3 years in venture capital
After 3 years of working in VC and funding early stage startups, I decided to write a reflection, both on the industry and also the particular firm that I work at.
A few years ago, I viewed venture capitalists as nothing more than bankers with more niche opinions, henchmen of an industry parasitic of the "real economy", who produced no real value compared to the engineers and operators who were compensated a lot less for doing a lot more work. Three years later of working “in the system”, I see now there is a lot more nuance, but have not reversed my opinion. VCs are indeed gatekeepers to the resources to build things, but necessary guards against irresponsibly-spent capital. I believe this is my job and my industry in its ideal form.
Should VCs exist?
That’s a hard question to answer because despite the industry being small, it is still incredibly varied depending on the stage and sector. The ones you're probably thinking of are the ones who funded growth-stage Uber and WeWork, the media caricatures of slick-haired, vest-wearing finance bros who floated over from Wall Street. My neck of the woods is different: We are the earliest stage in the VC pipeline who fund companies with a scientific backbone, we care about the technical details 100 times more than short-term financial projections, and we believe in empowering ours founders to grow into the best leaders for their company and the best stewards for the new world we're trying to help build.
I'd like to think I'm one of the good guys.
I once had this naive notion that I could change the world from “within the system" (I wanted to be a management consultant), until I slowly succumbed to the insistence of others that the system would change me before I could change it. Some would say I'm "in the system" now, and I think it's important for me to reflect on my values periodically to get a sense of evolution.
My perspectives have changed, yes, but at least now I have the lived experience to back it up. I’m 32, I often wonder how I would justify this to 27-year-old Wes, who was a grassroots environmental activist and canvassing for a presidential candidate whose platform included a wealth tax. This is that explanation. So first, get a sense of where I work, what we do, and then I’ll get into whether we play a necessary role in the innovation ecosystem.
An 'anti-VC' ethos
If you are looking for information on what it's like to work in venture capital, close this window now, because my experience is far from the industry norm, and I'm very lucky for that. The ethos here is almost "anti-VC" –“anti” here means “opposite”, not “adversarial to”. We are cognizant of every caricature our industry has, and we are constantly aware that we are not that.
First, nobody on my team is here for the money, despite the fact that a large part of our compensation depends on the fund performance (carried interest). I know with 95% certainty that I can make twice as much money somewhere else, but I would never trade the mission and purpose of my work for a higher salary, because I’m also 95% certain that I won’t love my new team as much as I do this one. I am right where I want to be, financing deep innovations so that they can replace the broken parts of our system that threaten our human health and planetary health. What's front of mind for us all the time is how we can help our companies, and our civilization. We think very deeply about the consequences of the technologies that we consider funding–no existential risk is ever worth the profit.
Second, we don’t operate on the same caste system as the rest of the industry, where you are your title, and the system nudges you to network and interact within your caste (yikes). Surprisingly, founders will also perpetuate this system by giving each other really terrible advice like "don't waste your time on associates, only talk to the partners." At IndieBio, I feel like we have titles only to conform to the rest of the industry's 4-tier caste system, but in our internal practice, we have a very flat hierarchy. There are only the GPs who have legal liability (and a more-real feeling of fiduciary responsibility), and then there's everyone else. Where other firms delegate all the "shitty" work to the analysts, our GPs at IndieBio would instead be sharing that “shit” work. This includes deck-making and spreadsheet crunching and scheduling. It feels like everyone respects each other equally, because nobody is saying to each other, "your time is worth less than mine therefore you should do this work."
This is a stark contrast from the other caste system I came from, which is academia. The PI writes the grants and goes out to lectures, while the post-doc does the heavy work, with help during terrible night and weekend hours from the graduate student, who “employs” the undergraduate intern to wash the dishes and count the worms. There is a palpable difference between all-hands-are-equal groups and ones that create a pyramid scheme of duties.Hierarchy, especially when it dictates who does which work, is an insidious way for organizations to assert that people's values are predetermined by their title. Sometimes this can motivate people to "move up the ladder," but a lot of times it can lead to people feeling disempowered and stuck under a self-imposed glass ceiling.
I remember in my first month on the job, not only was I sitting in investment committee ("IC") meetings as an "analyst", but our general managing partner, Sean O'Sullivan (after whom SOSV is named), would ask me directly if had anything to say about the startup being discussed. I was very surprised. I wasn't a title or tag-along; I was a teammate. Sean, who was once a janitor long before he was a billionaire, understands that everyone is important. Being seen is an underrated vote of confidence, and it empowered me to be better.
Radical congruence
Nothing says that "we are right there with you" to our founders than actually sitting right there with them. None of us on the team has an office--not even our managing director, "the" Po Bronson. He sits on a $40 office chair at a desk cluttered by his own sticky notes, while juggling three laptops like he's playing a pipe organ. Our other GP, Pae Wu, sits on an exercise ball under a ventilation duct, jammed between her dog's crate and her desk. Our newest GP, Mohan Iyer, barely has a desk. Our founders are sitting 5 feet away, and can hear every single word of Po's side of the conversation with another investor. The reason for the lack of walls is so that any of us can turn around and start building with our founders. That's the only thing that matters.
SOSV (the parent firm) handles over $1.5B of AUM--and growing--but every one of our LPs knows that the management fees aren't being wasted on Aeron chairs and daily Blue Bottle. That would go against our ethos (we are "Indie" after all) and its hypocrisy would betray the scrappiness that we expect from our founders. Our main export is our culture, and we don't dare contaminate our goods with a cushy lifestyle. That's why we're in a hacker's basement, deep in a SOMA alleyway underneath a methadone clinic, where no investor would think to find the most active VC in the world at our stage and sector. When we say we are in the trenches with our founders, we actually mean it: desk-to-desk, every day for five months, braving the same weather together.
So, if you were imagining glass walled offices and collared shirts, I hope my experience busts that myth. Last year, I was told by one of our founders in an impromptu 1-on-1, "I thought VC was a bunch of money-making greedy people, but you guys changed my mind. You are so human, completely different from what I imagined." It's moments like these that make me proud of where I work.
Don't take anyone's word that they are "for the founders" until you look at how they work. Look at whether or not your investment partners actually are putting you first on a daily basis.
Work-life balance is hard when you love work
In front of an audience, the first person that Po thanked at the end of Demo Day was his wife, who doesn't even work at the firm. But as someone who reads the timestamp of every message sent on Slack, I know exactly why, and know firsthand how your absence can impact people. All seven of us on my team are working hard for our companies, often into the night in high season.
Why?
If our startups fail, the founders lose their jobs, but the VCs don't (not immediately, anyway). That is a divide that we can't bridge, but I can try to work my hardest to make sure our founders live to die another day. They are working tirelessly every day to meet milestones and fundraise, and they go through so much emotional and mental labor to keep the mission alive. It's only fair that we work as hard as they do. Our founders are who make me work harder, not my boss or anyone else on my team.
But the other reason why I love working is that the work fits me. I literally get paid to learn stuff from all kinds of topics, from lipid nanoparticles to ocean alkalinity enhancement, and it's a true privilege to have a job like this. There are only about 2-3 hours a day when I'm not thinking about work. And it's not because I'm thinking about work that needs doing. It's the intellectual work that is always in need of honing. Knowing how all these pieces fit together, and knowing how to synthesize insights that others don't have. It's the edge that we need to sharpen as VCs, and honing that edge is equally a creative endeavor as it is an analytical one, which makes it hard to compartmentalize into a small block of time to "do." Like it is for artists, it's almost a way of life.
But I've had this workaholism burn me badly, and I've had to consciously make an effort to only work a reasonable amount so that I can make more time to tend to the personal things in my life: relationships, family, hobbies, etc.
The hard part about finding work-life balance for me is that if I work less, I feel farther apart from our founders and our mission (recall that investor-founder divide I was talking about), but if I work more, I feel more distant from my friends and family. It's a dilemma that I'm still trying to figure out.
Scale-bias is making me a snob
My third day on the job was when San Francisco declared shelter-in-place because of a little pandemic. Shortly after, our team started a "COVID-19 task force" and started to have a lot of meetings and discussions where I would sit frantically trying to figure out what exactly it is we’re doing. I'll never forget the moment where I interrupted the meeting and just asked, "what is this task force trying to do?" and Arvind Gupta (the founder of IndieBio and who was then the managing director) simply said with a well-duh attitude: "To end COVID." End COVID? I've never engaged in tackling a problem of this scale, but in retrospect it made sense why we were looking at so many technologies and talking to so many academics.
Let me be clear, we are not doing anything to end COVID, we're just making sure the funds go to the right groups to solve these problems, and making sure they get all the support they need (and sometimes that involves us rolling up our own sleeves).
But when one is engaging with problems at this scale, one’s mind starts to morph. I'm always thinking of big problems now. How do we mine enough lithium and critical minerals without ruining Indigenous communities? How do we eliminate the biggest driver of deforestation? How do we continue to feed our planet when we are losing land to degradation and climate change?
This scale is addicting, and it's morphing my values in a way that I find a little troubling. I confess to have developed some sort of "scale bias" wherein I tend to believe that it's not worth thinking about problems that aren't big. It’s a privilege to be even thinking about large-scale problems in a way that makes you feel like you can make an impact, but it’s also a snobbery to think that smaller problems aren’t worth solving. And despite that acknowledgement, I feel addicted to it. I'm addicted to feeling close to the bleeding edge of innovation, to being surrounded by great minds and great talent that tend to congregate in cities, and I'm addicted to feeling like I can have an impact at scale. It’s become harder to imagine life without that feeling. I used to want to live in little mountain towns so I could run and climb and ride my bike with my future kids, but it's becoming harder to imagine that I could live a happy life so distant from “the future.”
And the reason why this industry has to think about large-scale problems is because the business model is to return home runs. It’s high-risk, high-reward, and part of our job is to evaluate whether the rewards will be worth the aggregated risk.
Do we actually need VCs?
Ultimately, our job is to make money for our LPs, and for us, that aligns with the common good, but that’s not a requirement for the rest of the industry. Some are just playing in the capital-begetting-capital game, which is the initial problem that 27-year-old Wes had with the industry.
It’s not clear what the alternative could be. How else do we give people a shot at inventing a new life-saving drug, or the next carbon sequestration solution, without an arbiter to assess the commercial feasibility?
I think that VCs will be replaced by AI in less than 5 years. Imagine a founder who will live-pitch to some machine that can listen and interpret images from their pitch deck while interpreting their salesmanship and potential leadership ability. The machine will ask the right questions and make a risk assessment about whether to fund them. Then that machine will be good stewards of its investment, and give daily advice on how to build better, and make high-leverage introductions. (Honestly, by then, the founder will also probably be a machine.) The end of VC could be nigh.
If we reach this level of scalability, maybe the state can actually afford to have its own VC arm, and then we can socialize risk as well as socialize the rewards.
I tip my hat to Mariana Mazzucato who argues that the biggest VC in the world is already the US government, which funds a lot of high-risk research through scientific granting agencies and the military. The rewards just happen to be economic and national security rather than financial returns. She argues that we often forget the role of the state as an entrepreneurial agent:
Silicon Valley and the emergence of the biotech industry are usually attributed to the geniuses behind the small high-tech firms like Facebook, or the plethora of small biotech companies in Boston (US) or Cambridge (UK). Europe’s ‘lag’ behind the USA is often attributed to its weak venture capital sector. Examples from these high-tech sectors in the USA are often used to argue why we need less State and more market: tipping the balance in favour of the market would allow Europe to produce its own ‘Googles’. But how many people know that the algorithm that led to Google’s success was funded by a public sector National Science Foundation grant (Battelle 2005)? Or that molecular antibodies, which provided the foundation for biotechnology before venture capital moved into the sector, were discovered in public Medical Research Council (MRC) labs in the UK? How many people realize that many of the most innovative young companies in the US were funded not by private venture capital but by public venture capital, such as that provided by the Small Business Innovation Research (SBIR) programme? The Entrepreneurial State (Mariana Mazzucato)
In the end, do I think that VCs need to exist? Until we have AI VCs, I still think the functions we play are effective for commercializing innovation and technology. But VCs should be more deferential to the rest of the innovation ecosystem, including the state, which Mazzucato calls the “investor of first resort.” I don't believe in glorifying VCs as "genius risk takers", because in my experience the majority of VCs are relatively risk averse. (This is really frustrating to me because if you're risk averse, you should probably be selling mortgages, not funding moonshots.)
I'm not sure all VCs need to exist, but that can be said of industry. It's not perfect. At the end of the day, I see my job as helping capital go to the right place for the right purpose. I'm ok with the fact that we make money along the way--I think it's a good incentive alignment, so long as we can capture value from actually providing a public good, and not just the speculation of it.