I used to, and then I worked for one. Granted, it wasn't a top tier firm, but I hobnobbed with plenty of partners from actual top tier firms and came to realize they are all pretty much the same. They are all cowboys that try to act like visionaries and sages, and either peter out or get lucky with a big exit, because a single big exit from your first fund is enough to guarantee the rest of your career.
If I got an offer with AH though, I would take it. Hell, as an entrepreneur, I'd probably be skeptical of taking any money that wasn't from AH. They're the only ones that seem to do anything prescient.
What makes a16z so great? I know they have a great reputation, and do a good job marketing themselves, but what are the specifics that really help entrepreneurs?
I started to notice a trend amongst VC partners. They talk a big talk, but most of them are pretty risk averse and will only invest if someone else jumps the gun first. A lot of times, there will be multiple VCs interested in a company but they will bullshit the founders about wanting to invest, and just sit around waiting for someone else to invest so they can jump on the bandwagon.
What I find different about AH is that they invest when they want to invest, and don't care if other VCs are interested. Social proof isn't that important to them. And it's pretty crazy...they'll invest in a company that nobody else has been talking about and then out of nowhere the entire VC industry is throwing money at them.
My pipe dream is to be a non-shitty version of Erlich from Silicon Valley. I'd love to run an "accelerator" program out of a space that I owned where you take a bunch of smart people and set them loose, it seems like a perfect cross between fierce capitalism and communal living.
I'd rather be an adventure capitalist: contribute excellent products and services to the market, while living an adventurous life with the proceeds.
What's the fun in sitting on your ass rating/gambling on others' fortunes? Make your own!
BTW Aswath Damodaran once made a very astute point regarding VCs: they're traders, not investors, looking to enter low and exit high. Period. Anyone under the delusion that these people invest for the greater good is (largely) mistaken.
That's not necessarily a bad thing, but just not how I'd personally like to see my occupation defined.
> BTW Aswath Damodaran once made a very astute point regarding VCs: they're traders, not investors, looking to enter low and exit high. Period.
Notwithstanding the fact that investors look to buy low and sell high too, the point here is incorrect.
Venture capitalists, like many in financial services, are not really traders or investors. Sure, they might trade and/or invest, but their primary function is to raise capital that they can siphon fees from.
A 2% annual fee on committed capital on a $500 million fund that has an expected life of at least 10 years will produce $100 million or more in fees for a venture capital firm over its lifetime. Add a new, larger fund every few years (assuming you don't blow an earlier fund up) and you can see that the 20% carry, while potentially very significant, is really just icing on the cake.
Anybody who really wants to succeed as a venture capitalist should understand this. Incidentally, when you recognize that the limited partner side of the equation is more important than the startup side of the equation, it's not surprising that venture capital has a herd mentality and there are few true cowboys making bold bets. There is little to no incentive to stray too far from the pack.
The comment he made was with regard to the mentality they have when determining whether to deploy capital, not so much the legal and financial structure of their deals.
You can see the full context here, worded better originally than I could hope to paraphrase:
You seem to be missing the point: venture capitalists raise money to generate fees. How you classify what they do with the money left over after fees isn't all that important because the primary business is fee generation.
There's a saying in private equity: you can't eat IRR.
Venture capital funds aren't the worst products in financial services, but if they're as wonderful as you seem to be suggesting, why is it that there are lots of firms that haven't received a carry check in years and most VCs don't invest any money of real note in their own funds[1]? Is it possible you're overestimating?
> BTW Aswath Damodaran once made a very astute point regarding VCs: they're traders, not investors, looking to enter low and exit high. Period. Anyone under the delusion that these people invest for the greater good is (largely) mistaken.
I know at least one exception to that rule, so even if you might right in the aggregate remember that VCs just like founders are people too and generalization across populations is bound to treat individuals poorly.
Well, you're not helping by reinforcing the idea. People in general don't like people who get rich randomly (or as good as), because it's unfair (so it triggers the anti-cheat response), and yet, it's needed. So we should be careful of the bias, and I think it'd be all the better if the occupation was taken by people who care about the definition of their occupation. The hate on traders is a feedback loop leading nowhere.
I agree with your premise, but not the notion that getting rich randomly is unfair. It is often irrationally regarded as unfair however.
For it to actually be unfair, there has to be a legitimately injured party. As an example, Flappy Bird's creator didn't injure anybody, and did not take anything from anyone else (I'm not sure if you can get more random, for this discussion, than that product's brief but sensational rise).
There's no possibility of objectively defining the random aspect - what qualifies as random and what doesn't (varying from lottery winners to someone claiming Paul Allen fits the category). That logic hint makes it clear that the idea that getting rich randomly is unfair, is an invalid notion to begin with. It falls into the same camp as thinking that all wealth in general is unfair - a strictly subjective feeling, typically derived from a person's philosophy on life.
I'm indifferent to the situation. I don't hate traders & I don't hate VCs. I quite admire the few I've met. In a sense, one could say traders embody the essence of the human spirit. They provide an essential service for the markets, as you say, and that's fine.
Not sure why you got downvoted. This comment opened up my eyes to the reason why I am biased against traders. If I dislike people who are rewarded for the risks that they take I should also be sympathetic to those who took those risks and lost.
okaaaay. the whole "these people are only into something for X" ignores a lot about human nature. motivations and circumstances change all the time and over time.
Yup, eventually. For me, it's one of the huge benefits of working at AngelList. VCs, Angels, and LPs walk in and out of the office every day, and I live and breath VC every day, while still working at a startup. I've learnt more about VC in 8 months at AngelList than most founders will in all their funding rounds combined.
I used to think of myself as starting a successful company or two, and retiring to VC or as an Angel… I've come to realize that that scenario is entirely unrealistic. Few founders have the experience needed to do this right off the bat. It'd probably be hugely beneficial to anyone to work in the industry for a bit before jumping in. Work for a VC, or work for a VC-related company (e.g. AngelList, FundersClub, Equidate, eShares…)
I've thought about it. I'd like to get involved in more due diligence for investors (I've done this on an ad hoc basis a several times), and probably be an EIR for 3-6 months whenever it is convenient. I would only consider the ~5 universal top tier plus the ~5 top tier in my area of interest (security/infrastructure).
The full-time role I'd love would be opening up a new geography for a fund; say, a Berlin office for a top tier fund, focused on privacy/infosec/liberty investments in Europe.
AngelList kind of kills all but the top tier. If I had more money, I'd be investing or syndicating on AngelList.
I'd still rather do a startup again in a couple years, but EIR might be a nice transition, and seeing the other side would be interesting.
Several of the industry specific firms are pretty new, actually.
The main challenge is time, not opportunity. I'm at a top tier "unicorn" startup right now, and my next best alternative is founding another startup. I probably would walk for a partnership track position in a top firm, but that's it. (Or "fix all of apple's online services", build apple's enterprise business, "make android or chromeos secure and secure against third party doctrine", secure the usg, or spacex, but nothing else.)
There are some great niches in tech investing outside of early stage startups (a PE focused on turnarounds of ducked companies like yahoo or twitter?), but in early stage, if you aren't getting the top deals (by being known as top tier generally or in your market), why bother?
The ability to provide capital, access to a network, personal and professional support, real world experience (in that order) to founders in pursuit of helping them "change the world" is an awesome opportunity. Most VC's I've interacted with truly seem to feel this way. So in that sense, yes, it would be great to be a venture capitalist. Unfortunately, as argued in "The E-Myth", there are probably better avenues, at least for the later 3, to help founders, without the 800lb gorilla of submitting to the "VC system".
The first one is probably the main reason behind answer to OP's question. "Do you aspire to be a venture capitalist?" "Do I have the ability to provide capital?"
Indeed! I don't understand what the point is in living one's life neither in leisure nor in actual work, but instead in acting as a chief of the capital casino.
I'd rather be doing something than allocating somethings.
What, are you so sure about that? You don't want to own property for a living, using nothing more than a legal title to take ownership of the goods and services produced by those who happen to work on that property, pay them less than the market value of those goods, and use the difference to buy titles to even more property? And then rely on the state to protect that property -- with extreme violence if necessary --- all without having to even step foot on its premises? Are you mad? I'd love to be able to do that!
I think it would be a very interesting business to be in - I think Id' be more interested in being a VC advisor, which I've done sporadically in the past. Get to be involved in interesting deals and get paid for it, without having the grind of keeping LPs happy.
Sure - there's not much to tell. I was one of the founders of a venture-backed startup that raised a couple of rounds of funding from a set of VCs. I had/have pretty good relationships with a few of those, plus some other connections that I'd made through that process. Every once in a while I get a call or an email from one of them asking my opinion about an industry, a technology, or a specific company. From there it could be anything from a quick phone call, to a chat with the startup in question, to a full due diligence of their business and technology. Usually I'm involved either at the very early stages, "We're interested in maybe making an investment or three in this category", or very late, "We want to invest in this company, can you take a look at their technology and tell us what you think?"
I aspire to be a venture capitalist at some point in my life. For me, being a venture capitalist is more about spotting the right people and the right vision more than the money. Companies succeed and fail. VCs lose on a lot and gain on a few.
More interested in getting rich and then becoming an angel investor locally. I find the concept of really early stage ideas far more appealing than institutional investing.
If I got an offer with AH though, I would take it. Hell, as an entrepreneur, I'd probably be skeptical of taking any money that wasn't from AH. They're the only ones that seem to do anything prescient.