Confessions of a venture capitalist

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As the managing partner of TinkBig Venture and a serial entrepreneur turned venture capitalist, the most common question I get is how to enter into venture capital (VC).

I talk to a lot of people who are interested in startups but aren’t sure what they want to do. These people sometimes end up telling me “maybe I should look into venture capital too.” However, there is a misconception about VC as a glamorous job; in truth, it can be downright frustrating.

The upside of being a VC is that you get to meet tons of interesting people, help build companies, and have the potential to make lots of money. I just want to make sure that everyone who says they want to get into VC — and actively tries — actually knows what they’re getting into.

The VC burden

As a VC, you are responsible for managing other people’s money. These people are known as your limited partners (LPs). As a managing partner of TinkBig Venture, I am one of the general partners (GPs) in the organization.

Every struggle we have is a hard blow.

In our own fund structuring, GPs actually contribute 40 percent of funding. After all, if you’re not putting your skin into the game, how would you expect LPs to trust you to manage their hard earned money?

So every time my company announces good news, I’m super excited about the possibility of a big win for my investors. However, when we struggle I feel extremely frustrated and hugely responsible for poorly handling their capital.

Every struggle we have is a hard blow. When I’m out pitching and getting people to believe in me, I feel a deep sense of responsibility to my limited partners. There isn’t a day that goes by without me wondering why I don’t just take up an easy corporate job where no one would notice if I wasn’t working productively.

In order to build a sustainable and profit making business, it’s going to take a long time to be successful. In VC, no one’s investment gets bought on the first day or even the second. It would take at least a year or two before you actually score a big win. If you’re the kind of person that needs immediate and constant feedback and ROI, this might not be the right asset class for you

Challenges in deal sourcing

Every year, a lot of new investors join the fray and a lot of beaten-down investors give up. Only a few firms persist. In the space of the VC game, you are trying to be smart in a market with a lot of dumb money. As a VC, you need to negotiate deals with entrepreneurs. But there are times when some newbie investor comes along and offers them ridiculous terms and way more money than they need.

As a serial entrepreneur myself, I believe that to build a sustainable business you do not want to overcapitalize or under capitalize your investee company for a healthy growth plan. Getting reasonable deals in this market means having to work twice as hard to be early, value add, and build relationships and reputations.

The challenge in deal sourcing is that most of the deal flow isn’t good, so 99 percent of the time I am vetting through tons of pitch decks to spot the gem. Since I can’t be accessible all the time, I make sure to attend demo days. However, most of the pitches that I’m going to hear are likely from perfectly nice, smart people who have perfectly horrific, unworkable ideas. Sometimes I get the occasional crazy person with a legitimate idea, but unworkable valuation. Neither of these companies is backable.

To be honest, much of my job is spent trudging through pitches, feeling like a jerk, and trying to leave the pitch panel. There is nothing I hate more than having to say “NO.” I know what it’s like being an entrepreneur trying to get people to care about what I cared about and for the investor to see your vision.

The struggle is real

Conclusion