How to bullet proof your career in VC.
The Associated Team were feeling reflective, so we invited a group of friends that we’ve met during our time as VCs together to discuss the past, present and future of our industry.
Our panelists consisted of brilliant individuals at different stages of their career who shared their reflections, learnings and advice. Danielle, who was moderating, asked a question that made everyone shift just that little bit closer to the stage:
‘How do you bullet proof your career in VC?’
Given that this is a topic that seems to be on everyone’s mind whether they’re partners or analysts, we thought we would take a stab at it in written form for all our readers. So, without further ado, here is the short answer:
You can’t…
As with many career paths (in fact, in a recent survey over 40% of Americans have been fired at least once in their career), life as a VC is tumultuous and full of many factors outside of your control. It is, for all wants and purposes, impossible to avoid all the variables that could result in what you envisioned as a glorious career turning into dust. Here are just a few of the things that could thwack you:
Curveball I
Market downturn - gone are the times when Limited Partners (LPs) were throwing money at any fund manager with a pulse. Nowadays they are looking deeper and deeper at your fund’s performance. They’ve suddenly, magically remembered that historically only 50% of funds produce more than a 1x return for their investors (The median net investment rate of return for 2021-vintage venture funds was 2.1%, compared with 12.3% for 2020 funds - sadly we struggled to find more recent data) and Limited Partners (LPs) and, as a result, are looking at these numbers more closely than ever. This means that many are in the unfortunate position of:
Having a young fund that has not been around long enough to demonstrate good returns
Your previous VC funds have not performed as hoped
Both factors make fundraising much harder in a conservative market. And if the General Partners (GPs) running your fund are unable to raise subsequent funding, then it means that they will have no means to pay you. After all, you are a hefty negative line item on their P&L….
Mitigation: Put succinctly by one of our panelists, ‘beware of zombie funds’. These are VC firms that have failed to raise subsequent funds but are still praying for ‘big returns’ from some existing investments. A key question to push your (potential) employer is to understand how frequently they plan on deploying tickets. If your fund is not deploying, in short, it is time to leave. Be also conscious of the management fee of the fund and the composition of your team. For example, you can roughly guess what salaries people are on (check out the average VC salaries based across various levels in your geography) and assume that everyone wants a promotion. If there are two partners, one principal and five associates on your team - for the next fund will there be a budget for everyone to get promoted? And will the GP really want to have that number of seniors not willing to do the boring and repetitive tasks - what would you do as a GP?
Curveball II
A universal pain in the derriere in the workplace is internal politics. No matter how well you try and navigate them, it is never easy, especially when you consider the nature of VC. VCs have a pot of money to deploy, and a number of employees who are keen to have their name on a ‘deal’, as the ‘number of deals you’ve sourced, that the fund invested in, is often a KPI for promotions/prestige/reputation in the market. This can lead to vicious competition with everyone vying for the decision makers' ears. Without it, you may end up a whole year without a deal to your name - and the title of ‘investor’ might come across as a bit of a stretch to future employers and founders alike.
Mitigation: Perhaps a little generic but one of our panelists mentioned that you ‘have to be indispensable’ to the decision maker. How to achieve this very much depends on the skillset and dynamic of the team, but time and observation serves as the opportunities to build trust.
Curveball III
You decide to specialise in a particular topic, let’s say Web3, you are passionate about this sector and truly believe that this is an area that is going to produce the most number of unicorns in the next decade. The market agrees, until it doesn’t, LPs get cold feet and request the GP to no longer invest in this sector as it is ‘too risky’. Since you picked your specialisation, other colleagues have filled your shoes taking over other topics you were previously covering and anyways you don’t want to go back to those topics as you still have conviction that Web3 will come through - isn’t there a rule that you should invest more when the markets are down ;)?
Mitigation: It was a ubiquitous opinion from all panelists that it is so important to follow what your passionate and perhaps if the VC market doesn’t agree, it is worth heading to the operational side and work for a start up that is proving that your thesis is indeed, very correct. VC is a seasonal beast, and there could always be an opportunity to jump back in when the markets turn in your favour. Another great piece of advice that was given was to ‘set a North Star’. Although the likelihood of you achieving it may be slim, it is much easier to head towards something than to end up feeling lost in an industry that is not short of muddled opinions on what the future might look like. After all, it is much easier to add your opinion to the mix if you believe in it and, who knows, you might get others to agree with you and then you have truly cracked capitalism (check out this article for more details).
Curveball IV
The ever-blooming technology wave and how to protect yourself against it? A recent survey showed that graduates with bachelor's and graduate degrees were most likely to say they were threatened by generative AI, at 45% and 44% respectively. In the face of artificial intelligence and overall automation acceleration how do your avoid your job becoming obsolete and how do you keep differentiating your value in sourcing and diligence vs. what existing tools can do?
Mitigation: Play with these tools! Make sure you understand some of the ‘best practice’ tools (ex. VZero and o1 or Claude) and what they are good at vs. what they are not. For example, recently we found out that some large language models are not good at crossword puzzles because they cannot come up with multiple outputs based off of multiple tokens at the same time. Knowing what these tools do well will allow you to stay ahead of them as well as be able to use them to supercharge your skills. Keep your ‘enemies’ closer so to speak…
Hopefully, this article has been helpful in giving a not so straight answer!
Finally, to leave you with some other nuggets that we think you should adopt with gusto:
‘Stay humble, stay hungry and follow your interests’
And whatever you do:
‘Don’t follow the rules’
Huge thanks to our panelist for serving as the inspiration to this post - until next time!