Inside the Bizarre, Boozy World of a Junior VC in Silicon Valley
Welcome to an industry filled with 21-year-olds, open bars, and very little business experience
A lot of people want to be venture capitalists. People outside of the industry assume that there’s no cooler professional calling than investing other peoples’ money into sexy startup companies. But for those lucky enough to break into the industry, the truth is often less appealing than the mirage.
I’ll preface my story by stressing that this was my experience and is not representative of every VC’s experience. But I’m pretty sure it’s more common than uncommon.
I moved to San Francisco in January 2018 to join a brand-new venture capital firm as the first non-partner on the team. I had zero experience in the industry, and to be honest, I didn’t know what to expect or what I was supposed to do.
One of the first surprises I encountered, having five years of professional experience in the entertainment industry under my belt, was the sheer volume of recent college graduates who held analyst and associate roles at venture firms. From my perspective, hiring 21- and 22-year-olds (who are also mostly white men) with zero experience in the professional world to evaluate businesses and investment opportunities was not only stupid but reckless. I was dumbfounded during one of the first conversations I had with an analyst at another firm who had just graduated from college, was living at home with his parents, and didn’t know what CAC (customer acquisition cost) was.
I realized pretty quickly that there’s a lot to be cynical about in today’s venture capital ecosystem.
I stayed dumbfounded until I realized that these junior VC roles are usually 99% “deal-sourcing,” or lead-generation roles. Firms rely on junior VCs to “hustle,” “network,” and find “proprietary deal-flow.” Practically, this means lots of outbound emails, LinkedIn stalking, and swapping information about deals with the other junior VCs you know. It also means developing relationships with founders, investors, and others in the tech ecosystem in order to be in the know when companies are fundraising.
This, perhaps, is the #1 perk for junior VCs because it means lots of happy hours, social events, and traveling. I attended at least one to two social events per week with open bars, free food, and a room full of fellow investors or early-stage founders eager to pitch their companies to anyone who would listen. It was easy to justify spending thousands of dollars to attend SXSW in Austin, booking a private Airbnb, and basically embarking on a three-day bender of parties with free food and booze. I could show up to an exclusive private event that I wasn’t invited to, give the check-in table a business card with my firm’s name on it, and be enthusiastically invited in and accommodated.
That wasn’t even the most extreme expense. After our firm had only been around three months, our five-person team took a weeklong retreat to Israel, where we hosted an open bar in Tel Aviv, went wakeboarding in the Sea of Galilee, and took a daylong tour of Jerusalem. This trip didn’t lead to any investments or opportunities.
The biggest perk of working in venture capital, in my opinion, was the incredible access to intelligent, hard-working founders building their visions for a better future. A LinkedIn profile that labeled me an “investor” and an email address linked to a venture firm meant I could get a phone call or meeting with just about anyone I reached out to in short notice. I was regularly surprised to receive responses from successful founders and leaders who I would never in a million years had heard back from if it hadn’t been implied that our interaction may one day result in me giving them money. And I was just one of many who was privileged with incredible (and sometimes unearned) access: At one of those SXSW parties, I met an unemployed man who printed business cards that said he was a general partner at Asshole Ventures, which earned him as much access as anyone else. This is why so many of the LinkedIn profiles for professionals in the Bay Area include the term “angel investor” in the bio.
I was very aware that people were probably laughing at my shitty jokes because they wanted money from me.
I was very cognizant, however, that the context behind this access was my connection to the capital that founders needed. That power dynamic almost always corrupts the authenticity of an interaction, and I was very aware that people were probably laughing at my shitty jokes because they wanted money from me. One of the first founders I connected with — someone I thought I had hit it off with regardless of whether my firm invested — responded to the detailed rejection email that I labored over for hours (filled with sensitive, honest feedback) with: “Mike — I thought you were smarter than this.”
My least favorite part of the job was turning down 99.9% of the pitches I received from the intelligent, passionate, hard-working founders I met. Many of them I admired, rooted for, and wanted to invest in but couldn’t convince my firm’s partners to fund. I began to realize that the most important and least-discussed skill of a junior VC is sales: You must sell deals that you source to your firm’s partners, sell your firm and yourself to founders to convince them to take your capital, and sell your portfolio companies to other, later-stage investors. If you don’t understand and empathize with the interests and incentives of all of these stakeholders, it’s difficult to get any traction.
I realized pretty quickly that there’s a lot to be cynical about in today’s venture capital ecosystem. There are more firms, more funds, and more capital than ever before — and with that comes a lot of negative forces and people. From my experience, there are a lot of people who aren’t in it for the right reasons or don’t have their incentives aligned with their portfolio companies. There are even more VCs who, quite frankly, aren’t qualified to be venture investors, aren’t actually helpful to companies, and just parrot the same talking points and theses that they read on Twitter or other VCs’ blogs. There’s actually very little original thinking in the venture capital ecosystem.
I can’t tell you how regularly I was asked “Who else is investing?” as a validation test from investors.
Despite this, there’s nothing investors love more than tweeting about, blogging about, or promoting their current theses and “hot” investments. I noticed pretty quickly that venture investors and television development executives have a lot in common: namely, short memories for their failures, FOMO, copycats, and a thirst for attention for their rare successes. Most of this content is derivative, self-promotional, and tone-deaf, making it easily parodied by accounts like VC Starter Kit and VCs Congratulating Themselves.
For founders, the truth is that raising venture capital is usually more about psychology than anything else. Many investors are incredibly vulnerable to manipulation and storytelling, and what drives investment decisions more than anything (in my experience) is subtly convincing investors that your company is a “hot deal,” that there are many “top-tier” firms interested, and that time is of the essence. I can’t tell you how regularly I was asked “Who else is investing?” as a validation test from investors who don’t have any conviction of their own and who relied on signals from other investors who are actually good at their jobs.
Most junior VCs eventually churn out of the industry after two to three years. Unless you get lucky early in your career and source a deal that leads to huge markups, there’s little incentive for a firm to promote you to a general partner and split their share of the fund’s profits with you. It turns out that an early success in venture investing is somewhat like a flywheel: You become known for your investing acumen, which means you’re more well known to the VC and founder community, which means you have access to more investment opportunities, which means you have greater odds of investing in the best companies, which reinforces your reputation as a good investor. I’m not sure this is replicable outside of getting lucky early.
I’ve had plenty of people ask for advice about how to “break-in” to venture, and very few of them actually understood what the day-to-day of being a junior VC most likely would entail for them: a hamster wheel of continuously searching for the next deal, constantly selling to everyone around you (founders, partners, other investors), and the demoralizing daily task of turning down hopeful and hardworking founders. But hey, at least there’s an open bar.