There are a couple of core differences between venture capital and being “in the trenches” at a startup/portfolio company. Oftentimes at a venture firm, there are 5 Allstar NBA players (insert your favorites) playing on their own courts solo, versus a startup, where you have a crew of 5 draft pick rookies working together, as cohesively as possible (there will be hiccups along the way). Sure, the rookies have experience, but they also have the chip on their shoulder hustle that will let them figure things out as they go, get used to the new arena, and be accustomed to all the new teams and player styles they didn’t get exposed to in college. Venture capital will have experts come in and take care of their respective industries and a subset of problems on their own, and assemble once the job finishes to debrief, sharing news, and portfolio company updates.
The early-stage portfolio companies have a more substantial team element because there is one shared goal: survive, thrive, and make sure everybody is aligned. While the same could be argued for the VCs, the fragmented specialization of the individual operator / subject matter expert can drastically help accelerate their startups and remain lean simultaneously. Many VC firms can feel this way, where one individual will go to the coal mine, one will dig ditches, and the other will sell oranges, and at the end of the week, they’ll talk about the pains, pleasures, and industry insights picked up along the way, sharing the treasures at the end.
It is evident when a venture capital firm was started by a former entrepreneur or a career investor, as that intangible mission and shared objective will be much more evident, often without explicitly preaching it. Even then, if the firm is in its golden years with many funds under its belt, that shared objective can be diluted across all the new hires, market trends, and weighing pressure to execute from a returns perspective.
A positive shift over the past 5 years is the community element of venture capital firms (and subsequently, the industry). When the VC has clearly defined community guidelines internally, it will reflect in their investments not only by the investment mandates but also through the adopted culture, the operators, and the growth playbook. Startups want to go to cities where they’re treated best, the network is robust, and where they can attract their own talent (aka a “young” city). These will be ever-evolving, but if the venture firm is magnetic enough, they can shape that growth in their own way. They are transforming previously sleepy or unwelcoming cities for recent entrepreneurs into hubs where startups flock, such as Chicago, Miami, Singapore, Tallinn, and many more. Miami mayor Francis Suarez did exactly that with his crypto-friendly, tax-friendly, mandate-lax oasis that brought famed investors such as Keith Rabois, who is an active advocate for the shift away from Silicon Valley. Similar things could be said for Austin and Nashville, showing that Sand Hill Road and San Francisco no longer have a stronghold on the startup community. Could culture really be the main driver of that? Partially.
As VCs understand the importance of the personal brand and Twitter followers, they are catering more towards the average person by way of relatability and a look behind the iron curtain, generating deal flow, and ruthlessly networking. Being transparent about their investments, their lives, and their company culture has had massive effects on these elements, and the firms doing it right are re-building their culture from the ground up, showing what it means to be a true partner in growth, rather than a passive investor, and this is more important than whether or not the venture managing partner was a former founder or not.
As venture capitalists shift into a more involved partner despite their minority investment position (which is somewhat required with the recent market swing), we are interested in watching how the involvement translates into returns and exits. The other obvious key function of being a true partner to these portfolio investments is having the operational expertise to give specialized direction, not only from the investment team, but having real operators on call to step in when necessary to execute, minimizing mistakes and shortcutting growth. Luckily, we exist and can step in as a tool in the VC tool belt, only working with the most vetted, deeply experienced operators. If you believe you are either of these, reach out below.