In the spirit of clearing out some half-formed thoughts, here’s how I try to kill the dream for folks who tell me they want to get into venture: “You really want to be an… investment manager?”
Investment manager? That doesn’t sound as much fun as taking meetings with top founders, diving the future of tech with your fellow GPs, speaking at events across the world. Master of the universe. Maker of fortunes. Guru to the unicorns.
Yeah, whatever. Truth is, it’s never been easier to become a VC and never been harder to stay one. Heck, it’s four years in and we would tell you that Homebrew hasn’t yet earned any right to assume our success is a given! And while I’m excited to welcome new GPs and new funds to the marketplace (especially from people underrepresented in venture today), you should not become a VC unless you’re prepared to realize that you are, at the end of the day, an investment manager, responsible for performing at or above the benchmarks for the asset class. [Caveat of course to those who are investing only their own money. You can do whatever you want.]
Now, that doesn’t mean being a VC is the same as any, or all, other investment jobs. Or that all VCs share a similar approach to investment management. In fact, reconciling your fund strategy against the reality of being an investment manager is one of the most important success criteria for a GP.
For example, with Homebrew, the ties are strong between what type of investment manager we want to be, how we want to spend our time and what type of relationships we want to create with founders. Satya and I take a concentrated approach to seed stage investing – playing a leadership role in financings and committing 50%+ of our time ongoing to working with current investments. We excuse ourselves from opportunities where we don’t feel a strong connection with the missionary zeal of the founders. We keep our funds large enough to execute our strategy but small enough to not be burdened by the pressure of too much capital – such as misalignment with our founders on what exit scenarios could be down the road. We invest at the seed stage because we enjoy being early or contrarian; operating with little data but really getting to know the founders and their teams. This is our approach to investment management and, frankly, it likely wouldn’t work at a larger, multistage venture fund.
If you’re looking to get into VC in 2017 just make sure you are clear on what type of investment manager you want to be and your venture vehicle (fund, stage, strategy) is consistent with this approach. If it’s not, you’re eventually going to create problems for your founders, your investors, your partners and yourself.