5 Questions for @VC Starter Kit
Labyrinth Interview Series #1
We’ll be trying out different forms of content, each providing a new perspective on venture capital and startups. Today is our first interview and we’re “talking” with @VCStarterkit. Anonymous accounts parodying venture capital have become quite popular in the last year. While some of the accounts can be pretty brutal/mean spirited and don’t contribute much to the conversation I think VCSK is pretty insightful and find his criticisms to be worth discussion. Give him a follow.
1) Parker Thompson was one of the first anonymous satire accounts, he decided to be anonymous because he wanted to see how people would respond to his antagonistic arguments without knowing who was behind the account. The way I see it, StartupLJackson (Parker’s anonymous account) was in search of authenticity of reaction via anonymity of the messenger. What made you decide to create an anonymous account?
VCSK: Parker certainly proved out the model of an anonymous account gaining attention in Silicon Valley, but the anonymity here was almost accidental. Initially I just thought there was nothing that readers would gain from knowing my identity and eventually the buzz around people wondering "who runs @VCStarterKit?" became a self fulfilling prophecy.
In practice, enough people now know my real world identity that it is no longer anonymous but I don't plan on going out of my way to do a big reveal to the world. In some ways, Parker did such a great job hiding his identity that it inevitably led to people digging deep and unmasking him.
After the VCStarterKit website launched a few hundred people followed the associated Twitter account which I had; I realized these people were interested enough in VC culture to follow the account so there was a natural channel to continue the "gentle ribbing" of VCs that the website started with. It took some time to find the voice I wanted.
2) What do you hope to accomplish with VC Starter Kit? Are you trying get a message across, just have fun, etc?
VCSK: I mostly do this for fun in my spare time but if there is an agenda it is to highlight the disparity between the public perception of junior roles in VC and the reality. I remember asking a former associate what skills (that are useful outside of VC) they got out of two years in venture and they said "Nothing" and that they wasted two years of their life. (Not all junior VC roles are like this to be fair, but many are).
I believe the world needs more builders than financiers and that if you have the skills to build things, you should try to build things that make the world a better place. There is certainly leverage from being the person who finances projects (especially if you fund an under-represented group or new markets), but overall I don't think the world is constrained by not having enough people to allocate capital to Stanford students.
Part of this stems from repeatedly having conversations with friends who "want to work in venture" and once they learn what the day job of being in any non-GP role at a VC entails (lack of carry, lack of a clear promotion path, intense firm politics, more sales grunt work than intellectual), they lose interest. So far (of everyone I've spoken to) I have a 100% success rate in convincing people to be an "operator", continue grad school, or start a company instead of taking a junior VC role. I don't have anything against people who work in venture, but I think everyone would be better off if they went into it clear eyed about what they are going into.
3) You're not a VC but you're in the ecosystem, if you were launching a new firm tomorrow what would you be focused on? Sector, stage and differentiating factor? What would you be doing differently to avoid being skewered by satire accounts?
VCSK: Everyone talks about value-add / smart capital, but I have been captured by the thought of formalizing founder-friendly "lazy capital". Specifically a low overhead fund that can commit instantly (given good enough co-investor signal) and fills up the remainder of a round at friendlier terms (15-20% better terms for the founder). There are a few ways you could make the returns comparable for LPs (mostly by reducing fees) and you would still have a good shot at being in the third or top quartile of VC returns.
At the early stage, I'm skeptical of how much real "value add" a founder can get from small checks from a few firms. If I were a founder I would want to raise from a single high signal firm leading and bring in a select group of value-add "operators" to fill out the round rather than chase a lot of undifferentiated firms for capital. The irony of this idea is that so many firms are undifferentiated and this hypothetical firm stands out just by embracing the lack of differentiation.There are already a bunch of funds that essentially run strategies of following Sequoia & A16Z, but they usually don't give founders better terms or even save founders time by committing quickly because they don't publicly admit that they just are looking for signal.
When founders raise they care about the time it takes away from building the business, who they work with, and the terms. This gives founders the best alternative so they can raise from exactly the set of people they need and know that they can fill the rest of the round quickly and find the optimal mix between capital at good terms and "value-add" investors.
It should be said that I haven't done the data analysis necessary to validate this as a fund strategy and there are a few obvious holes in it. I'm mostly thinking about what I would want as a founder.
4) If you were raising money for a startup today and had your pick of VCs who would you want to work with and what are the major decision points that bring you to that answer?
VCSK: Like many founders, I have a list of investors I want to work with and those that I definitely do not because of poor references. I won't share the entire list because I think it often depends on the context. That being said, there are many VCs who I have only heard positive things about and that plays a big factor in what goes in my "ideal investor" list. I spend most of my time looking at early stage venture and my personal list has a bias towards former-operator VCs. One common thing I see founders doing is only choosing investors from the "very-online" subset of VCs but there are a lot more well regarded VCs who just don't tweet as often.
* Elad Gil (praise from founders)
* Sarah Tavel (particular endorsement for marketplace investing)
* David Hornik (everyone loves him)
* Shruti Gandhi (praise from founders; great partner for technical founders)* I'm a fan of many of the folks at Greylock
(This isn't a comprehensive list by any means)
5) What are the last 3 books you've read and what is the one book that you recommend everyone read? Who has most influenced the way you think about things?
VCSK: The last few I've read:
* "Facebook" by Steven Levy
* "Masters of Doom" by David Kushner (about id Software)
* "The Seven Principles of Making Marriage Work"
As for what everyone should read: The Seven Principles of Making Marriage Work was recommended to me by an entrepreneur (now VC) as the "best book on entrepreneurship" they have read because it helped them improve their relationship with their co-founders & family.
Bonus Q: What's your favorite/ most under-appreciated tweet:
VCSK: This is one of those things that is common knowledge to people in the know, but not to outsiders.
Thanks for taking the time VCSK! I agree there may be a space in the market for a firm to move quickly based purely on investor signal but pay up in price to secure an allocation at pre-seed to maybe seed. Once you hit series A or later there is too much capital chasing the “high signal” investor’s deals, which combined with pro-rata and ownership targets would make it almost impossible to secure allocation unless you were paying insane 2X prices. I totally disagree that the prolificness of an investor's twitter account is not directly related to success. :-)