While startup founders are praised for their creativity, ingenuity, and grit in building new businesses – and rightly so – VCs are on the sidelines, often considered “just investors.” Yet, what is often overlooked is that many VCs are also entrepreneurs in their own right.
Having worked as a VC for the last 20 years, founding two venture firms, and launching six funds, I know first-hand the challenges involved. I don’t perceive myself as “only” a venture capitalist, I am a founder too. I didn’t join an established venture firm, I built it, alongside some tremendous partners and colleagues, facing many of the same challenges as those founding a startup.
Founders and VCs are more similar than many realize and this can give both parties valuable insight into each other’s motivations and challenges. It is also why many startups prefer to partner with smaller VCs, where they are working directly with individuals who understand what they’re going through.
More similarities than differences
Becoming a successful VC involves navigating a complex cycle of fundraising, sourcing deals, investing, managing portfolio companies, and then securing a favorable exit. Launching each new fund is like launching a new company, with a new set of rules, a new strategy, and often new people. Plus, ever-increasing competition means constant innovation is needed to deliver the returns LPs expect. All the while, you’re managing numerous moving parts, spanning marketing, admin, compliance, staff, and reporting, while limited human resources mean you must multitask and be as resourceful as possible.
Like startup founders, VCs must be highly curious, and have flexibility and resilience in spades. You need the agility to embrace change, build while moving, be responsive to trends, think long-term, and have the patience to stay the course. As with starting a company, launching a venture fund nearly always takes longer than you think, and to be successful you must embrace a lifestyle that accommodates learning, networking, and a lot of time on the road, while constantly nurturing and mentoring portfolio companies.
How do we differ?
At the same time, understanding the key differences between VC founders and startup founders can also help us to work together more effectively. For instance, the day-to-day life of a startup founder is usually more focused, with a roadmap and clear targets in place. In contrast, the life of a VC is one of constant unpredictability in terms of new deal flow, issues, problems, and challenges across multiple companies, along with ongoing successes that must be leveraged and communicated.
VCs are the ‘jack of all trades’, constantly fighting with time and prioritization, whereas company founders must excel at solving a big, focused problem, which is often intellectually stimulating but very hard. Only very few people in the world can excel at becoming a successful founder, and good VCs are there to facilitate, providing insights on best practices and making useful connections, to aid the company and founder as much as they can.
The growth pains are also usually significant for an early-stage business; the challenge of bringing in the right people and maintaining the right culture as the headcount rises. In most cases, the stakes are also higher. As VCs, we diversify our portfolio to mitigate risk, but for a founder, if a product fails or a business runs out of money, it can mean years of work down the drain.
A transfer of knowledge and experience
My own experience of starting and building a VC business has given me a deeper understanding of what founders go through and enabled a valuable transfer of knowledge. Being an entrepreneur means I can relate to the pressure they are under and the ongoing challenge of balancing work with home life. I empathize with the founders’ constant role as chief salesperson, and the responsibility for spinning numerous plates without breaking any. Neither role is for everybody, but this mutual understanding is often critical to why the VC-founder relationship can be so powerful and mutually rewarding, in more ways than one.
Originally published on Forbes
