"A man who carries a cat by the tail learns something he can learn in no other way," Mark Twain once said. What most venture capitalists lack is not brains, but experience.
Venture capitalists who are serious about turning their firms into more than one-fund wonders may want to have their associates actually start and run a company for a year. Running a company is distinctly different from simply having operating experience - (working in bus dev, sales or marketing.) None of that can compare with being the CEO of a start-up facing a rapidly diminishing bank account, your best engineer quitting, working until 10pm and rushing to the airport and catching a redeye for a "Hail Mary" close of a customer, with your board demanding you do it faster.
Today, you can start a web/mobile/cloud start-up for $500,000 and have money left over. Every potential early-stage venture capitalist should take a year and do it before he or she makes partner.
Venture capital as a profession is less than half a century old.
Over time Venture firms realized that the partners in the firms needs a variety of skills:
- People skills (ability to recognize patterns of success in individuals and teams)
- People skills
- People skills
- Market/technology acuity (patterns of success, domain expertise)
- Rolodex/deal flow (deal sourcing/ability to make connections for the portfolio)
- Board skills (start-up coaching, mentoring, strategy, operational/growth)
- Fund raising skills
Some of these skills are learned in school (finance), some are innate aptitudes (people skills), some are learned pattern recognition skills (shadowing experienced partners, hard-won success and failures of their own), and some are learned by having operating experience. But none of them are substitutes for having started and run a company.
HOW TO BECOME A VC
Early-stage venture capital firms grow their partnerships in different ways, some hire:
- partners from other firms
- associates and put them on a long career path
- venture/operating partners to get them into new industries
- an executive who had startup "operating experience"
- rarely a startup founder/CEO
In surveying my VC friends, I was surprised about the strong and diverse opinions. The feedback was extremely varied:
- ".. because culture is such an important part of who we are, we will probably never hire a partner from another firm. The idea of bolting on someone from another firm is somewhat antithetical to who we are. We think that our venture partner role is the most likely path to general partner."
- ..we have a partner-track associates program. We want to find someone who has a lot of consumer internet product experience as either product manager, founder, VP Product, etc. with 3-7 years of experience."
- "...we do not even try to train new partners. We bring people into our firm who have learned how to be VCs at the partner level somewhere else and have demonstrated their talent in boardrooms alongside of us. We completely and totally punt on the idea of "training a VC." It's an ugly and painful process and I don't want to be part of it."
- "...if they don't have operating experience the odds of them knowing what they're talking about in a board meeting for the first five years is low.."
CARRYING A CAT BY THE TAIL
When I finally became a CEO it was after I had spent my career working my way up the ladder in marketing in start-ups. I did every low-level job there was, at times sleeping under my desk (engineering was doing the same.) By the time I was running a company, having some junior employee tell me why they couldn't do something because of "how hard it was" didn't get much sympathy from me. I knew how hard it was because I had done it myself. Start-ups are hard.