The problem with Venture Capital is that it’s a hard industry to find training. In general there are two approaches on being a successful VC investor:
- Operational Experience – The thinking here is that if you’ve built a couple of companies, led them through significant VC funding and into strong exits, then you have a wealth of experience on what it takes to grow a company, the problems that often arise during growth stages, and how to position the startup to be acquired….VC partners with strong operating backgrounds are highly encouraged right now as VC firms shift towards a service model – that of adding strategic value, rather than simply money, to their portfolio companies. In this sense, who would you rather work with? An experienced entrepreneur who’s built and sold a $500M company or a professional investor who joined the firm after 7 years at Morgan Stanley?
- Apprenticeship Business – The other approach of what it takes to be a great VC is to work alongside experienced VCs, be mentored by them, and learn how they think. While this approach is less popular (although still utilized at great firms such as Accel, Venrock, and growth firms such as Summit and Insight), the thinking here is – while an entrepreneur might be an expert in what made his company a success, he may not hold a broader perspective of multiple industries, or companies in a myriad of stages. In this sense, apprenticing a VC with 20 years experience who has watched dozens of companies go through their cycles would be more valuable than having built a company yourself.
My guess is that these two models will vary with popularity depending on the health of the VC economy and performance of its partners. But given that it’s not easy to build a $500M company or find some nice, altruistic General Partner to take you under his/her wing and teach you everything s/he knows, you’ve got to work hard to get up to speed. Thankfully, there are some amazing resources to learn how great investors and entrepreneurs think. Remember, your great advantage over VC partners is TIME. They have none – you have a lot. Spend your time wisely, soak up their language, the companies that excite them, and WHY.
Given that I am currently in the process of hiring an analyst at I2A, there is nothing more gratifying than speaking to applicants who can speak VC lingo; people who understand the terms, and have the complete picture of what we’re looking to see with any company we invest in. You can start to build this mentality without actually working in Venture Capital, but you do need to fully immerse yourself in the VC mindset. Here are some important blogs and websites to read regularly to start building your approach:
- Fred Wilson (Union Square Ventures) – avc.com
- Brad Feld (Foundry Group) – feld.com
- Mark Suster (GRP Partners) – bothsidesofthetable.com
- Bill Gurley (Benchmark) – abovethecrowd.com
- Ben Horowitz (A16Z) – bhorowitz.com
- Rob Go (NextView Ventures) – robgo.com
- Ashu Garg (Foundation Capital) – globalchoupal.com
- Phin Barnes (FRC) – sneakerheadvc.com
- Josh Hannah (Matrix Partners) – joshhannah.com
- Chris Dixon (A16Z) – cdixon.org
- Jason Calacanis (Angel) – calacanis.com
- Jeff Jordan (A16Z) – jeff.a16z.com
- Nabeel Hyatt (Spark Capital) – nabeelhyatt.com
- First Round Capital Blog – firstround.com/blog/
- Lightspeed VP Blog – lsvp.com/blog/
Tech Sites to Read (Don’t just read TechCrunch!!!!)
- Term Sheet (by Dan Primack)