I have been doing VC for one year as a Junior. One year is too short to say something about VC, but I want to share my thoughts because there are not many Junior VCs, so my story can be an inspiration for someone.
1) I define VC as someone who re-allocates money.
Whatever I do, I always think about the essence of my work. There are many definitions of Venture Capitalists, the most common definition being making money by investing in startups. However, I think that VC’s real role is allocating capital from LPs to Startups. To elaborate, VCs should create a fund by sourcing institutions that have lots of money, then VCs invest in startups that need money to grow.
Especially, Our fund’s LPs consist of senior founders, so my role is to give what the senior founders have already achieved to be the foundation of growth for junior founders. It is also meaningful work for society, and that’s why I work with responsibility.
2) LPs are more important than you think.
I think the importance of LPs can be missed because many VCs join venture capitals that already have a sufficient amount of funds. However, if your company doesn’t have any funds, you can’t do anything. Most of the times, borrowing money is harder than spending money. The same goes for VCs. Gathering LPs to make a fund is usually harder work than investing in startups. If you want to be a senior venture capitalist, you should learn social skills such as how to gather LPs.
It is also important who the LPs consist of. There are many types of LPs such as institutions, government fund (like Pension Fund), and founders who have already made an exit. Usually private funds which are made up of private companies or entrepreneurs have less constraints than other funds, which allows them to invest more aggressively.
3) VCs are like salespeople.
It is not true that VCs can invest in startups anytime when they have money, because VCs should be selected by the startup founders. Likewise, VCs should appeal their advantage to LPs just as they do to persuade founders. So if you have a good communication skill, you are qualified to be a good VC.
In addition to this, VCs should have a skill to orchestrate stakeholders. In the process of deal making, there are many stakeholders such as founders, shareholders, and other investors. VCs should deliver results that satisfy lots of stakeholders.
4) And VCs are like solo entrepreneurs.
VCs often spend time by themselves, when they are not involved in discussions or making decisions, so it is important to spend personal time worthily. Even though VCs usually don’t have any fixed tasks, it is easy to become lazy if you can’t motivate yourself. Many people want to be a VC because they think that VC’s work-life balance is better than other jobs, but actually excellent VCs usually have alignment of work and life.
And VCs should have own competence such as self branding, a broad network, and long experience to persuade founders. Therefore, VCs have to consider how to make their own identity. Due to these factors, VCs are similar to solo entrepreneurs in that they always spend time meaningfully and think about strategies to make moats.
5) Post management is more interesting compared to the initial stage of the investment.
Before I joined a VC, I thought that processing the deals is the most interesting part of the job. However after I started working as a VC myself, I realized that spending time with our portfolio founders is more interesting than I thought. When I meet our founders, they usually share insights on how to grow their companies. These are real business stories that people can’t hear elsewhere.
Furthermore, VCs must support founders to trigger their company’s growth. As a VC, I have the most proud moments when a portfolio company goes to the next level because of my advice. For these moments, VCs should constantly learn and gather something new.
6) My own frameworks: Item, Market, People
Each VC has their own type when it comes to investment decisions. It is the most important for VCs to have their own decision-making frameworks. Additionally, having a skill of making frameworks better by trial and error is the path to be outstanding VCs.
As for me, I consider the item(product), market, and people(team). When I meet a new startup, I determine first if the product is likely to be used by customers. In addition, I evaluate how many people will use the product. Then, if lots of people are likely to use the product, I check the founder’s ability to achieve desired results.
7) A junior can be a good VC.
It is natural that senior VCs have a longer experience, so they usually can perform better than junior VCs. However, there are many areas of work where junior VCs can do better. For example, young founders can feel easily connected to junior VCs who can share similar experiences due to their similar age.
I usually don’t recommend VC for a junior, but if you have a clear purpose to be a VC, you can be a good VC by honing your strength.
Many aspiring VCs believe that a VC should not be the starting point of their career to build expertise. However, I don’t think it matters. By meeting lots of founders, processing the deals, and supporting portfolio companies, you will naturally be able to build the specialties required as a VC.
So I often say that if you really want to be a VC, there is no reason to take a detour.
8) Finding my passion as a VC
During the early half of my 20s, the question of how to make my own company and grow it drove me, and through various experiences, I could fill in the answers. Honestly, I never anticipated to become a VC, but now I am leveraging my answers to be a better venture capitalist. That’s why I can work as a VC.
Preparing for this job was by chance, but now that I have become a VC, it’s now time for me to demonstrate my ability to excel at it. By earning recognition as an outstanding VC, I will move on to the next stage.