very weird animal. Each venture capitalist has a distinct career path that could not be compared to that of another. There's no way one could interview 100 successful VCs and conclude that "this is the best strategy to become a VC".

Therefore, trying to join a VC firm to learn how to be a VC is a futile attempt. VC is neither a corporate job nor a bank job, much less a consultant/lawyer/doctor job. There's simple no systematic way to get on a VC career path.

Except maybe one: start by being an entrepreneur.

A huge part of the VC job surrounds the entrepreneurship. Only former entrepreneurs will be able to interview a startup team and detect potential fatal issues in the team work. Only former entrepreneurs understand the anxiety/dynamics of different rounds of startup fundraising that they know what the best angle is for them as a VC to work with a particular startup. Only former entrepreneurs know why hiring in a startup is even more crucial than in a big corporate and how a VC could help the portfolio company in this regard. Only former entrepreneurs know that working capital is not just "Current Asset minus Current Liabilities" on the Balance Sheet but rather a living hell when a startup is growing like crazy but there's only $10k left in the bank account. Even former entrepreneurs that didn't make it to IPO know a tech IPO process more than any non-M&A investment banker since they would have gone through some IPO evaluations when they worked on the exit of their own firms.

What's more important: only former entrepreneurs know that the future is unknown, since they have at one point of their life helped change the existing industry structure and created a micro — or major, if your last name happens to be Zuckerberg or Brin — new future off the set path. And because former entrepreneurs know this so well, they would be able to stay truly open-minded about any crazy proposals and recognize better the kind of people able to execute those proposals.

In other words, the only remotely systematic way to become a real VC is to be an entrepreneur first. However, if one chooses to start his or her own company because he or she wants to become a VC, it's almost for sure that his or her startup will fail very quickly and there will be no such conversion to a VC career.

This lies the fundamental dilemma: to become a VC one has to start as an entrepreneur, but starting a company in order to become a VC someday dooms that company from the very beginning, therefore killing any chance of a VC career.

From another angle, there are many successful entrepreneurs who have become VCs and then decided to go back to start their Nth company simply because they love entrepreneurship so much. I don't think reversely that pipeline works.

All in all, "how to get a VC job" might still be a valid question in this yet-to-end lean startup era, but don't expect getting an analyst or associate job without entrepreneurial experiences would put you on a career path of analyst => associate => principal => managing partner — there is simply no such ladder to climb in the VC world. And if the wind changes again and lean startups are no longer the trend, you'd be trapped in an associate job forever with no real next career waiting.

And "how to become a VC" is simply a false question, period.

 

Read more on the lucid article « Asking a VC for a job » by my former boss at Truffle Capital, Mark Bivens.

 

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