1/ What if you’re thinking:
“I don’t want to be a junior investor at a big firm, and then likely have to join another startup or start a company before being able to join back as a general partner, or start my own firm—I want to invest sooner”?
Some musings—feel free to add.
“I don’t want to be a junior investor at a big firm, and then likely have to join another startup or start a company before being able to join back as a general partner, or start my own firm—I want to invest sooner”?
Some musings—feel free to add.
2/ This may be controversial to people who’ve paid their dues as junior VCs without check-writing, but I think the answer is--find a way to write checks as early as possible (into good companies!)
Note: Some firms allow “junior VCs” to write checks, or at least share credit.
Note: Some firms allow “junior VCs” to write checks, or at least share credit.
3/ Some disclaimers:
Being a “junior VC” at a great firm is a great education—and launch pad: @sarahtavel discovered Pinterest at Bessemer, joined it, and then joined Benchmark as a GP.
Many people got their start this way, some of them are the best investors in the world.
Being a “junior VC” at a great firm is a great education—and launch pad: @sarahtavel discovered Pinterest at Bessemer, joined it, and then joined Benchmark as a GP.
Many people got their start this way, some of them are the best investors in the world.
4/ Others were journalists, etc—there’s no one way to be a VC.
So, if you can get the job (they are very hard to get), and you want to do it, go for it!
But not everybody can get the job, nor wants it.
So, if you can get the job (they are very hard to get), and you want to do it, go for it!
But not everybody can get the job, nor wants it.
5/ Back to writing checks. Why is this important?
Because being a “good investor” to *most* people is about track record.
You can say all you want about other attributes (and they’re all true!) but at the end of the day, your track record is the most legible currency.
Because being a “good investor” to *most* people is about track record.
You can say all you want about other attributes (and they’re all true!) but at the end of the day, your track record is the most legible currency.
6/ Guess how long it takes to build a track record. Something like 7-10 years after your first check.
Hence the urgency. The sooner you start, the sooner you are 7 years away from being potentially considered a "great investor" in some people's eyes.
Hence the urgency. The sooner you start, the sooner you are 7 years away from being potentially considered a "great investor" in some people's eyes.
7/ “Being a good investor” isn’t just ego.
VC is reflexive — a person is considered “great investor” because they have a big win.
This creates a fly wheel effect: Once they get that brand, more deals come their way —> more big wins. Success begets success.
It’s tautological
VC is reflexive — a person is considered “great investor” because they have a big win.
This creates a fly wheel effect: Once they get that brand, more deals come their way —> more big wins. Success begets success.
It’s tautological
8/ In a field with little feedback loops, track record reigns supreme.
Of course, there are more sophisticated ways to evaluate investors. Do founders like them? Do they have good decision making process? Etc.
But these are hard to measure, and thus hard to prove.
Of course, there are more sophisticated ways to evaluate investors. Do founders like them? Do they have good decision making process? Etc.
But these are hard to measure, and thus hard to prove.
9/ So: how do you start writing checks sooner?
Join a firm that, in addition to educating you, allows you to write a check, or gives you a path to writing a check, or shares credit on deals you work on. Something (!)
Join a firm that, in addition to educating you, allows you to write a check, or gives you a path to writing a check, or shares credit on deals you work on. Something (!)
10/ To be clear, this needs to be a check in a winning company, at a stage that proves you exercised investment judgment.
If you invest in a bunch of duds, you won’t prove much. On the contrary.
If you invest in a bunch of duds, you won’t prove much. On the contrary.
11/ What’s almost as important as what you invest in is *why* you invest. What do you see about the market, people, and team that others don’t see.
Investing in Uber now doesn’t demonstrate much judgment, although access is important too.
Investing in Uber now doesn’t demonstrate much judgment, although access is important too.
12/ Another way to start writing checks: become a scout!
A scout is someone that a firm gives money to to invest on their behalf.
The firm puts up the money, the scout makes the investment, and the scout typically gets a small cut of the profits.
A scout is someone that a firm gives money to to invest on their behalf.
The firm puts up the money, the scout makes the investment, and the scout typically gets a small cut of the profits.
13/ Sequoia popularized this early, but there have been many iterations since they started.
A firm might do this to extend their network, get better deal flow, test out a potential GPs, etc.
A firm might do this to extend their network, get better deal flow, test out a potential GPs, etc.
14/ Some firms, like VG, think a network-based investing model can be great for returns.
After all, Sequoia’s early scout fund had Uber, Thumbtack, Stripe.
After all, Sequoia’s early scout fund had Uber, Thumbtack, Stripe.
15/ Being a scout is super rare—probably less than 500 scouts in existence?
And somewhat controversial.
Imagine working your ass off for years not writing any checks + some schlub writes a check into company they don’t understand + it becomes huge?
That’s venture sometimes.
And somewhat controversial.
Imagine working your ass off for years not writing any checks + some schlub writes a check into company they don’t understand + it becomes huge?
That’s venture sometimes.
16/ So: How do you become a scout?
Well.
You have some unfair advantage as it relates to deal flow.
This is a pretty rare thing to have, but if you do it it’s a strong moat.
For me it was On Deck. I was also lucky to work at Product Hunt.
Well.
You have some unfair advantage as it relates to deal flow.
This is a pretty rare thing to have, but if you do it it’s a strong moat.
For me it was On Deck. I was also lucky to work at Product Hunt.
17/ Then leverage that unfair advantage to build strong relationships with firms. Send them deals that they end up investing in. Then ask if you can be a scout so you can send them more of the same. They may do it, if only to stop you sending to another firm!
18/ In summary: People use track record to determine the “good investors”.
Why does this matter? “Good investors” get better deal flow.
To build track record, write checks early—into good companies.
To write checks, join a firm that lets you do so, or angel/become a scout.
Why does this matter? “Good investors” get better deal flow.
To build track record, write checks early—into good companies.
To write checks, join a firm that lets you do so, or angel/become a scout.
