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Why I chose not to become a VC analyst

VC jobs are one of the most lucrative in today’s job market. Grads from top MBA schools are looking to break into VC. VC firms are increasingly offering pre-MBA roles, clearly highlighting their ‘MBA’ requirement. Even to become an analyst at a VC firm, you need to spend a couple of years at top consulting firms. Since there are a very few VC openings in a year, VC firms have the luxury to be highly selective. I also was ready to fight for the VC analyst position, my gateway to VC world, and perhaps one day becoming a partner or raising my own fund. Here are a few reasons I changed my mind - (I referred to a few people for the same - Steve Schwarzman, Keith Rabois, Peter Thiel, Paul Graham, Chamath Palipathya, Naval, Sam Altman, Jerry Neumann).

“Too often in the race to compete, we learn to confuse what is hard with what is valuable. The intensity of competition becomes a proxy for value.” - Peter Thiel

  1. Be clear on what you want at the end - To become a partner or raise a fund, analyst can be the least probable path. To achieve either two, you have to be ‘special’, which you don’t become by simply climbing the ladder.

  2. The work - Analyst role mostly involves writing research reports and sourcing startups. Writing research reports is a boring task(It’s a different thing to study out of curiousity vs writing an extensive report). Dealing with all the macro bull shit - that is what consultants and journalists are for. You will learn but look at the opportunity cost. I am comparing this with working as an Investment Banker or as a Data Scientist, where you will learn real and valuable skills. Quoting Steve Schwarzman - ‘When you’re young, only take a job that provides you with a steep learning curve and strong training. First jobs are foundational. Don’t take a job just because it seems prestigious.’

  3. The path - Working as an analyst is a linear trajectory. You want to be on a career path that compounds over time. You should build specific knowledge. You should be hard to compete with - If what you do can be done by someone else, it eventually will be, and for less money.

  4. Raising a fund - The question LPs will ask - What makes you so special? When Schwarzman was raising funds for Blackstone, even though he had Pete with him - the CEO of Lehman and a politically well connected person, still he was finding it difficult to raise funds. You have to devote at least 10-20 years of career to earn that reputation, and still it is quite an improbable path. When Thiel was working on Paypal, he knew that you couldn’t compete with the big credit card companies directly; to compete, you had to undercut them in some way. PayPal tried to do that in two ways: through technical innovation and through product innovation. To raise a VC fund in today’s age, you should be a new technology focused fund, for which you have to develop the technical competency.

  5. Low money - VCs earn very little. Best is to angel invest, where you have the chance to actually make earn high returns. VC is just a commission business at it’s core.

  6. New ways to value add to startups - VCs currently add value through their advice and network. But there are new ways of adding value to startups, and VCs/institutiobs who own it will own the future game. Providing tech support(AWS) or providing distribution channels(Appstore publishers) are a couple of examples. With time, we’ll see many new models.

  7. Herd Mentality - VCs follow herd mentality - they proxy number of users with everything. The most value of the future is in the hard problems - like climate change. VCs mostly have a consumer/B2B lens.

  8. Optionality - You should choose a role which opens up maximum options after it. For me, working in a technical role could be that. The skills we learns as VC analyst are very VC specific.

I am someone who would want to work towards something at any point in life. Eg- When doing my startup, I worked towards my startup becoming big. I cannot see what goal I will work towards when working as a VC.