Jon: All right, we ready? Begin. So welcome to the Venture Capital podcast. And today we're going to talk about is venture capital a good job?
Jon: So I used to actually I started often called Boom Startup. I worked with John Richard was an angel fund are a group sorry, a correction, a group of angel investors that I worked with for a number of years. And maybe I'll talk about my story. What are these individuals who started a fund and someone said, Would you want to team up with them?
Jon: And I said, No. And the reason primarily would be from something that you taught me is that VC funds typically have very poor succession planning. And I think most funds typically revolve heavily around the concept of one super wealthy individual. And so it almost becomes like a private family office that you're working with and having worked for a number of fairly wealthy people.
Jon: I recognize that that one, when you get any measure of success, is when their family members get greedy and they don't have the discipline to say, Hey, you can't come in. Which has been one issue that I've learned from past experience working for a bunch of like wealthy individuals. But the second thing is like, I'm at the stage like, I want to build, you know, like the next $100 million plus company, and it could be a VC fund.
Jon: But if the right succession planning wasn't there, I wouldn't want to do it. And most funds, I feel like that's a really struggle. And truthfully, it's where a lot of startups fail.
Peter: Because they don't have good succession planning.
Jon: Yeah, so that's why I would not want to get a job in venture capital, most likely because most of these funds are small funds. Yeah, and I like to be in control of my life and maybe it's arrogance or I think I know more than other people. And I don't like playing the game of, Hey, do this deal.
Peter: Know, like having partners to give you a good feedback and help you make better decisions and you do it on your own.
Jon: I've had a bad history with partners. Love my partner. Yeah, that's true. But I'm also like oil and water, right? Like, I'm not I don't think I'm an easy person. And looking back, I probably expected too much from partners. So let's just instead of me seeing what's wrong with them, that's what's wrong with me. I'm not an easy person to get along with.
Jon: I feel bad for my wife, very demanding, probably very passive aggressive, not on purpose, very strong opinion in the room that's very silent.
Peter: I feel like this is turning into a little bit of a therapy session for John and therapy.
Jon: Do you do therapy? They love their.
Peter: Interaction on venture capital. Jobs are interesting or not.
Jon: Yeah, so I think they're interesting. But for me to jump back in the VC space, if a fund were to recruit me, that would be the first thing I'd ask for was.
Peter: What is your succession plan?
Jon: Is am I a partner and what is your succession planning?
Peter: So the question is, is venture capital a good job, right? And so clearly, it depends. Right. It depends on like, so many things. One, it depends on like, first of all, what is the job? So you just said like, am I a partner or not? Right? So right off the bat, like, there are basically three buckets of jobs.
Peter: And in any venture fund there are the partners, there are the like investment support. So that's analysts, associates, anything on the investment team that's not partner. And then there's like support staff and the support staff could be everything from like, Investor relations, executive secretary, head of community, like all of those things. Right. And generally, there's not a lot of overlap or transition between those three.
Peter: It's possible it occasionally happens, but for the most part, there's not much movement between those three buckets. You know, if you started as an analyst or an associate at a venture fund, they're typically a couple of years and you're out. Now what what can happen is if you join a venture team as an analyst or associate, there is the possibility of moving from that to partner.
Peter: But you basically have to do it in two years. And if you've been there for more than two years and it hasn't happened, it's probably not going to happen. And, you know, 99% of the time it does not happen. So if you join a venture fund in that role, you just have to know like you're not in venture for the long run.
Peter: Right. Because that's not a partner track position or partner position. If you're support staff, same thing, except for even worse, because support staff almost never even makes it over to the investment team, no matter what the partners tell you. If you're considering a role on the support staff side of the venture fund, you will not really be part of the investment team.
Peter: Now, if we look at those two categories of jobs, are those interesting and fun jobs? Yeah. And you can do very well. Like I know people that are CFOs of venture funds, they don't make as much money as the partners, but they still make a decent amount of money. They don't have a lot of stress in their lives.
Peter: It's a pretty good gig, right? there's nothing wrong with that job, right? You get a lot of the same perks of working for a venture fund as being the partner without the stress of it. And a lot of ways. And even though you don't get that, even though you don't get the same pay, you're also like, maybe not having to work quite as hard in certain ways, right?
Peter: and some, some of those jobs I think would be super fun, just anonymously, like had a community like.
Peter: That'd be super fun, right? Like, you just go around and you, like, build community and you like, help your startups at the fund and, you know, put on events and like all of that stuff. Like that's, that's cool.
Jon: Right ahead of community. One of my thoughts this week was, Man, it'd be fun to just be the person at a fund to there to help the portfolio company.
Jon: It's like my job is how do we get you from zero to here? All right. Is there a key hires or key introduction? Yeah. And that way you're not. Hey, how do I go pick winners and losers? Is how do I help the winners we've already picked?
Peter: And so if the question is around whether or not VC is a good job solely around like the actual work and not so much on the compensation and the upside potential, then like, yeah, those can all be great jobs, right? Working as an analyst or an associate at a venture fund for a couple of years can be a great job.
Peter: Like you'll get exposure to a ton of companies, a ton of people, you'll learn kind of insights and of of how good companies are run and poor companies and how poor companies are run and like major pitfalls. And then that will open up the opportunity for you to, like, go get a great MBA somewhere or join a startup or start your own company and potentially raise money from that fund.
Peter: Right? So, and all of those ways, those can be really great jobs. but I think your question is more is being a partner at a venture fund a good job?
Jon: Well, I think it's a good job depending on where your position or position in which expectations are expectation. So like my foray into venture with John Richards was like the best experience of my life. And I think it's something that every founder, if you want to go into into startups, it's a great way space to be for, you know, 2 to 5 years.
Peter: Yeah. Your biggest frustration with with that experience was you thought it was partner track and it wasn't. You were like in the junior bucket.
Jon: In the junior bucket.
Peter: You just didn't realize it.
Jon: No, no, no. That's a whole different story. I realized it.
Peter: At the beginning, of course. okay.
Jon: Abso. I was. I'm not. I'm not that. I'm not that naive. I was the when I started, I was working with a guy named John Richards. Yeah. And my job in life was if he said jump, I jumped and said how high. Yeah. And if he said I wanted you to jump this far, I would do twice that.
Jon: And I if you look for internships that people spend the most time at, and I think it was an unpaid internship, it was I would spend like 20, 30 hours a week doing it. And it was a phenomenal experience. I think the one lesson, if you don't want to go this route that I learned is you see all these guys with great ideas who don't know how to execute and get their first sale.
Jon: Yeah, and so it sounds really simple, but I learned the most important thing was getting sales, which sounds really, really stupid, but it's where most these individuals just failed.
Jon: And so probably every startup I've started, I've made sales, at least in the space, more to potential customer before I ever built, you know, my first line of code.
Peter: Yeah, just smart. So back to easy job.
Jon: But that was a great job as a as an intern. Yeah, because you learned to tie analyst. Yeah. And I would recommend it for anyone who wants to go the founder route. The question is the Cheshire Cat, where do you want to go? Yeah, and why? And if you don't know for a founder, I think it's a great job.
Jon: Yeah. I think even for someone today, like an analyst is a great job. I just got I've got I've got different criteria that I measure success for my life. It doesn't fit me. Being an analyst is no on that list.
Peter: Yeah, but still a great job and a plug for you. Jeff University Growth Fund is that if you want to be an entrepreneur, you really should go through our program because then we've had multiple students go through our program that have then gone on to raise from top tier venture funds like Andreessen Horowitz and go through programs like Y Combinator, 500 startups and others.
Peter: And I think going through our program gave them like a massive leg up because they understood like who all the players were, how to negotiate term sheets, how to, you know, present to investors in such a way that would get them excited. How to identify interesting trends and market opportunities, etc., etc., etc.. So yeah, I agree.
Jon: And a plug for you. If I was going to create my own fund, which again I'm not, I would consider going and spending the next six months before raising a fund and just working and volunteering. Assuming you would like me.
Peter: Yeah, well, and that's because Venture is really much like an apprenticeship industry. So pros and cons of being a partner at a venture fund.
Peter: Partner track, right? So you talked about success and succession is potentially an issue. And the reason for that is because the people that start the firm, right, they take the risk to start the firm and then they do the hard work of making the invest the initial investments, generating the performance, raising the fund and establishing the firm. And once they've done that, then they they hire more people and inevitably, if they're good at it and they raise more money, they're more people.
Peter: Those people go out and they start generating the real value around like track record and so on and so forth that's generating the carry, generating the track record and returns that are then required and used to raise additional capital. And so the junior guys look at this and they're like, Well, I'm doing all the the heavy lifting here.
Peter: The senior guys are just sitting on their duff, right. Taking, you know, taking the deals that I give them, funding them, taking credit for them and taking the board seat. Right. But like, I'm doing all the hard work of like finding the deal diligence and executing, you know what I mean? And so then they get frustrated because they're not able to, like, break in to that top layer and the top layer like right or wrong there, they're like, Yeah, but like we put in all this that we built the firm, we took the risk, blah, blah, blah, and they don't want to give it up, right?
Jon: And understandably so.
Peter: And understandably so to a certain extent. Right. the flip side is I was like, every fund is like a new company. And so, you know, what ultimately happens typically is the junior partners or, you know, junior people essentially say, hey, I'm doing all the work, I'm going to just spin out. And I like if what's necessary in order to get like the lion's share of the pie is to take the risk and start the firm, then that's what I do.
Peter: And they leave. And then when they leave, all of a sudden the senior guys have a choice. They either have to put in the effort themselves or they got to hire new people to do it for them. And if their reputation gets so bad that they can't hire anybody, good, then the fund collapses because usually they're just not willing or not able to do the work anymore.
Peter: And and firms shutter or they go from being a top tier fund to being a mediocre or lower performing fund that can't raise another fund and shut shutdown or sometimes they're successful in finding kind of the next people and, you know, training them up and then they leave and they just have this perpetual.
Jon: This is what McConnell's done a bunch of. Right can call it Mercado Yoke. Ricardo.
Peter: But I think we both know firms that have done that.
Jon: So there's a there's a fund that that we both know that literally none of the founding teams there except their original partner, one of the two parties, the senior partner.
Peter: Yeah. So, yeah, I mean, so that's that's a challenge. The flip side is I mean that's, that's where I Benchmark came out of the gate and was like, we're all equal from day one. And when we leave, when one of the partners leaves, I don't care who they are, how much money they've generated for the firm, if they were a founder of the firm or not, like when you leave, you're out, you're cut off from like, you know, a management company, future funds, all of that stuff.
Peter: You're out and the new guy or gal that they bring in takes that whole position, right? And you know, their argument is like, that's partly what makes us like a good firm. The downside is, is that it puts them in a position where they can never really train up people. Right? Because if if everybody's going to be equal, you don't want to bring in somebody that's not going to like be equal in terms of their contributions either.
Peter: And you don't want to spend time in what that means, that you can't really train them up because it takes it takes like some losses for a good VC to really get trained up and they don't want to take that. And so they ultimately have to like go and poach from other funds. Right. That have done the heavy lifting of training that person up and then they put you in and bring them on.
Peter: The flip side is they can kind of poach whoever they want because our track record is really good and they can tell them with like real authenticity, like, Hey, you will be treated the exact same as Bill Gurley, who funded Uber. Right? Same economics. And that's super compelling, right? Value prop other pros and cons like if you are, you know, senior partner, you're getting the lion's share of the economics.
Peter: And that can be very meaningful even on relatively small sized funds. Right? Like a $50 million fund pulling 2% management fee at a you know, it's a million bucks every year. So, you know, that's pretty good. That's pretty good income coming in. And then you get 20% carry on that. So if you three X the fund, so that's 100 million, you get $20 million.
Peter: Like those are pretty good economics. And then it just gets better and better. If you raise 100, 200, 300, $500 Billion funds. Right. So a lot of money flowing into the top. There is a lot of pressure. And I think this is another one of those downsides is, you know, Bill Gurley says it takes about five years. I think that's probably about true.
Peter: Right, to know whether or not you're good at this. The problem is, is that if you're not good at it, what do you do afterwards? Because you're like, especially like, you know, this is something I think about a lot is I've been doing this now for about 14 years. I feel like I'm pretty decent at it. But if like theoretically, like we have a bad fund or we have a couple of bad funds, nobody's going to fund our next fund and I'm going to be out of a job.
Peter: And then it's like, Well, who's who's going to hire me, right? Like, I've never you know, I've built a venture fund, but I'm not a good V.C., clearly, because my returns aren't very good. And so what am I good at, right? Like, who would hire me? Right? So, so like, that's some of the downside of being a VC is that you're a little bit of like this, like little bit of like a master of you're kind of like a jack of all trades, master of none in a way.
Peter: Like because, you know, you're kind of a bit of an expert on a lot of different spaces, but you're not like in the weeds on any one of those spaces. So I don't know that that's one of the downsides.
Jon: I think you're thinking about that one too much. But is that a bigger issue than I think? Because I feel like one. I mean, it may be the roots are that you would want to go to, but like if someone's a V.C., I think there's a lot of startups who need help fundraising after a series, a series B side, and having some who's dedicated who can help feel that that's a great position.
Jon: Maybe that's not a position of VC wants to go into.
Peter: Yeah well and and you know part of it too is like, are you, are you willing is a VC willing to take like the ego hit? But I think a lot of VCs do do that, right?
Jon: Or they become like you.
Peter: And I know like kind of washed up VCs that right? And I don't know if that's super compelling.
Jon: I don't know. I know that many, many washed up VCs.
Peter: Yeah, well, because usually.
Jon: If they just disappear, you.
Peter: Just disappear, which is my point. Yeah. And I just think it's a risk that not a lot of people appreciate, because a lot of the VCs that wash up, wash out, right. And you just never hear about them. I think another like downside is because of these economic differences that we talked about in that like venture funds struggle or succession.
Peter: And then like you also have this dynamic where even if like maybe they're all equal like one, you know, it's Bill Gurley and he finds Uber, right? And like his other partners, they have anger deals, but it's not over. But now Bill is like splitting up the carry on Uber, which is like in the billions or not billions, but hundreds of millions.
Peter: Right. With these other these other investors that didn't contribute to that. And he's like, well, I he could think like, I should deserve more of that. And the other thing is like these investments, they take so long to pan out, right? And then it's like you need to convince your partners to do deals. And like sometimes there's like deal training.
Peter: There are all these things that create this dynamic where there are a lot of venture funds where every single partner hates each other.
Peter: Right. And they're like, they stick together because there's so much money at stake, right? But they really don't like hanging out with these people. And yeah, I was talking to a mentor of mine and he was like, he's like, I think like most venture funds are kind of like that under the covers. I mean, clearly not every fund is like that.
Peter: And but, you know, it does it does happen, right? So like, that's another thing is like you go to work every day and you just, you know, you don't love the people you work with. And that's that's a challenging work environment.
Jon: And that's one of the reasons I like being a founder. And I think I'd have a hard time being a VC.
Peter: Know because you would want to work with everybody or because, as you said earlier, you're not like, I don't struggle with partnerships.
Peter: So glad we're partners on this podcast.
Jon: But I think like you, you, I think when we look at this like the podcast, like there's a very like there's very there's very different value add that we both have and I think it's very synergistic. It's how I look at it. I think it's very different when you're in a startup and your business partner is not watching ESPN all day.
Jon: I think this must be here's here's the problem.
Peter: The problem is like you want your partner to be pulling their weight. Yeah, I think. And if they not, then you get disgruntled.
Jon: Yeah. And I think my problem is, in most startups, people either don't pull their weight or they have a very contrary view to where you need to go. So there's a lot of friction.
Peter: Yeah. I think the other problem is even when they do pull their weight, sometimes they're pulling in a direction that you don't want. You don't want right on your point, like you're not pulling in the same direction.
Jon: There's a founder who former business partner, has raised several million dollars. And one time he came in and I'm like, he's trying to do a hostile takeover. Yeah. And it was like 40 minutes of him, like beating around the bush. I'm like, finally, like, come out with it. Like, were you saying? Yeah. And he's like, I want to, like, fire half of the company and I want you instead of B majority to be a third, a third and a third.
Jon: And I'm like, if you're going to fire all these other people are going to be third and third or third, and then you and this guy you're bringing in is going to fire me. So I'm like, No, yeah. And then just burned up. Anyways, in looking back, I'm like, he, he understood something I didn't understand. Yeah. And those are the parts I miss.
Jon: Yeah. I think that when a start up it's hard. I think it starts and I don't think maybe VCs are the same way as, you know, Are you like Blood Brothers, Blood sisters type of thing. Have you taken like, this oath to, like, protect each other? And I feel like the hard part in startups that may be different from VC is, you know, once someone once someone is making a third to two thirds of what they were making before at a regular job, they stop pushing hard and they're more company.
Jon: They love the infinite flexibility and freedom that they had comparatively, which is fine, but I'm here to win, right? Have I told you my metric? What's your metric? So my metric is whenever someone tries to recruit me. Yeah, I have a test. If it doesn't pass the test, I shoot it down. Okay? And it is I have to be able to make whatever the route is.
Jon: Not now, but I have to be able to make $1,000,000 a month for 12 consecutive months. And if I don't see a path for me to get there, it's not worth my time. So I don't have to make a million a day. But but when I when when my last start talks failed, when Facebook turned off the API so it crashed for reasons that I don't control, I started hanging out with some people who had much bigger visions than I had, you know?
Jon: And I'm like, I need these bigger visions. And so I need a litmus test that allows me to say, Hey, if I'm ever going to choose something, can I get there in five years? I can. Can I get there in ten years? That's fine. But, you know, maybe it's a one lump sum payment pay out of 12 million.
Jon: Sure. But if I don't see it, I'm not there.
Peter: Sure, that's right.
Jon: With the exception of this podcast, which is free.
Peter: Yeah, I guess it's an interesting test.
Jon: And there's probably other ways to have tests, but it's kind of like, how do you measure life? What's your time worth? Because do you know, you know Josh Josh Coates from Ozy, you know, he taught me he did like this private, like founder mentoring thing, you know, set up by Roger Andrus and is probably the most valuable training sessions I've ever I've ever gotten.
Jon: And he says, look, he's like he's like, you can spend your time creating a lifestyle business or a venture backed company. And the only difference is you're putting out the same amount of time. It's just, just the risk component, right? Yep. So it's like and.
Peter: The potential outcome.
Jon: And potential outcome. So at that point I'm just like, I'm going, I'm steering hard, right? High risk, high potential outcome. See how it all pans out. But that's how I've chosen to, like, live my life. Yeah.
Peter: And look, not everybody can live like that, right? Some people can't handle risk, and that's fine. But don't get grumpy at the people that did take the risk and generate the outsized returns because of it. Because for every one that did, there's like ten more that took the risk and lost and got.
Jon: So that was one of the guys name when it first starts. When I first started doing start ups and I was like, Why do I play at all mature or Adobe for a job or to go do startups? And he sat me down and he's like, Look, like no matter how good you think you are, you're going to you'll be like my dad, who ended up not my dad, his dad.
Jon: He's like most successes. Hey, you, you sold the business, you paid off your house and you had to get a job afterwards anyways. Yeah.
Jon: But I mean, I think that's the outcome for a lot of founders. Lester Or you get a lifestyle business or.
Peter: You're a lifestyle business and lesbian is there are a lot of people that have great lifestyle businesses. There's nothing wrong with lifestyle businesses.
Jon: Which is something I didn't realize. I was older. I was taught that lifestyle businesses were evil.
Peter: They're not evil. But yeah, I think a lot of people do bash on lifestyle businesses when they shouldn't, and they raise money when they should, and they should just focus on building a lifestyle business, whatever.
Jon: It's a free loan, interest free loan. Why would you not like that?
Peter: Venture capital is an interest free loan if.
Jon: It's under the right terms. It is. Look at look at the top. How did they had interest? But they which firm did they just squeeze out? It was a top tier firm like Andreessen Horowitz or something like that. They had a they raised on a convertible note. Yeah. Never converted them, paid off the note, never gave an equity.
Peter: Blew my mind. Now, that doesn't happen a lot, though.
Jon: I mean, the contract said yes, it definitely seemed like.
Peter: I mean, technically it's that's that is a risk. It's part of it.
Jon: But we do think we've covered how to get a good you know what is a job in venture Is venture capital a good job how we covered it? I think so.
Peter: You know, I will say the thing that I love about working in venture capital is just the ability to meet amazing people and to constantly be learning. I think if you are somebody that is intellectually curious and you enjoy helping people and you enjoy, you know, being with people and thinking about like hard problems, then venture can be a super fulfilling, really fun, really fun career.
Peter: It's not without its risks and its downsides and also just at scarcity. But, you know, for me at least, given like the kind of person I am who places a high value on learning, on building, and on helping people, like I can't think of a better a better career.
Jon: I mean, definitely my my tenure, my stint with USA Angels, those exact things, the intellectual curiosity, just very different ideas. Loved it. Yeah. But I think that mainly comes on the partner or I guess the analyst level too. Yeah, to an extent. And just, you know, being able to help people. When I was there, my goal was I wanted to at least help one person get a job every single month as a, as a way to give back.
Jon: And it was an easy way for me to get back from my network.
Jon: All right. We'll go to venture capital out of em. Let us know your questions. We've recently launched a Slack channel, so if you want engage with us, that's probably the best way to reach us. Right? Great. Peter.
Peter: Yes. All right. John will be there to answer all your questions.
Jon: Maybe we'll do a live session in there. All right. It's a.
Jon: A hard, maybe not a hard maybe. I think as it gets critical mass, we'll just Peter more and more and so. All right. Well, thanks, guys. And join us for the next episode.
Peter: See you next time.
