📶 theory vs. experience in VC

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Good morning 👋

This post might piss some people off, but sometimes the truth hurts.

It used to be a requirement for VCs to have company-building experience, but that has gone away as more funds have popped up.

Some founders take all advice they get from VCs as gospel, but the reality is that a lot of VCs today are just reciting blog articles to their founders.

The best advice you can get is from somebody with lived experience.

We break down why that especially important in venture today.

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VC used to be a cottage industry; that is clearly not the case anymore today.

But as more funds popped up, something big changed that nobody is talking about.

A larger percentage of VCs started to emerge with zero prior company-building experience.

Instead, many VCs today have traded startup experience with traditional finance, IB, or consulting on their resumes.

This is not inherently bad, but it's a shift worth noting.

Here’s why.

Why it matters: Especially when going from zero-to-one, VCs (at least the good ones) are pretty involved with the companies they invest in.

They give advice on product positioning, go-to-market strategies, building KPIs, and hiring plans.

But shouldn’t the source of information matter?

If the person giving advice doesn’t have anecdotal evidence, should you really take that advice as gospel?

Would you rather seek advice from somebody with some battle scars or somebody who has read a lot of blog posts?

Questions for Plato.

The other side: To be fair to the VCs with more of a finance background, there is definitely a place for them to play to their strengths:

But in true early-stage investing (pre-seed and seed), the reality is that most of the jobs to be done require more willpower and ability to operate in unstructured environments and less financial analysis.

As a finance major, my degree did not prepare me to:

And a million other things that goes into taking a company from zero-to-one.

All of those skills were learned, and as a founder now, I look for the advice of others who have learned through trial-and-error before I turn to advice from those who were taught.

What happens next: If you’re a founder, you should determine early what you want from any capital partner.

Are you looking for helping finding PMF?

Do you need help building a hiring plan?

Maybe you need somebody to step in and help you build planning docs in Excel?

Whatever your main objective is, filter VCs who have a demonstrated history solving for that same objective.

As a VC, the biggest takeaway here is to know when to stay in your lane.

I used to try to give advice all the time. Now I try to keep my mouth shut only if I have true conviction in what I’m talking about.

Figure out what your strengths are as an investor, stick to those strengths, then be able to reroute to others when you can’t help anymore.

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- Clay

Here are the results from our poll question in yesterday’s piece:

What do you think about us including more market maps in these newsletters?

🟨🟨🟨🟨⬜️⬜️ Love it - please do it (3)

🟩🟩🟩🟩🟩🟩 Don't love it - don't do it (4)

🟨🟨🟨⬜️⬜️⬜️ What's a market map? (2)

9 Votes