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 business development, sales or marketing). None of that can compare with being the CEO of a startup facing a rapidly diminishing bank account, your best engineer quitting, working until 10 p.m. then rushing to the airport to catch a redeye to close a deal with a customer, with your board demanding you do it faster.
Today, you can start a web-mobile-cloud startup 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. It is still very much a “craft” business.
Over time, venture firms realized that the firm’s partners need a variety of skills:
- Deal-picking skills (recognizing the right combination of founder and market opportunity).
- Rolodex-deal flow (deal-sourcing ability to make connections for the portfolio).
- People skills (recognizing patterns of success in individuals and teams).
- Board skills (startup coaching, mentoring, growth strategy, daily operations).
- Market-technology acuity (domain expertise).
- Fundraising 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 career path that makes becoming a VC a profession not just a craft.
- Venture-operating partners to get them into new industries.
- An executive who had startup “operating experience.”
- Rarely, a startup founder-CEO.