Q: What are the pros and cons of working in the venture capital space, and why?
I’ll list the pros and cons, but before we get there, it’s important to note a few things:
- Venture Capital is a tiny industry. Tiny. It’s a tiny asset class, and most VC firms have just a handful of partners and a handful of additional investors.
- There are very limited promotion paths in venture. Yes, the largest and top firms promote a handful of folks to partner. But it’s just a handful of slots per year, really. Few firms really have a traditional partnership promotion path. Small partnerships just don’t need to add … too many new partners.
- It’s a sales and finance job. And you are just a number. Yes, VCs are much closer to founders than public market investors. But in the end, you are just a number — your returns. And to get strong returns, you have to hunt, find, and close top deals.
- Only the very best startups matter — in venture. It’s a bit of a sad thing, but in all but the smallest funds, only unicorn+ ($1B+ valuation) investments move the needle. There’s almost no point in investing in any startup that can’t be worth $1B+, at least potentially. Yet, so many amazing startups just won’t quite fit this narrow niche.
- It can take 15+ years or more to get real profits from your investments. VCs don’t take profits until they pay back their own investors first. Add to that the fact you may not share in any of the profits when you start in venture … well, it can be 15+ years until you really make any profits personally from your investments.
- It’s fiercely competitive. The best startups generally have far, far more investor interest than shares available. Why will you win? Do you know?
- Salaries are good and you can make real money on “carry” (investment profits) — but the best founders make much, much more. The math here is nonobvious, but more here. Most VCs can’t really be founder/CEOs. But those that can, can make much more as a founder CEO.
So as you can see, the Pros and Cons of venture depend on … compared to what.
Compared to many “ordinary” jobs, it’s an amazing job. Compared to jobs where you can change the world directly … well, it’s more nuanced.
Whatever you do, don’t romanticize it.
A bit more here: