Why I'm not a VC (yet)
There is too much money chasing too few operators. #reflections #money #vc
Read time: 4 minutes Published:
Imagine a job where you make $600k a year investing other people's money (no downside) into amazing founders, try to be helpful, and make as much as $20 million over 10 years. Pretty sweet right?
Those numbers aren't hypothetical; that's exactly what Brianne Kimmel does with her WorkLife Fund (to be fair she has top tier results, with >200x returns in 2 years on Hopin and Pipe alone). It's a pretty sweet life and is governed by the Matthew effect inherent in the capital part of venture capital: initial success leads to better dealflow leads to more funds and more success.
I accidentally have a decent profile for a VC career. I have an economics degree from Wharton and spent my first 6 years working in every part of finance from central banking to investment banking to hedge funds (long story here). I also code and am well recognized in (mostly JS) devtools circles. I was with Netlify (a16z backed) from Series B to C and am now at Temporal (Sequoia backed). I have a better-than-average network across my blog, newsletter, Twitter, podcast, including many founders, a dozen GPs, and I think I've shook hands with at least 3 billionaires. As an indie creator I've watched with green-tinged eyes as Ryan Hoover, Li Jin, Tyler Tringas, Sahil Lavingia, Paige Doherty, Packy McCormick and others launched funds that tie in perfectly with their brands. (Evan Armstrong came up with a witty term for writer-VC's: Content Capitalists)
I'm nowhere near as accomplished as any of them but pursuing their path was at least available to me given my network and trajectory. Instead I've turned away and chosen the more traditional path of salaried startup employee, with less freedom and more discomfort. I get asked why every now and then so I figure I better jot down my post-hoc rationalizations:
- I don't want to be a meta-creator: Meta-Creators have a ceiling to substance - they burn bright but are overwhelmingly talkers rather than doers.
- There is too much money chasing too few operators: This is a time of ridiculously easy money, with GameStop still worth $11b and Dogecoin worth $26b, Devtools startups raising unicorn rounds at 260x ARR, and Roam raising a $200m seed. Interest in private company funding is at generational highs, while new company formation is just coming off generational lows. Investors say getting great dealflow is their biggest problem, but post-PMF founders themselves report that hiring experienced senior executives is their biggest problem.
- This will be much easier after I have "made it": "I'll be ready someday" is a terrible reason to not do things — a college friend of mine is already a GP at Greylock without ever having been a founder or early stage exec. But I also see heaps of bright eyed bushy tailed "partners" who haven't done a notable thing in their lives and I know that nobody gives them the time of day. Just being at a good firm is no longer enough — your shortform bio (founded X, led X at Y, coined X) has to get to the level where people get you on the cap table just to have your name on the funding announcement. Power is moving to the person. As Ashley Mayer put it, the influencers are trying to become VCs at the exact same time as the VCs are trying to become influencers.
But the biggest reason of all: I'm on the hunt for bigger problems. When you are a frog in a well, all you see when you look up is a tiny circle of sky. My imagination is constrained by my experience, and despite my already diverse background across countries, industries, and cultures, I feel like I haven't pushed myself into hard enough problems.
- When you are a regular employee at a stable company working on defined career paths, everything looks "solved" and your main job is to learn how things are "done". But founding and investing in startups is not just the art of identifying what big things are broken (everyone can complain about how everything is broken), but also whether the technology and market are ready for the right people to lead everyone to the promised land.
- When you take the "solve your own problems" approach you most like come up with B2C ideas, which are pretty universally regarded to be much harder than B2B (B2C has lower ARPU, higher churn, higher support cost, higher UX/design bar, but do have high growth potential). On my own, the best idea I've had is "Superhuman for Twitter". At Temporal, I've had two theses — X University as a Service, the Enterprise House of Brands — that off the bat have much better revenue potential and lower product/platform risk.
As an "operator" I'm focusing on specializing in Developer Experience, which economically speaking is helping Developer Tools companies "cross the chasm". I also practice this on a light burn basis with Svelte Society, which in its second year alone memed Svelte to the top of the StackOverflow frameworks survey.
I'm not resting on my laurels though. I started angel investing last year and have made 6 investments so far, 2 of which already have markups. I'll share more detailed investment theses for each soon, but I think my goal is to deploy ~$50k/yr as an angel as a way to dip my toe into startup investing, mindful that valuations are sky high right now. If I get an early hit, then that's an accelerant to an eventual VC career.
I could also start a syndicate or rolling fund. Even now the maximum I've allowed myself to go is starting a devtools-angels list and Discord (where we are currently at 400 members!!) but the principle is the same — I'm not ready to be a fulltime investor, so I refuse to take formal steps, but I'm happy to lay the groundwork and have the option someday.
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