Taking Matters Into Your Own Hands

Angel investing is the hack into building your own track record, but be very careful.

One of the major career progression frustrations as a non-partner VC is friction in “building a track record.” How do you elevate yourself from merely playing a supporting role in the new investment process to becoming the person who actually sources, diligences, prosecutes, and leads one? Plus, and perhaps more importantly, get credit for it?

I had personally felt the disappointment in doing all of the work in championing a new investment - cultivating a founder relationship, conducting the proper diligence, developing a unique investment thesis - only to get shot down by the senior partners at my previous firms. Even more discouraging is to then watch those same deals get done by more prestigious VCs. Before too long you can see that there’s real company traction in a story which you could have been a part of. If I look back across my anti-portfolio over the nearly two decades of my venture career, those are some of the ones that still sting the most. Later on, the misses were my own doing. But earlier, my misses were partially the result of my situation as a mere junior VC.

This situation arises especially at larger firms which are a bit slower and more deliberate about new investment pace, but also at unfolds at more prolific early stage firms as well.

Career advancement for non-partner investment venture professionals requires attaching your name to something.

But there’s the “Jr. VC Catch 22”: you’re not empowered to truly lead an investment without having the prior experience, but can’t get the experience without having led an investment.

One way to hack this conundrum is to start making investments with your own person capital. I have a mentor who often says, “Becoming a venture capitalist is so easy: all you have do is give money to entrepreneurs.” Left implied but unsaid is that it’s in reality quite hard if you include the other (important) part of becoming a VC… actually getting more money back at some point!

Yes, it’s one thing to have a VC job, but it’s another to have personal conviction to spend your own money (however small it is on a relative basis) investing in startups. Does that make you nervous? Then maybe you aren’t “ready” for the senior role as you thought you are. After all, all GPs do pay in personal capital into each of the funds which they’re investing from. So their upside isn’t just derived from play-money options which “could be” that startup employees receive, but rather real hard-money skin in the game. Well, you can short-circuit that process of being promoted to GP for this privilege of giving away money by starting your angel investing career now.

However, be wary about the perilous path of proceeding forward. Of course, there’s the obvious risk of losing money. Even all of it. As you know, the majority of startups fail and lose money. And especially earlier in career, there’s not a lot of abundance.

But the greater risk is with your employer firm. There is not really a scenario that they view their investment professionals investing in startups outside of their purview as a positive thing, and it may even be a fireable offense, depending on their perspective and even your employment contract. The partnership which you work for is (in my opinion) understandably is going to be quite sensitive about you taking advantage of the access & platform which it provides and leveraging it for your personal gain above the priorities & benefits of the firm itself. After all, you work for them and they do pay for it. So tread very carefully in how you deal with your employer if you decide to make extracurricular angel investments. My partner Rob details in a previous post the above-board, medium-board, and below-board paths to approaching this issue.*

The result of making a few investments on your own - early on even before you have actual results - is building a Body of Work. These are direct relationships with founders’ companies not intermediated by your employer firm. A set of investments which you and only you can point to as your own. That’s incredibly powerful. Powerful in in getting a new job, when you need to. Or in eventually raising your own fund. And in finding out if you’re any good at this line of work… better to know sooner than not, if that’s the case.

This angel investing topic is important enough that, in upcoming posts, we’ll dive deeper into some strategies, tactics, and pitfalls around angel investing.

*Disclaimer: in no way am I recommending that you violate any explicit or even implicit agreements with your employer.