How do I become an early stage VC investor?
This week’s problem
I am a corporate lawyer working with emerging companies and venture capital clients in Silicon Valley. I like my job, the pay is great and I enjoy working with founders and investors. However, I don’t want my career to be forever tied to billable hours. I want to listen to a founder’s visions and invest in them. I don’t have a financial background, but is there a way I could pivot into early stage VC investing? Or am I delusional? Male, 20s
Jonathan’s answer
You have a well-paid role you like, a valuable skill, and people with whom you enjoy working: ingredients many seek for a happy career. However, it is not unusual to be looking ahead and weighing a change in direction to add new skills and responsibilities.
Tej Panesar, partner at Prism Ventures, has seen this before when a senior lawyer enjoys the intellectual interest and challenge of venture capital and eventually moves over to become an investor. But he notes, that “there is a very different mindset between being an external lawyer, providing a fee-for-service with low risk, and being able to make risk-informed views of how to invest”.
For example, established VC managers have the battle scars from structuring and dealing with risk, he adds. “Early-stage VCs have developed ways of managing the problems” and these are likely to be new to you as a corporate lawyer.
Alexander Lushnikov, co-founder of trendi.money, offers two options to consider: make a career move to work at a VC or perhaps first gain more active exposure to the world of venture funding. For the first choice, a role to consider is one where you still use your legal training and experience but in a VC, for example as a general counsel.
As a GC, Panesar points out that you would have exposure to the transactions and deal flow, and also be running the corporate side of the organisation. While he hasn’t seen GCs move to be venture partners, he has found that lawyers who came in-house to be GC did not then seem to feel the need to move. “They got the exposure to deals and retained their niche expertise,” he says.
Platforms such as trendi.money would give you the opportunities for more active engagement, as an investor. Lushnikov highlights that there has been a continuing democratisation of venture capital, saying “sophisticated investors, or high net worth individuals, now have the chance to hear the pitches from companies seeking funds, often at Series B or C, and join consortiums by investing £25K-£50K rather than more typical amounts of 10x that.”
It will be fundamental to be honest with yourself about your appetite for risk. While VC funds have made excellent returns in recent years, the money is not easily accessible and there is always the chance of losing considerably. Your path may lie through early stage investing, perhaps via a start-up investment platform, while still having the choice later to move to be a GC at a venture capital firm.
Readers’ advice
If you are a junior in venture capital, your job is to source deals — networking is the main skill. Having a nose for the right types of business helps, but your seniors will tell you what to look for. There will be some financial analysis but it will be fairly basic. LibrarianCap
Sign up to join an angel syndicate like Dot Matrix Group where you can get exposure to angel investment opportunities as a hobby. After a couple of years you will be able to show you are well versed and actively participating in the space. AintNobody
Next question
I work in product development for a global asset manager but want to leave my firm and travel. Should I take a leap of faith, leave my job, travel for a year, maybe get a contract role in another country, and then come back to London? Or is this too risky, and will result in years of making up for it? Female, 20s
Jonathan Black is director of the Careers Service at the University of Oxford. Every fortnight he answers your questions on personal and career development and working life. Do you have a question for him? Email: dear.jonathan@ft.com