From VC to Operator: Why I Made the Jump

Facebooktwittergoogle_plusredditlinkedinmail

VC to Startup JumpA little over a month ago, I jumped from the safe, prestigious world of venture capital to something more volatile: working for a startup directly. It wasn’t something I had planned — at least, not as quickly as it happened. But it was a decision I knew I had to make eventually.

Since my job in VC involved working very closely with startups, I thought I knew what I was getting myself into. I was wrong; it’s been way busier, crazier, and more fulfilling than I expected.

There are many aspects I miss, such as knowing industry trends and meeting incredibly bright founders. And, since my background is very finance-heavy, I related to friends by talking about fund returns and IPOs and all that other investment jargon. I’ve sort of lost those now but I’ve gained a newfound respect for super early stage founders and startup employees.

So, VC to startup. What happened?

The Stunted Career Path of a VC Associate

Stunting Growth

Like me, many people join venture capital to get a high level, broad view of the startup ecosystem. Working at a VC firm means knowing about the trends of the market — what’s new and exciting and what’s overhyped and failing. Entering a conversation with a bunch of VC associates is like playing bingo with mad-libs and spelling errors, starting with, “Have you heard of this company?” (which is spelled “Lyke” with a y) and ending with, “they’re the Uber for x”.

Because that’s the job for a venture capitalist — to be on the cutting edge of tech and to know what’s happening before anyone else does. It means having an insider track to everything new and exciting and having the courage (or blind optimism) to believe that other people and investors will also buy into the story.

That’s what people join VC for, but the truth is associates generally join knowing that there is a two-year time limit. Why? Because in order to become a VC partner, you almost always need an MBA or operating experience. That often means heading off to business school or joining a startup.

It’s something all associates start thinking about around their one year anniversary. They start hitting up friends and asking about business school and their employers might begin hinting which portfolio company needs help.

From a startup’s perspective, it makes sense too. Why would an entrepreneur want a board member that has never actually experienced everything a startup faces? It’s easy to tell which board members have actually walked the walk and which ones have only ever talked the talk.

So as a young VC, I began to ask myself that question:

Business School or Startup?

The debate usually boils down to this:

Should you spend $100k+ on business school with the hope of becoming a VC partner one day?

OR

Do you take a huge leap of faith and join a new startup?

Taking the Leap

B-school is expensive, and tuition is only increasing faster every year. Adding to that is the opportunity cost of missing out on a paid salary for two years. It is true that the connections and network in business school are life-changing (though working for two years can also net great opportunities), so many people choose this route, increasing the enrollment rate in schools and creating fierce competition after graduating. Getting a good job post-MBA is no longer guaranteed.

On the other hand, joining a promising startup is very competitive, especially if you’re not an engineer. Good engineers literally can choose any company they want; I’ve tried to recruit engineers who mentioned leaving their job yesterday only to find out they already accepted another offer today. Unfortunately for the rest of us, we are fighting a crowded field, filled by a trend where bankers, consultants and managers are ditching their jobs for tech startups.

That’s not to say a jump is impossible. 

It is difficult though, and it’s scary, and a lot of times it’s hard to figure out exactly what you’re jumping into. You need to work out exactly what your career goals are, and what risks you feel are worth taking.

Me? After a very difficult internal struggle and many close friends questioning how delusional I was, I decided to get my hands dirty as the General Manager at Roomi instead.

The Benefits of Switching From VC to Startup

One Side or the Other

Again, my time in venture capital did not prepare me to jump in and run a business directly. I’ll be the first person to call BS on anyone who claims their VC background gives them any unique expertise in leading a company. I’m learning more than I could have imagined every day.

Now, when I talk to some investors, I realize that they have no idea about decision-making in startups, but unfortunately, they have the money and marketing power to make it seem like they do.

Many VCs are out of touch

This was true while I was in venture capital and even more true on the other side of the fence. As a VC, it often surprised me how some partners were only starting to ask how blockchain worked (despite investing in startups there), or figuring out what Spark was vs Hadoop. Often, the associates are actually the most ahead of the curve for trends.

On the startup side, the surprise is more due to how behind VCs are about what’s happening in their portfolio companies. I’ve been to meetups where investors talk about decisions, unaware that the management team had already begun testing months ago. It makes sense; VCs work on a weekly, if not monthly, schedule, while tech startups operate on a daily schedule where every hour counts.

Knowledge is not the same as experience

Technically, I know a lot about products that startups use to run their businesses. Unfortunately, knowing about them is completely different from actually using those products. It’s the equivalent of how college students learn about industries and all the hypothetical ways to solve problems. After graduating and getting a “real job”, all those lessons go right out the door; you may never need to calculate higher order derivatives by hand in real life but you better know how to Google the answer.

That’s why board members with operational experience are so valuable.

Jack of all trades, master of none, though oftentimes better than master of one

In larger companies, duties are usually delegated and employees work on specific tasks within their department. Being in a young startup means learning and doing everything. The best employees step in to fill gaps, regardless of what the task is.

Also as a young employee in a big corporation, while you may be important, the future of the company doesn’t generally ride on a decision that you make. While that safety net is great, it’s easier to stay inside your comfort zone. In a young startup, the decision you make could actually mean the company might fail in the next month and all the employees could lose their jobs.

No pressure.

So, all that being said, how do you know which startup is the right one?

Choosing the Right Startup:

Looking at the Stars

With everyone and their dog (literally) wanting to jump on the startup bandwagon right now, getting into one is not easy. But if you are serious about joining one, think about these tips:

If you want to do it, do it now.

Right now, funding is easier to get than ever. Good startups have the upper-hand in every negotiation and are giving away small portions of equity for huge amounts of cash. Entrepreneurs are flooding the market with ideas. I’ve actually had debates with people in San Francisco about whether all the truly innovative, good ideas are already taken.

For millennials who buy into their own self-importance, they go start their own companies. For the rest of us — let’s call us the realists (or risk-averse) — joining a small startup gives you the opportunity to make a major impact without risking your life savings. What other industry in history has allowed so many people the experience of growing a team from 10 to 1,000, or a customer base from hundreds to millions in months?

And the exits right now are huge. Public investors are shocked by the valuations of some recent IPOs, yet they can ride the hype machine for a good while before reality hits (see: Twitter). Many startups aim to get bought instead, which nowadays can turn out to be even better than a public market exit!

The market is robust, people are investing, and Silicon Valley has never been this big.

Find the right team.

Find a person or company whose ideas you can really get behind. Regardless of how far along the company is, you must believe in the company’s product and vision, and that the employees are the right people to get it there.

For many young companies, they often just want to find great people. They hire first and then figure out what the actual role is after. So don’t be discouraged if the perfect role isn’t available online.

Make sure everyone is bought in.

Find a team that truly believes in their mission. If they are passionate, and believe they are actually creating something unique and meaningful, they will have the drive and motivation to make their company a success.

If you’re joining a small startup, you will work long hours. So find something to work towards that makes those hours worth it. You may do work that is “below you”, but guess what? Someone has to do it.

To me, working at a large corporation vs a startup is the difference between doing something because someone told you to do it and doing something because you intrinsically want to do it. Because you could actually be the reason the company is successful, you’ll put in the time and the effort to make sure it’s the best damn job anyone has done.

That’s a huge difference in mentality, and if you work with people like that, you better believe you’re in the right place.

Are they prepared for a downturn?

Find a company that looks like it could last through a downturn. Valuations are at an all-time high and that makes joining a company easier than ever, but that bubble won’t last long. A lot of people making the move to startups are worried about the exit. That’s only part of the problem; a company that is thinking about how to survive a downturn is just as important.

Look for startups providing products or services that people will still want and need even when they’re short on money.

If you’re energetic, motivated, and prepared to work hard: Now is a great time to join a startup.

8 thoughts on “From VC to Operator: Why I Made the Jump

  1. alvin y says:

    Great post, Linda! Would love to catch up in person to hear your thoughts (if you’re ever not working)

  2. Laksh says:

    Awesome awesome post, gonna have to reshare…

  3. Teddy says:

    Sweet post, good to hear an open, baring story of your transition. On top of that, making it applicable to me.

    Hope things are good at Roomi, just checked it out and I may be a user in the near future :D.

Leave a Reply

Your email address will not be published. Required fields are marked *