Good afternoon! In today's edition, we hear from a group of VCs about the parts of their role that they see as the most challenging. Questions or comments? Send us a note at email@example.com
Partner at Ridge Ventures
My journey from 20-year CIO to venture capitalist was unconventional, and I knew it would entail some equally unique challenges. One unexpected lesson I learned early on was this: The transition from operating executive to investor is far from seamless. Buyers and investors fundamentally ask different questions about products. CIOs are thinking about cost, implementation, how a solution helps their IT organization; VCs want to know about product-market fit, competition, founder pedigree. The day-to-day tasks vary as well — after managing a large team and actively deploying technology, I was now sourcing potential investments and reviewing them with my fellow partners, jockeying for deals and issuing term sheets.
However, despite any difficulties I’ve faced on my unusual path to VC Land, the camaraderie with founders and other venture capitalists — even from competing firms — is a constant source of knowledge and friendly collaboration that’s greatly facilitated my transition. Learnings from my past CIO life still come in handy, too. When it’s time to provide guidance and actionable feedback to a founder, even for a deal we’re passing on, I can always call on my real-world operational experience to help them navigate a challenging startup ecosystem.
Priti Youssef Choksi
Partner at Norwest Venture Partners
It’s a known fact that as an investor, your job is so much more than deploying capital and serving on the board — you’re a trusted sounding board, a resource center, someone your founders call on the weekends to problem solve or share exciting updates. What was unexpected to me was how much you are personally vested in each of your companies. There’s a saying, “You are only as happy as your least happy child,” and this is certainly true for how I feel about the founders in my portfolio. If any one of them is having a tough time — whether on the execution or leadership fronts — I carry their emotional burden with me until we can find an appropriate solution or define next steps that would help them get over the hump. There is immense gratification, however, once you get over the hurdles and are on the other side of these challenges.
Partner at Menlo Ventures
Several things were unexpected! Previously, I was a large public-company CTO responsible for managing an extensive product development team and support teams. VC partnerships are structured differently. As a VC, I suddenly had no management responsibility and very little support. I was suddenly an IC again! I found this refreshing and challenging; it forced me to worry about MY output rather than the team's.
I had assumed winning deals would direct most of my time and thinking. But I learned quickly that the real work is in the day-to-day partnership with portfolio companies (particularly during a time of economic uncertainty.) This is where my background gives me an edge.
Coming into Menlo, I expected my experience as an operator/technologist would give me a cool twist on the traditional VC background. But that background really resonates with founders (particularly product-oriented founders), which I love. Speaking a common language means we can cut the small talk and get to the big topics faster. I’d much rather have deep product conversations with founders than spend hours digging into P&Ls.
Finally, I’d add that I was used to discussing my work day with my wife and going deep into the challenges I was facing. But now, “talking shop” at dinner is off the table. She’s also a VC; most of our day-to-day work is confidential and protected. (Thankfully, we have kids to discuss!)
Partner, talent & portfolio at Northzone
The most unexpectedly challenging part of being a venture capitalist is the high level of founder psychology skills required. To fulfill your role as a trusted adviser, it's imperative to understand, at a deep level, a founder’s mindset, vision and their desired culture.
This is a mental shift from my prior experience in private equity, which focused more on leading and directly implementing changes within a business. In venture capital, this is reversed: Although you may be in the room when the calls — including tough decisions — are being made, you are not always there when they’re implemented. This requires a mindset of being a coach, not a player, and is a dynamic that can be challenging — but rewarding — to navigate.
The next biggest challenge is having to quickly adapt advice across all disciplines to suit the current economic context. Attracting and retaining talent, particularly in the present climate, is my biggest focus with our portfolio currently as a culture and operations adviser. While tech layoffs have been widely publicized, we are also subsequently seeing that quality talent has become available to move to younger companies, and early-stage startups can make the most of this talent becoming available.
The climate is tough at the moment, but I always remind founders that the most successful companies were built during downturns. As a venture capital partnership, our biggest value-add is the wealth of knowledge that we can share, and our ability to connect founders to the wider ecosystem to ensure their success.
Co-founder and partner at CoVenture Holding Company
The hardest unexpected challenge of being a venture capitalist is navigating when to be helpful versus supportive with a founder. When done right, building a deep relationship with management provides opportunities to give difficult feedback from a place of trust. But when trust is never built between a founder and investors, that feedback can often eat away at the relationship and have a counterproductive effect. Some VCs navigate this by always telling founders what they want to hear. Others are bulls in a china shop, and say whatever is on their mind before building trust and a strong relationship. But building a relationship of trust to earn the right to give difficult feedback is one of the hardest challenges I am still learning how to perfect.
Sector head for life sciences at Lightspeed Venture Partners
As an investor, I meet incredible founders and visionaries and get very excited about their ideas. I will walk the extra mile to help them make these ideas a reality, particularly for patients’ lives. What no one prepares you for, though, is the tough reality of not being able to say yes to more entrepreneurs, especially the ones who could well make powerful impacts of their own. That by far has been the most difficult part of the role. At times, I feel as though I help make some visions and dreams come true at the expense of putting others on hold because we can’t possibly back and support every idea. I have to focus on the ones that I truly believe have the best chance of making a tangible difference to the lives of thousands of patients. These are the tough decisions unfortunately that must be made daily.
Founding partner at 1843 Capital
Venture capital is about investing risk capital to fund someone's dreams. The most difficult part of being a venture capitalist is bowing out of someone's fundraising process. We see over 1,000 investment opportunities per year and make four investments. I need to say no a lot. It must be a perfect fit for both sides. The opportunity needs to be a fit: team, market, timing, product development/roadmap, customer acquisition strategy. Also, the deal needs to be a fit: stage, amount raised, deal terms, valuation. So much needs to go right.
Rarely is anyone building something "terrible." Often we are simply not experts in the sector someone has chosen. At 1843 Capital, we invest in technology for aging and longevity. Someone could bring us an investment for climate change that is earth-shattering, but we wouldn't be able to properly assess it or subsequently invest. I always tell people, "Do not be discouraged ... you just haven't found your match yet." Very often that match is not venture capital. It might be non-dilutive funding or debt. There are many avenues for funding dreams that have nothing to do with venture capital. At the end of the day, I try to be helpful and give founders some direction. I have so much respect for people building things and taking a risk; I want to see them all succeed. As Theodore Roosevelt said, "The credit belongs to the man who is actually in the arena."
See who's who in the Protocol Braintrust and browse every previous edition by category here (Updated August 4, 2022).
Kevin McAllister ( @k__mcallister) is a Research Editor at Protocol, leading the development of Braintrust. Prior to joining the team, he was a rankings data reporter at The Wall Street Journal, where he oversaw structured data projects for the Journal's strategy team.