Venture Upwards Q&A
Leave your firm the right way, and build LP relationships early on.
In the preface to our post Spend the Currency Which You Have, Rob & and I invited readers to (anonymously) ask questions about VC careers which they would like answered. So as the first in a likely series of posts, we wanted to address Venture Upwards readers’ actual questions directly.
What's the best way to tell your firm that you're leaving to go to a competitor firm, without pissing them off or burning the bridge?
The key idea to remember with this transition is that relationships transcend organizations. In other words, there is a distinct difference between “the firm” and the people who comprise it. So foremost, concentrate your bridging efforts on those individuals who you’ve had the strongest relationship to date and those that are most likely to endure for years to come.
Depending on your level of seniority and the size of the partnership, along with the contribution impact which you’ve been making, it’s no doubt that your departure is going to cause some negative ramifications to the firm, even if it is just that they now need to spend energy to hire somebody to replace you. Naturally, that fact will upset some people, especially if you’re departing to a direct competitor, and honestly it’s unavoidable. Particularly those individuals who you’ve had less contact and meaningful interpersonal interactions, your news isn’t something that is congratulatory for you as a person, it’s a setback for the firm.
Even so, there are a couple of considerations to keep in mind when the role at your current firm is over. First, the timing of the departure matters. If possible, for example, try to avoid leaving before or during the firm’s fundraising efforts for their next fund, or in the weeks leading up to the firm’s annual investor meeting. Optics matter as much as substance here. Second, of course communicate your decision effectively yet gracefully. Tell your boss or the senior partner first before you let other colleagues know, and be humble in your tone. It’s a decision about your own career progression and opportunity, not about specific issues with your current employer. This moment is not the time for your gripe session, as tempting as it may be. Lastly, there are tactical moves which you can offer to smooth the transition, like retaining your board seats past your official tenure until a suitable colleague can replace you or continuing some of the extracurricular activities which benefit the firm. Depending on the context of the situation, they may not take you up on these overtures, but even that you offered can help make the perception of the transition smoother.
When I departed my previous firm to start NextView, I employed the tactics above (including retaining a Board seat for a year) which helped. But of course any job transition isn’t going to be completely smooth. However, the fact that I’m most proud of is that I asked and was able to get as individual investors in our new fund a handful of the GPs from both of the previous firms where I had been employed. No, it wasn’t everyone that I had worked with in the past, but it was from those folks who mattered most to me and I to them. Our personal and professional relationships transcended the respective organizations that they had enough confidence in me to put their own personal capital behind my next endeavor.
How do you build relationships with potential future LPs? It's not exactly like you have something immediate to offer them.
In asking this question, you're already in front of your peers. Or at least you’re ahead of where I was as a non-partner VC. Early in my venture career, I quite mistakenly saw LPs as something that the GPs did and I didn't really need to worry about. Instead, I was myopically focused on building my personal deal-flow because that’s where I perceived the most immediate career ROI, while not thinking bigger picture about my overall career and realizing that I too would be a GP some day with investor responsibility.
My first recommendation would be to find your peers in LP-world and start building those relationships first. As with much networking, you can’t always necessarily go straight to the top. But just like you’ll eventually be a partner in a fund before too long, they too will be decision makers in organizations with meaningful capital. I can specifically recall back to being invited to a junior VC-LP bowling event early in my career in which I spent all of my time mixing with my own group. Not only should you embrace attending events like these to mix with LPs avoiding my mistake, but you should organize them. Yes, it’s playing long ball, but so is building a career in this industry.
Second, in your firm, raise your hand to do any and everything on fundraising and LP communications, even the gruntwork. That can mean anything from assisting prepping the fundraising materials on the next fund to helping with organizing the details for the upcoming Annual Meeting. The more involved you are in these types of activities, the more likely that you’ll get pulled into actual conversations with limited partners.
Lastly, I’d disagree with part of the premise of your question - you do have something to offer LPs. As my partner Rob noted in Laying the Groundwork for Your Future Fund, some LPs like getting to know some non-partners at a VC as it offers them an inside and non-marketing view into the firm. It’s like having a relationship with a mid-level person at a startup who can tell you how people internally really feel about the business or management team, both the bad but also the good, too. You can use those interactions as a springboard to developing a genuine relationship, but just be mindful not to be overzealous in those follow-ups, as you don’t want your current partnership to perceive that you’re methodically attempting to port their relationships elsewhere.
If you have questions about getting ahead in venture capital which it’d be constructive to share our perspective, please share on this form, and the two of us will look to address them in an upcoming post.