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99 Brutally Honest Takeaways About My Time In Venture Capital (2023 Edition)

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clayconfluencevc

I published my list of 50 takeaways about working in venture capital in June 2022.

 

It’s still the most popular piece of content we’ve ever shared.

 

Here’s an updated version of that list with more things I’ve learned or noticed over the past year.

 

If you think I’m right, wrong, or anything in here resonates with you, let me know in the comments.

 

**This post has been updated with more learnings in this Twitter thread.

99 Brutally Honest Takeaways About My Time In Venture Capital (2023 Edition)
  1. There are not enough good companies out there to justify the amount of venture funds in existence.
  2. It used to be a requirement for VCs to have company building experience, but that has gone away as more funds have popped up. The advice you get from most VCs today is based on something they read and not personal anecdotes. Do not take this advice as gospel.
  3. The best founders spend the least time fundraising. If you make your diligence process a burden on the founder, you’ll have to settle for bottom-tier deals.
  4. VC Twitter is the worst place on the internet. Avoid unless you want to lose brain cells.
  5. You’ll constantly hear the line “Where can I be helpful?” Most people cannot offer you help. Accept this, and move on.
  6. The most interesting investors I’ve met have the most unique backgrounds. Not saying it’s impossible to become a great investor by following the standard path, but more lived experiences equates to broader mental models. On that note, if you want to be more interesting, do interesting stuff outside of work.
  7. Everybody in VC claims to want to be your friend. It’s up to you to figure out a) who you want to work with and b) who you can actually do business with.
  8. Having your money locked up for 7-10 years is not ideal, and a lot of smaller LPs are starting to realize this. This is more true during markets like the one we’re currently in.
  9. It is way easier to 3x your money at a $10mm fund than it is at a $100mm fund. It is also way easier to 3x your money at a $100m fund it is at a $1b fund.
  10. Over the past five years, I’ve known many funds that have invested based off of hype alone. No diligence, no reference calls, no thought out thesis – only an expectation that somebody else will bid higher in 12-18 months. That is changing, but it still exists.
  11. The VC tech stack for nearly every fund is ironically horrible. Spreadsheets and email are the standard. The bar is low for being “tech-driven”.
  12. Building an audience is overrated. Building a skillset is underrated.
  13. You will not build any skills on the job as an analyst or associate at a venture capital fund (unless you consider outbound prospecting as a skill).
  14. Most junior VCs are glorified business development reps.
  15. The larger the fund, the more focused your job is on sourcing. The smaller the fund, the more you’ll have to be a jack-of-all-trades.
  16. Proprietary deal flow is a myth.
  17. You can raise a fund on influence, but it is very hard to scale one on clout alone (Ashton Kusher + The Chainsmokers are a few of the only ones that have proven this wrong).
  18. “Partner track” roles are not as popular as you’re led to believe. Most analyst / associate roles are two-year positions, then you’re expected to find something else after that (preferably joining a portfolio company or starting your own company).
  19. If you earn carry at your fund, consider yourself lucky. 90% of junior VCs get no upside for their work.
  20. If you want to be rich, working as an employee in VC is one of the worst fields to do that.
  21. If you want to work directly with founders, you’re better off joining an actual startup. Your involvement with the founding team will peak during the diligence process, and then it will wane off from there.
  22. Selling a product or service to VCs is incredibly difficult. These people are some of the most selective people in the world, and they say “no” for a living. If these are your target customers, de-risk your business by selling to another audience.
  23. Venture capital rewards being solely focused on your job for long periods of time. If you have any plans of being multi-faceted and not obsessed with your work, there are better careers for you.
  24. Spray-and-pray seed funds do more harm than good to companies that require large amounts of capital. If a fund isn’t able to follow on into your next round of funding, it sends a bad signal to other investors.
  25. Most VCs are extremely lonely in their day-to-day. Small teams and saying “no” all day will do this to you.
  26. Venture capital is an apprenticeship game. Because of this, you’ll be expected to be in the office to get facetime. It’s tough to find roles that are open to remote work.
  27. You don’t have to focus on content all of the time (I’d argue that many new funds over-index on the importance of having a digital presence). The argument is that more content makes you more discoverable, but that really only applies to a handful of funds (most notably First Round + a16z). Benchmark is one of the best funds to ever exist, and their website looks like this.
  28. The best companies want to work with the best brands of investors. If you aren’t a tier one or tier two fund, you have to figure out another way to get meetings (this typically means more work needs to be done before the call or being closer with the founder).
  29. There are very few contrarians left in VC because almost everybody is scared to say what they actually think.
  30. Seed and pre-seed investing is all based on narrative. The easiest way to raise money is to tell a story that feeds into that narrative (AI in 2023, web3 in 2021, creator economy in 2020, fintech / embedded finance in 2018 / 2019). If you study history, a lot of money lights itself on fire chasing after these narratives.
  31. The biggest asset an investor has is his / her network, but 90% will scoff at the chance to 10x the value of their network overnight.
  32. If you don’t want the life that your boss has, why are you working there?
  33. The best deals come from people you actually take the time to get to know and become friends with. If you view every interaction as transactional (“you send deals if I send deals”), why do you think anybody would send their best deals to you?
  34. Relying on sourcing software will have you competing for the same deals against everybody else. A Pitchbook subscription will not save you.
  35. Most inbound deal flow is worth ignoring, but if somebody is smart enough to break the mold and capture your attention in email, meet with them.
  36. If you find yourself putting higher emphasis on financial projections or fund returns for seed investments, you’re thinking about it the wrong way.
  37. Serious investors back the best companies. They do not have to make up metrics or checklists to justify their decisions.
  38. If you hate virtue signaling, you will hate venture capital.
  39. There will always be an MBA that wants your job. If you’re a junior VC and think you’re indispensable, you’re not.
  40. Venture teaches you to pattern match, but by definition, you are supposed to invest in companies that break patterns. Following the same mental heuristics as your peers will get you nowhere.
  41. You don’t have to live in Miami to “make it” in venture today (spent eight months down there in 2021, thought there was a lot of noise, and decided it was not for me).
  42. If you’re doing a lot of in-person meetings, one easy way to stand out is to not dress like everyone else. Not saying to wear loud outfits, but the Allbirds + vest + Apple Watch + tech pants look has been played out, and you look like a clone. Be better.
  43. “The better the weather, the the better the network. The worse the weather, the better the worker.”
  44. “Don’t talk politics” only applies if you have conservative values.
  45. However many LP meetings you think you need to take in order to raise your first fund, double triple it.
  46. Fundraising is 90% proving track record and ability to get allocation into competitive rounds.
  47. Most “VC” online communities are trash. You’re better off finding the best one and being engaged there than trying to keep up in 10 different Slack / Discord / Whatsapp groups.
  48. If you haven’t built a Twitter audience by now, I’d argue that it’s not a great investment of your time. You’re competing for attention on the most-crowded platform, it’s not evergreen content, and good luck consistently saying something that hasn’t already been said.
  49. The earlier you decide what you want out of your career, the better off you are. Some start a career in venture to increase their options in the future, but then they never leave. Nothing wrong with this, but if you have a plan, you can realize what actions you need to take if venture is not your final destination.
  50. Venture is a branding game. You can only earn your brand through building a track record or being loud on the internet. Which of these options do you think LPs prefer?
  51. Partnership jobs are for people that work in sales but don’t want to say that they work in sales. On that note, “partnerships” are idealistic and don’t pan out most of the time.
  52. “Breaking into VC” is played out. “Succeeding in VC” is not.
  53. Five years ago, most college kids didn’t know what venture capital was. Today, many undergrad kids want to skip the line and work in VC right away.
  54. Very little work done within a venture capital fund is repeatable. Writing quality investment memos takes time. Making reference calls takes time. Putting together LP reports takes time. The people trying to skip corners are risking their reputation to do it.
  55. The better questions you ask, the more memorable you become. If you want to stand out, stop asking the same things as everybody else. Go a level deeper, and see what happens.
  56. If you feel the need to trade your reputation for shitpost engagements, you’re simply not going to make it.
  57. Be open to rescheduling a meeting once, but never take a meeting with somebody that moves meetings around more than that. You’re not a priority, and the meeting will be a waste of time.
  58. If you’re raising a pre-seed round without traction, you’re better off finding a handful of angel investors instead of looking for venture money. More institutionalized equals more bureaucracy, and this means more people you need to convince in order to get a deal done.
  59. VCs are the most-likely group of people to get caught up in the “current thing”. If you work in VC, you can lap your peers by focusing on what actually matters and ignoring trends.
  60. Sector specialists outperform generalist funds unless those generalist funds have sector-specific experts. The world is changing faster than ever; it’s impossible to be truly knowledgeable about more than a small handful of things.
  61. If you’re an institutional investor and want venture exposure, invest into venture fund of funds. You’ll get more coverage into the right types of funds instead of having to see everything yourself.
  62. ChatGPT will create less entry-level VC roles, but it will give entry level investors way more leverage. If you know what you’re doing, you can 5x your output by dividing your labor costs.
  63. The people that are loudest with their spending habits are usually the most insecure. This is a general life observation, but it lends itself well to VC too.
  64. Venture capital sells the dream better than every other industry other than startups. What are the odds that you break into VC? If you do, what are the odds you land at a fund with returns that beat the market? If you succeed then? What are your odds of eventually earning carry? If you make it that far, what are your odds of negotiating a meaningful amount that can create wealth for yourself?
  65. People like to draw patterns, and there are no patterns in the family office world. Every family is different – different paths to wealth, different generational interests, and different opinions towards investing.
  66. Investing is all about longevity. You can be the best at what you do for years or even decades, but your strategy can blow up in your face at any time. The longer you stay in the game, the more impressive it becomes.
  67. Winning search volume as a VC means you have to compete for keywords and attention against some of the smartest tech minds. If you hate competition, good luck.
  68. Positioning is the most important skill you will ever learn, and it’s by far the most important part about venture investing. Good positioning means that the best opportunities come to you instead of you having to constantly find them. Once you reach this point, it’s hard to lose.
  69. Everybody wants a remote investor role except for the people hiring.
  70. If you’re raising money and all of your marketing slides are about how your market or asset class outperforms, that gives no detail into how you are going to outperform the other players in that market or asset class. Dumb money bets on markets; smart money bets on people.
  71. Venture capital = money + deal flow + access + judgement. If you don’t have one of these, you don’t have any.
  72. The majority of investments you make aren’t going to change the world, and even in a successful outcome, only a small percentage of the world will know about the company. Investing as an idealist will cloud your judgement.
  73. Ego drives and kills fund returns. You don’t have to hold until and IPO for a successful outcome. A 5x on a secondary exchange is better than watching your equity position go to zero because of unexpected news.
  74. The smartest investors I have met also talk the least.
  75. Tech social norms are not the same as societal social norms. Trying to “fit in with the crowd” is actually making you incredibly unrelatable. Touch grass.
  76. You are better off downplaying how smart you are vs. trying to convince everybody you’re the smartest in the room. I can’t remember a bad interaction with somebody that says, “I don’t know much about this industry, but here’s what I’m thinking. You know much more than me, so I’d rather hear your opinion”.
  77. If you struggle with confidence or feeling like you’re constantly the dumbest in the room (that was / is me), start talking to everybody that comes in your orbit. Lack of confidence comes from living in your head too much, and this forces you out of it.
  78. Marketing is the new software engineering. If you can find marketing channels (or engineer them yourself) for your portfolio companies, that has become more valuable than finding them another software engineer.
  79. “How can we collab?” > “How can I be helpful?”
  80. Avoid 50/50 partnerships. There is no such thing as an equal partnership, and somebody is always bringing more to the table. You’re better off addressing this early instead of waiting until resentment kicks in.
  81. I have never met a person I consider successful that writes formal emails.
  82. Closing deadlines aren’t real for 98% of opportunities. This applies more in fund investing than direct investing, but it applies in both worlds; it’s not very difficult to adjust legal docs to make more room for investors.
  83. The bar for people you take meetings with should be rising rapidly each year. If it’s not, you’ve plateaued.
  84. “In a venture firm internal political power comes from “getting deals done.” When the main currency for the culture is getting credit for making investments it aligns every activity around deploying capital and judges it against that bar.”
  85. Phone contacts > email contacts. If you aren’t close enough to text, you’re not top of mind for that person when something relevant comes in. This is a quote about investing.
  86. Writing good investment memos is a skill, but it doesn’t make you irreplaceable. Great investors are great evaluators, so the more time you can spend doing this, the better.
  87. The more time you spend building up pipeline, the harder it becomes to prioritize assignments. (A good rule we’ve played with us forcing the investment team to rank their top three live deals after every pipeline call to force simplicity.)
  88. Luck favors the physically attractive. This is a shallow reality, but people want to surround themselves with good looking people. (I’ve met multiple funds that only bring in celebrities and athletes as LPs so they can leverage them to be spokespeople for their portfolio companies.)
  89. People forget a lot of things, but they don’t forget people that offer favors without asking for anything in return.
  90. At its core, venture capital is legalized insider trading. If you’re completely reliant on publicly-available information, you have no edge, and you’re not going to win in the long run.
  91. Innovation pockets are real, and you should be living in one if you want to make it in this game. You can spend time only all day long, but do really think that the information you want is being shared in a random remote town?
  92. The best investors of all time don’t get labeled that until they are in the later-stages of their life. If you want early wins and notoriety, this probably isn’t the right career for you.where you get quick success and acknowledgement, this isn’t the job for you.
  93. All fund managers pitch J-curve returns to investors. The earlier you invest, the longer that curve becomes. The shape of this curve matters a lot to different types of investors based on their time horizon.
  94. I have no data on whether having celebrities / athletes as LPs has any meaningful impact on returns, but it makes your fund sound 3x cooler.
  95. The era of LP investing based only markups is over. Distributed capital is what funds are being graded on in LP meetings.
  96. Want quick liquidity to help DPI numbers? Start leveraging secondaries exchanges.
  97. As a general rule, don’t trust people in VC or startups that use avatars to represent themselves. Ironically many of these people are the loudest ones on the internet when they’re too self-conscious to show their own face.
  98. As an investor, you’re not the man in the arena. It’s easy to get a big ego when you act as a gatekeeper, but it’s a good reminder that magnitude of your problems are a fraction of those faced by founders.
  99. Tech investing will not give you the answers to life. There are more important things than evaluating software companies. Find purpose in things outside of your computer.

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