I was recently talking to a new venture capitalist. He started working in VC several months ago and wanted to know what it takes to be successful in the industry. There’s certainly no magic bullet to answer this question. However, there are some usual suspects. The first is a strong sense of pattern recognition gained through experience investing in several startups and monitoring their outcomes. The second is relevant operating experience to add value to the startups post-investment. If, in addition to these, you have a genuine passion for supporting entrepreneurs, rather than a desire to be in the limelight yourself, VC just might be the right career for you.
While these are the common answers to the question, and are all indeed correct, they avoid the most important contributor to a successful VC career: networking. I’ve seen great VC’s emerge as early as the second or third years of their career. I’ve also seen great VC’s with very limited operating experience, or only experience at startups that failed. I’m certainly part of this group. My first startup didn’t make it to launch due to team issues, and my second startup met with very little customer traction. Finally, there are many VC’s who try to capture more of the glamor which results from a successful startup than the founders. This is despite the fact that I’ve never seen a VC put more sweat into a startup than the founders. What I haven’t seen is a successful VC who isn’t also a great networker.
Let me take you through the logic of why you need to be a great networker to have a successful VC career. A great VC is one who produces great returns for his limited partners. To produce great returns, you need to invest in great startups. And to invest in great startups, you need to know about them. Either they need to come to you or you need to find them. Both of these require extensive networking. The former is much easier than the latter, however it tends to come only after you’ve made several successful investments and built a name for yourself. Until you reach the stage where the best startups come to you because you’ve invested in successful startups before, you have to go to them. And this is more about shamelessness than social skills. I’m an introvert, so my social skills likely fall below at least half the readers of this blog. However, I also don’t hesitate to ask for introductions, cold call if necessary, stubbornly pursue leads, and not take no for an answer if I believe in something.
If you want further proof that great networking is about shamelessness rather than social skills, consider why the answer to how to be a successful VC very rarely includes networking. Networking has a negative connotation because it implies that you’re approaching someone for personal gain rather than a mutually beneficial friendship. This couldn’t be further from the truth, as once you start networking you soon discover that you eventually end up helping most of the people you initially reached out to. However, this doesn’t change networking’s negative reputation. Since networking is frowned upon, most successful VC’s, even though they’re great networkers, are ashamed to admit that this is the key to their success. Well guess what? If you want to be a successful VC, it’s necessary. So you should either get your shovel out and start digging, or play outside the sandbox.