The Venture Capital Aptitude Test (VCAT)

If you want additional proof that we’re in a bubble, here it is: young people are trying to get into the venture capital business again. I get several emails a week along these lines:

I’m about to graduate from college where I majored in economics. I’ve always been interested [what does “always” mean for a twenty-something year old, but I digress...] in business and entrepreneurship and ran my school’s entrepreneurship club. I’ve been working as an analyst for Goldman, Sachs, and now I’d like to get into the venture capital business to further my understanding of entrepreneurship and to help startups achieve success by tapping into my knowledge base. I am adept with PowerPoint, Excel, and PhotoShop.

They see a wonderful job: going to cocktail parties and networking events, flying in private jets, and getting sucked up to by entrepreneurs while pulling down a base salary of $500,000/year plus a piece of the upside of selling a YouTube for $1.6 billion. Who wouldn’t want such a job? (Frankly, I would too.)

First, a rare moment of Guy-Kawasaki humility: I am by no means “proven” as a venture capitalist. I’ve been in this game for about ten years, but I don’t have the mega-hit that “makes” a fund. Thus, I may not be a source of good advice about getting into this business, but when has the lack of knowledge stopped a blogger?

Regardless, here’s my advice to all the Biffs, Sebastians, Brooks, and Tiffanys who want to be kingmakers:

Venture capital is something to do at the end of your career, not the beginning. It should be your last job, not your first.

My theory is that when you’re young, you should work eighty hours a week to create a product or service that changes the world. You should not sit in board meetings listening to an entrepreneur explaining why she missed her numbers while you read email on a Blackberry and intermittently spew forth gems like, “You should partner with MySpace; I can also introduce you to a few of the losers in our portfolio.”

Furthermore, entrepreneurs should view any young person who opted for venture capital over “real world” experience with contempt. Why would you want advice from someone whose background consists of working in a college bookstore or cranking spreadsheets at an investment bank? Financial models are almost totally irrelevant because there’s no financial wizardry involved in making a good product and selling the heck out of it.

I’ve concocted the Venture Capital Aptitude Test (VCAT) to help people decide whether they are right for the venture capital business. If you’d like to take this test online, click here. My buddies at an interactive agency called Electric Pulp created the test for me. Knock yourself out!

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Part I: Work Background

What is your background?

• Engineering (add 5 points)
  
• Sales (add 5 points)
  
• Management consulting (subtract 5 points)
  
• Investment banking (subtract 5 points)
  
• Accounting (subtract 5 points)
  
• MBA (subtract 5 points)
  

The ideal venture capitalist has an engineering or a sales background. Engineering is useful because it helps you understand the technology that you’re investing in—for example, is the entrepreneur trying to defy the laws of physics? Sales is useful because every entrepreneur has to introduce a product and sell it. For the third time in this blog, let me say, “Sales fixes everything.”

The three worst backgrounds for a venture capitalist are management consulting, investment banking, and accounting. Management consulting is bad because it leads you to believe that implementation is easy and insights are hard when the opposite is true in startups. Investment banking is bad because it leads you to believe that everything can be reduced to cells on a spreadsheet and that companies should be built for Wall Street, not customers. Moreover, investment bankers are oriented towards doing deals, not building companies. Accounting is bad because it leads you to believe that history not only repeats itself, it predicts the future.

Finally, there is the issue of the pertinence of an MBA to venture capital. The upside is that such a degree can provide additional tools and knowledge (such as calculating that 25% of $1.6 billion is $400 million) to help you make investment decisions and to assist entrepreneurs. The downside is that earning this degree (and I have one) causes most people to develop the hollow arrogance of someone who’s never been tested. All told, the downside of an MBA outweighs the upside.

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Part II: First-Hand Experiences

You may have been in the right places, but you also need the right experiences in those places. Specifically, have you gone through these?

• Been kicked in the groin by a major, long-lasting economic downturn, so that you know how powerless you are. (add 1 point)
  
• Worked at a successful startup, so that you can speak first-hand about the ecstasy of entrepreneurship. (add 1 point)
  
• Worked at a failed startup, so that you understand three things: first, how hard it is to achieve success; second, that the world doesn’t owe you a thing; and third, what it’s like to be fired or laid off. (add 3 points)
  
• Worked at a public company, so that you know what the end goal looks like, warts and all. (add 1 point)
  
• Held a CEO position, so that you have this fantasy experience out of your system and will not try to run the startup from a board position. (add 2 points)
  
• Been an angel investor with your own money, so that you understand the fiduciary responsibility of investing other people’s money. (add 2 points)
  

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Part III: Necessary Knowledge

Finally, can you answer these questions for entrepreneurs? Because this is the kind of advice that entrepreneurs need. (Don’t worry: many current venture capitalists would fail this part.)

• How do I introduce a product with no budget? (add 2 points)
  
• How do I determine whether there’s really a market demand for my product? (add 1 point)
  
• What do I do if customers hate our first product? (add 1 point)
  
• How do I get Walt Mossberg to return my call? (add 2 points)
  
• How do I get to the folks who run Demo? (add 1 point)
  
• How do I get a plug in TechCrunch? (add 1 point)
  
• How do I get the folks at Fox Interactive to return my call? (add 1 point)
  
• How do I dominate a segment when there are five other companies doing essentially the same thing? (add 2 points)
  
• How much time, energy, and money should I spend on patent protection? (add 1 point)
  
• We bet on the wrong architecture for our product; what do I do now? (add 2 points)
  
• What kind of people should I hire: young, old, unproven, proven, cheap, expensive, local, remote? (add 1 point)
  
• How do I get them to leave their current jobs without throwing a lot of money at them? (add 2 points)
  
• How do I tell my best friend that he can’t be chief technical officer just because he was a cofounder? (add 2 points)
  
• How do I get to the buyer at BestBuy to return my call? (add 1 point)
  
• How do I handle a customer who wants to send back his purchase for a full refund? (add 1 point)
  
• How do I fire people? (add 2 points)
  
• How do I lay people off? (add 2 points)
  

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Results

Here’s how to assess your readiness to become a venture capitalist:

• 40 or more points: Call CalPERS and tell them you’re raising a new fund.
  
• 35 to 39 points: Call Sequoia and Kleiner, Perkins and tell them that you’re available.
  
• 25 to 34 points: Send your resume to 2,000 venture capitalists and pray.
  
• 24 points or less: Work until you can score higher and keep flying on Southwest Airlines.
  

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Here’s the bottom line: You should become a venture capitalist after you’ve had the shiitake kicked out of you. This will yield at least two positive results: First, you’ll stand out from the full-of-shiitake artists who entered the business when they were young. Second, you’ll really be able to help your portfolio companies—which is what venture capital should be all about. See you in ten or twenty years.

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Comments

[David Kochanek]

How about some compensation data to add to this conversation? A survey conducted by JobSearchDigest.com (http://www.JobSearchDigest.com) focusing on the private equity and venture capital job market was designed to help private equity and venture capital players better manage careers and fund managers differentiate firms. The survey includes participation from firms both large and small such as: Credit Suisse, Labrador Ventures, Intel Capital, Mayfield, New Enterprise Associates, and SoftBank Capital.

The survey addresses issues such as the compensation earned by professionals and their work satisfaction. The survey also aims to understand how these professionals perceive their work and what they expect from their employers.

Some notable findings include:
• The annual average compensation for professionals in the industry is $224,000 with an average 3.5 weeks of vacation benefit.
• Nearly ½ of respondents bring at least 10 years of work experience to the table and only 5 years of private equity or venture capital experience.
• Although common in the industry, an MBA doesn’t guarantee better compensation.
• At the lower levels, there is very little difference in cash compensation between the US East and West coasts and even the Central states.

Regards,
David Kochanek

[Daniel]

Venture capital funding is when a startup business or an existing one needs funds from outside people to sustain or keep it growing.the investor becomes a capital venture firm who will be doing this not only to jump start something new but also to make some money from it.

[adiadi]

If my company's current assets do not exceed its current liabilities, then i may run into trouble paying back creditors in the short term. The worst-case scenario is bankruptcy. A positive change in working capital indicates that the business has either increased current assets (that is received cash, or other current assets) or has decreased current liabilities, for example has paid off some short-term creditors.

[edit] See also

[working capital]

If my company's current assets do not exceed its current liabilities, then i may run into trouble paying back creditors in the short term. The worst-case scenario is bankruptcy. A declining

[Muthu]

I used to think a lot about making my ideas alive. I thought that i should not think about what VC's will think when they hear my idea. It wasn't working. Then i thought deeply about what they will see as a value in my idea. Not i read this blog and i feel that i have a new dimension added to my thought.

Thanks

[Carson Danfield]

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[Mike]

Ah, personally I don't even like the idea of Venture Capital at all. They force you to grow even if it's not what you need and push you towards an exit event that might be the death of the company you threw your life into. And on top of it, if you look at many of the VC's out there, they DO have management consulting or CFO backgrounds. So some ex-accenture MBA wonderboy is going to tell my how to run my software company, forget it. They don't call them vulture capitalists for nothing.

[Young VC]

As a young VC I agree that one shouldn't build his career within the VC world. That being said, as a starting point for a career in high-tech, it's a great place to be. Reading hundered of business plans, working out investment strategies, and doing research is an excellent way to learn

[Brandon]

Interesting take on VC, I'm not much for standardized tests

Ventrilo Servers

[Marco]

Some of the posts on this site are a joke. I mean 26 year olds talking like they have years of experience in business. I'm 39 years old, with an MSEE and and MBA and have over 10 years experience in business development and product management. If anyone is qualified to be a VC it's me. I wouldn't take the advice of a 26 year old with at most 5 years experience. Business is the real world, not some MTV game that you play with.

[Senthil Kumar Natesan]

I am 26, an budding MBA with Chemical engg. background. Very good posting by you. I disagree with your points subtration for MBA. I worked in R&D management for a premier govermental institution with the technical background. I got enough funds to develop a native technology with native tools. It failed. But, after coming to MBA, I understood why it falied through. So it is the MBA which refines from others to take decisions in this changing world. But, we cannot say MBA is a must.

[laura]

Great post - I'm very interested in the VC space - for someday when I'm done with my current position at Yahoo. But I dont have the VC credentials. Instead, the people I know in the VC space are saying exactly this (what you said) about me "How do I get them to leave their current jobs without throwing a lot of money at them?". Before I was at Yahoo I did exactly that - spent months of my time on VC projects that I didnt get paid for, and I didnt totally beleive would be successful but I beleived in them since they were VC folks. Lesson learned. They dont always know.

I'm naive to the VC world but I hope that there is a medium where those of us who are in the grind and come across rare great talent and great ideas can work with the VC folks with the Engineering or Sales backgrounds? to blossom some original and successful online brands.

Does this connection exist?

[Matt]

Thats great Guy, but honestly why on earth would you bother with a post about how to become a VC. Lets keep it about whats important. How to build great companies, great products, great returns and great FUN!

[young vc #343]

Interesting post Guy. As a 26 year old VC with no MBA, exposure in several failed start-ups and a few successful investments, I would counter that my experience within venture has been more educational than all my previous positions to date. I have been fortunate to gain insights into what makes companies successful or at least characterizes their strengths. I like to think that these lessons will help me refine my future education - whether when selecting a start-up employer in the future or when considering a tough operating choice.

Separately, I would address your quiz with the following concern: The questions are fair but the answer must vary depending on the company, market and time. Further and in my very limited experience, the best board members offer their thoughts on problems and help the executive come to a conclusion - not simply dictate it.

[Anshuman Singh]

I do not know . Really do not know anything about venture capitalism as a career nor that of an entrepreneur. But i am a strong believer that an MBA or an investment banking career does not matter. what matters is the person... and his attitude toward entrepreneurship, investment and risk taking capabilities. Beyond acquired knowledge through degrees rises the phoenix of startup blown-outs.

Thanks

[Nate]

Classic entertaining and true post from you Guy and just dead on right. If you still have some energy left, you should either be building a product or selling a product, depending on your aptitude and interest.

On the other hand, the world definitely needs financing, and the startup world needs VC financing. I guess that means that the world also needs VC associates...to do all the work the partners don't want to do. They're necessary. I'm just not sure why anyone - other than risk averse ibank/consulting dropouts during a bubble - would want that job.

[Rani]

For me, this could have been titled "why I didn't become a venture capitalist, or stopped trying".

I'm 38 years old, an MBA and former management consultant, but also with 10 years experience in software... I was entertaining the idea of getting into VC a couple of years back, and after talking to some people both informally as well as formally, decided it's too early. VC is a career you exit TO, not FROM. So I recently joined a fresh start-up as VP Marketing and now I'm experiencing start-up life as it should be experienced - from the inside.

[Marcus]

Being young myself, I would like to post my favourite quote here:

"Victory usually goes to those green enough to underestimate the monumental hurdles they are facing." Richard Feynman

It's great to be clueless sometimes.

[fyreMAN (Alan)]

I scored a 42. But looking back no wonder I did. I have lost everything... twice. Start-ups are what these young VC's should be out there working on. A prior post said we (Entrepreneurs)should have nothing but contempt for these young VC's. He/she is right. I do! In business, I listen to NO ONE that hasn't been kicked in the balls, looked up with tears forming in their eyes, and said "Is that ALL you got???" My best, most trusted VP joined me with less that 7 years before retirement age. He was/is my greatest assest! I would personally tell a noobie VC to go get me some coffee and be quiet while the adults talked if he had the nerve to open his mouth in a meeting with me.

*** Know risk, know experience, KNOW success.
NO risk, no experience, NO success. ***

I'm 37 now. Engineering and Sales. NO MBA. NO BA/BS. No Accounting. No Banking or even consulting. Currently a CEO in Telecom/VoIP/Cellular. Adore Cargill, Sprint, Hy-VEE, and ofcourse, Starbucks as companies (quoting Guy “Sales fixes everything” - sales drives these guys.). My thinking is long term gain, not create "hype" and sell to big dog. (Learn from Buffet, y'all).

See you in 15-20 years Guy, 3/4 of the way through my career!

ALAN

[insomnia169]

You have to love the passion on both sides. That what makes this such a great post. And, the fact that I was getting a good laugh.

Of course Guy's post is broad strokes and does not and can not address every young VC out there in the world. Get over it. But, taking a step back the post has some great truths. At at the very least for all those current young VCs and propective young VCs out there in the world realize your strengths and weakeness. Being young can sometimes be a strength and other times a weakness. Know the difference and use it to your advantage. I always think back to the movie "Big" with Tom Hanks. There are some great lessons to be mindful of for both the young and old.

[yet another silly naive youngy]

Besides the fact that you over generalized the ambitions of young people interested in venture capital, I think you unfairly conflate 2 issues:
1. Young ppl are interested in VC.
2. What it takes to be a good venture capitalist.

Your argument is that #2 points to the idiocy of #1.

How unfair!

As a 24 year old working for a great venture capital firm, I can't help but take issue with this post (clever as it is -- I'll give you that much).

It is unfair to generalize the motivations / ambitions of young people interested in VC. Frankly, pre-MBA positions are not as lucrative as other financial positions (e.g. ibanking) and they are Not Partner Track. Dreams of corporate jets are delusional and anyone who does their homework should know that those dreams are just that. But you would be surprised to know that a lot of young people are interested in this new breed of pre-mba job because of the broad exposure to entrepreneurship. And I say that NOT with the misguided belief that they can experience what it is to be an enterpreneur by being at board meetings or tagging along with a GP. Instead, the value comes from the exposure you get with talking to hundreds of companies a month and learning about different business models, ideas, experiences, etc..

Secondly, a venture capital group is not only composed of GPs. (GASP?!) The role of the top tier does not trickle down in replica to the rest of the firm.

[young VC]

First, you should spend more time trying to find new deals vs. writing books and giving advice to the world - then you might have some home runs....Second, the next thing you'll be saying is that young professionals shouldn't work at hedge funds either since they haven't been squashed yet...give me a break.

[Peggy Farabaugh]

Too funny! You only say it because it's true.
Thanks, Guy,
Peggy Farabaugh
VermontWoodsStudios.com

[Juhi Kumar]

Hi Guy,

I love this post!
I am doing an MBA (marketing and finance) right now and I took a class in financial modelling, which is the probably the worst course selection I've made since undergrad...will be spamming this comment to a lot of people :-) :
"Why would you want advice from someone whose background consists of working in a college bookstore or cranking spreadsheets at an investment bank? Financial models are almost totally irrelevant because there’s no financial wizardry involved in making a good product and selling the heck out of it"

[Ideawhip]

Guy,
I did like the post although as a young person trying to get into VC, I find it not to be completely true. I've started a couple of semi-failed businesses (none of them took off, but none completely bombed either), and I think some young people might want to get into VC because:
1.) a lot of VC's are former successful Entrepreneur's themselves, so you can learn from them directly.
2.) you get access to the VC's network and you can start building a good one for yourself.
3.) You can see how the funding process works from the VC point of view...so when you are looking for cash you know what to expect.
4.) You can use some of that $$ you make as funding for your company.

So although I do agree that having operational experience is a good idea...wanting to get into VC at a young age isn't a bad one either.

[Marc Duchesne]

One of your best posts ever, dear Guy ! Thank you for the learnings, and the fun ;-)
BTW, those feedback, to help you do even better next time :
- the online test doesn't work under Opera 9 for Mac (all buttons are inactive)
- it works with Flock 0.7.8 - Hence my question : do you really prefer start ups or what ?!!!
- no 'back' function : a problem when you hit the wrong button because you've been too fast ;-)

Now, the real stuff : I scored 39. Any chance for me to join Sequoia ?

[John Dodds]

Sales experience alone or marketing (not promotion/advertising) or both?

[Pierre-Olivier]

Guy,
One of your best... again and as usual.

I get 41 ?!? May be I should have a look to the formulas in my spreadsheet again ? :-)

[Marko Krause]

I was never introduced in this subject like that. Amazing and very interesting at the same time. It´s like a game to bring the things you have to know about venture capital in your mind. I love it.

[John Nguyen]

"Entrepreneurs should view any young person who opted for venture capital over “real world” experience with contempt."

Offbase: Guy probably isn't even going to reply to you. So I think you should reread the post.
--------------

What he really meant was, there's no point in taking advice from someone who's knowledge is an MBA versus taking advice from VCs that have built startups, flipped companies M&A/IPOs, been there and done that etc. Venture capital is certainly not the thing to do right out of college(maybe ibanking). And not everyone is the next Tim D. When I spoke to a venture capitalist(Guy's colleague John Morris), he directed me to the Tech Coast Angels. Venture capital isn't the hoi polloi that the internet makes it out to be. VCs, essentially, invest other people's money. And the whole point of the matter is, why would anyone trust an mba student with a 100million dollar endowment fund? What Guy is advising is probably the easier path to venture capital. Build companies, be there and experience everything, then teach others when others need help. Or invest your own money and create results before trying to become a vc.

[alan patrick]

anyone got walt mossburg's number? :)

[John Nguyen]

ermmm... let the bootstraping begin.

[Peter]

Like your writings about PowerPoint slides, the number of questions should be limited in all surveys. I'm up for 20 true/false and that is it. I almost gave up, but I kept going to earn my 25 or 28.

Thought provoking as always.

[vivid]

I apologize for the length of this post, which is not an attack on Guy's (see the end). Tests such as Guys above should rank very low in priorities after searching deep into what you want to do with your life. I repeat, your life - a ticket with only your name on it and which you can take for a ride that only you will experience. No one can define for you the experience of riding that one ride with that one ticket. I majored in math but did I do it because I did well on my math SAT (which I did). Absolutely no way! Looking back my pursuing math would have happened regardless of how I had scored on my SAT. Why? For starters, math on SATs isn't beautiful math - it's arithmetic, and some of the brightest mathematicians are horrible at it (that and drawing). The real reason I did math was because I simply fell in love with it one day and this is my life I'm talking about. Real math - the one of beautiful proofs and weaves of logic - gives your head an unbelievable high when you really "grok" a proof. You have to love it to get anywhere...to get to the point of constructing a Galois Group and beyond. After doing the hedge fund thing while bootstrapping a startup, I'm now working full time on building my company. Why? Because I love the technology I'm bringing to market and this is my life I'm talking about! The labels and simple formulas of "MBA", "few years at Goldman then..." or "few years at a VC" just wash away against the reality of dealing with your life and what you want to do every single day, every single moment, and with whom. Don't try and escape from that reality. Engage it, follow it, use your intuition, look at the facts, and, most of all, love what you do. For me the fact that I went to top schools like Stanford or schmoozed with big hedge fund traders dosen't mean a thing when I look day to day at the challenges I face in trying to steer my startup to ultimate victory - I don't even think raising a lot of money from a "VC" will help because my end user is going to do the final vote. In any case, meaning in life can be found in any pursuit at any point in your life (see an excellent book by Viktor Frankl called "Man's Search For Meaning"). Perhaps you'll decide that spending time with your loved ones is more meaningful, but, please, it would be too easy to base such decisions on simple tests. Life's not that easy.

By the way, this post isn't trashing Guy's. Learn from the meaning of his words but dig deeper into the meaning of your life. I felt the need to respond because I've noticed that quick "tests" have a really bad influence on our psychology due to our conditioning from childhood Actually I believe Guy has done more for entrepreneurs than all the VCs combined. Why? I'll use myself again as an example. I have experienced several difficult moments while working on my startup, the worst being when my ex-girlfriend dumped me. All throughout I would periodically read something from Guy that inspired me on. There is a way he sometimes puts things into perspective that get right to the truth of the matter. One of his best pieces of advice was to recommend a book called "If you want to Write", by Brenda Ueland. Reading that book gave me the courage to continue creating with confidence. His book entitled "Art of the Start" has invaluable pieces of advice - no doubt the best collection of practical advice for high-tech entrepreneurship at this time that I've read. And for those who've had the chance to see him talk as I did one day at Stanford, you just leave that talk ready to take on the world! And this is what one needs when pursuing a startup because you will get questioned every moment (never mind from a "VC", how about from your own friends, family, and, yep, you guessed it, yourself!!!!!).

[Kimber]

I don't really see the fascination of being a VC (other than the cash, and cash is everywhere). Sort of like being an agent instead of a writer. If I have a book in me, I'd rather be the writer. If I have a startup in me, I'd rather be the entrepreneur.

[Jim Fowler]

My favorite post ever, Guy. Hilarious.

[Brandon]

This test got me thinking about aspects that I had never thought about before for startups. I've recently begun a startup and we'll be launching later next month. I don't necessarily have all the connections and our goal right now is to submit to YCombinator next month.

I have one question that I can't seem to answer myself. The startup I'm working on is currently being created by myself and another. The idea for the site was completely mine, I do all the design work and he does all the programming. I contacted him and we've become friends and now we both just work on this in our spare time. I'm not sure what sort of percentage of the company I should offer him once we begin seeking Investors and turn this into a company. I don't want to go into this 50/50 but I'm not sure what a reasonable offer would be. Maybe someone here could give me some advise as to how to manage this.

[Nick Arnett]

I scored 35. When do I start?

[Ten Million Minus Two]

Classic case of a has-been risktaker. Guy is washed up and has been reduced to crafting new and petty methods to attract attention to ventures that he's recently dipped his paws into. His fire is long gone; he's stuck in that awful state that many like him end up in: rich enough to avoid discomfort, yet terrified of truly taking a real risk again. From a guy who's scored 44 on this so-called test, here's my advice to anyone wanting to know if they're ripe for the world of Venture Capital: if you have to ask ...

*************

Ten Million Minus Two:

Do you feel better now that you got that off your chest? FYI, I don't feel any worse after reading your comments. :-)

Guy

[lurker]

Would be very interesting to send your survey to VCs in your personal rolodex and compile the results (using surveymonkey, etc). Even better is if the responses are not anonymous and you could benchmark against their resumes.

IMHO, most VCs are like thunder: thunder takes the credit for the boom, but it's the lightning that does all the work.

[DavidK]

Good post, and good fun to fill in.

I have little desire to enter VCap work, but always like keeping an eye out for the chatter in other industries as a way of keeping myself on my toes.

I'd argue that my score of 36 isn't enough, I had everything but the ability to plug the product through known channels (techcrunch, demo, WSJ, etc)... being able to spot something and knowing how to make it work on a low budget and then scale is all fine and dandy, but there comes a watershed point in which almost every tech related startup is going to need additional exposure and will be missing their chance if they don't get it. I couldn't provide that, yet I scrape through.

Still, pretty good post, and I especially like the "should be your last job and not your first" line... very very true.

[Brad B]

I scored a SIX!! That's right, 6!! Can I join your firm, or should I say, "When do I start?"

Loved the article. This one of a handful of sites that I visit daily. Keep up the great work.

Brad

[Abhishek Goyal]

Hah! I got just 25! ;-).

[Motts McGregor]

Great post, yes!

I can't believe there was NO mention of lawyers. Most of the former-lawyer VCs I've interacted with have been the most painful of all. They have a mechanistic and strangely idealistic ('the way things *should* be') view of the world that is incompatible with the need for a startup to just GET STUFF DONE in a smarter and more capital-efficient way than they're done at big companies. Also, *everything* is an opportunity to negotiate. It is painful to endure.

(of course there are exceptions!)

-Motts

[Elad]

One of your best posts ever, Guy.
I've yet to meet a VC who scores over 40 in your test :)

[Brad Hutchings]

This test works for picking an investor too. The sales and engineering experience are key. If they send a youngish MBA to sit on your board, it'll be nothing but trouble. And the trouble will stem from everyone thinking he's a clueless fool and him proving it at every opportunity. Been there...

P.S. I scored 21, and I lied on a couple questions.

[Anonymous]

I am not so sure that institutional LPs are seeking old GPs in the sunset of their careers. LPs want GPs who are hungry, who possess an insatiable drive to succeed, and who are going to be around in 10 years. Sure, the old guys in their “last job” may have fire in their belly…, but it more likely to be indigestion.

[Jay Parkhill]

Guy,

The "VCs should have operational experience" definitely has some basis in truth, but I think it is a little overstated. Two comments:

1) Early stage venture capital is very much about hand-holding and mentoring. In later stages it seems to have at least as much to do with financial & market analysis. I.e. your statements are more applicable to the early-stage environment, IMO.

2) Even within the early stage arena, experience does not count for everything. David Hornik comes to mind as someone who might take issue with your comments. Equally, I have met plenty of VCs with operational backgrounds that couldn't get past the fact that they are no longer the CEOs & had trouble working with management instead of being it.

I don't think your post meant to say that experience is everything. I agree that it should be a factor in evaluating investment partners, but disagree if you mean it as a litmus test.

[larry chiang]

I answered "Yes" to a lot of questions but just cuz I 'know' how doesn't mean I execute them all.

[Ernie Vazquez]

I'm wrapping up my first startup (shovelfull's of humble pie over 4 years) and I'm looking for my next gig.

Corporate America is out, been there done that, and there's no question another startup is next (holler at me if you know of any in Texas)

Thanks for the inspiration and keep the posts coming.

[michelle]

This is probably the best post I've read on your blog yet. Getting a MBA and Doctorate degree has its advantages and disadvantages. For me, my area of expertise is medicine. There are things in medicine that I consider "common sense" that isn't common sense to other people - and that is where I miss out on alot of potential innovation --> taking what I know as what the world knows when this isn't the case. However, my background in medicine allows me to see the gaps and needs whereas someone who doesn't work in this industry would not be able to see.

From your list, I think you're missing "initiative" characteristic...the energy to learn about various areas and step outside your comfort zone. I think that to be a successful VC, you need to keep up-to-date in what's going on in everything.

You mentioned that you don't consider yourself proven as a successful VC. I would have to disagree -- people hear about you, the little guys know about you and read your blogs. That's success..the ability to connect with potential big hits b/c you respond to them. They come to you first as opposed to the others.

Okay, stepping off my soap box

[Dimitar Vesselinov]

Donald Rumsfeld would be the perfect VC:

"Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns - the ones we don't know we don't know."
http://en.wikiquote.org/wiki/Donald_Rumsfeld

[Dave]

great post, on target.

having been:
- a programmer
- an entrepreneur (multiple times)
- startup CEO (once)
- startup founder (a few times)
- acquired (one small, one large)
- at failed startup (several)
- at successful startup (paypal)
- at bureaucratic public co (ebay)
- an angel investor (5 startups)
- a startup advisor (several)
- a D-list blogger

... i realize i am *definitely* still not qualified to be a VC. or at least, a good VC.

totally agree, do it *after* you've had startup success / operational experience, not before (except perhaps as an associate, helps to learn that side too). you'll have a lot more to offer, likely be a lot more successful with your deals after having 20+ years experience in the field.

[Alexander Muse]

Thanks for the post, I couldn't agree more.

[sonshi]

Guy,

OK, I was going along with you there on the experience part but the MBA is something personal. What does it say when you have a doctorate in business as well? Arrogance is not an MBA thing; it's a people-who-think-they-know-it-all thing. Many MBAs are that but the good ones listen more than they talk -- and know when to shut up. Good MBAs also have gobs of experience, earned down in the trenches where the money is made and therefore hate corporate culture with a passion. In fact I think I just described you and me.

sonshi

[Offbase]

@has to be anonymous:
I'm not saying that I'm going to be a know-it-all VC rainmaker in two years. But at least I will know what I do not know and I can go out and either get an MBA with a clear focus for what to do with it, start a company through the network I've developed, or both. There is a legion of "me-too" entrepreneurs who keep flooding this area and not learning from their predecessors' mistakes. While I have respect for all the risk-takers, pitching your idea for MySpace-meets-Skype-meets-YouTube-meets-whatever the hell doesn't make you a vanguard of change. The ecosystem of this area requires the entrepreneurial-thinkers (optimists) as well as the "vulture" capitalist investors (realists) to work together. Don't lose sight of that.

I also detest the blackberry-wielding, value-detracting clownshoes, but they exist everywhere and in every industry. It's the arrogance that they embody that sickens everyone. But let's not pretend that some entrepreneurs don't have similar delusions of grandeur...

[just.a.guy]

Your stereotypes are generally right, but I've met many exceptions that break the rule (and I work with several of them) -- VCs without operating experience who are good judges of deals, good judges of people, and quite helpful to entrepreneurs. This is evidenced by the fact that many great entrepreneurs have returned to work with the same non-battle-scarred partners at our firm when they clearly could raise money from anyone in the business after their first much less second successes.

Most of your points and stereotypes are generally true but many, many exceptions abound. If I were writing this test, the taker would answer all the questions and it'd conclude :

"there is no one path into venture capital, and there is no one background that guarantees success as a venture capital investor. good friggin' luck."

[Dave!]

Damn... 29!

How about instead of wanting to *be* a VC, does that score get me some pitch meetings? :)

[Clint]

Fascinating post, Guy. I started my career in banking with my sights set on VC. That was three years and 1,000 financial models ago. Rather than moving directly into investing, I decided to cut my teeth at a start-up. My message to other bankers/would-be private equity investors: you're not ready. The challenges of building and growing an operating business are likely beyond your comprehension (I've been surprised daily). Guy's visual depiction of the blackberry-wielding associate is spot on - don't be that guy.

[Jay]

Hmmm... I scored a 42. I'm pretty confident in that score, though my answers to the questions of how to solve common problems may not agree with yours.

I'd be interested in working for a VC firm because I believe I can better evaluate businesses, certainly from an engineering perspective, than the VCs I have dealt with in the past.

But in my heart I know that's not the path for me... time to start another company!

[Joe Duck]

Guy this is a great test though I doubt it'll stem the tide. Your talk at PubCon was excellent - really enjoyed the insights and the family>billion dollar calculation.

Now, about that $500,000 + free espresso schmoozing job with your VC firm...

[Chris]

Guy:

I scored a 35. Call me :)

[MBA=toughroadahead]

Offbase,

I tried to e-mail you, but the account must not be active. I am currently a first year MBA student trying to gain some insight into the industry by talking with associates. The industry is really intriguing and I'm doing everything I can to get some relevant internship experience this summer. I'd appreciate any advice you could give me and would love to chat sometime. Thanks so much in advance. You can reach me at Penny462@aol.com.

[engtech]

I think I pushed it over the edge to get on Techmeme. :)

[engtech]

Great post. I blogged it.

I got 27. You really should add some sort of Star Wars character reference for the final result if you want it to take off as a quiz meme. :)

# 40 or more points: You are Boba Fett. Call CalPERS and tell them you’re raising a new fund. You're the baddest gun in town.

# 35 to 39 points: You are Jabba. Call Sequoia and Kleiner, Perkins and tell them that you’re available. Also, don't chain hot chicks to your desk.

# 25 to 34 points: You are Bossk. Send your resume to 2,000 venture capitalists and pray. And eat your father.

# 24 points or less: You are Greedo. Work until you can score higher and not get shot by Han Solo in a catina.

I'm such a nerd.

[has to be anonymous]

Excellent article!

A few years back, I was saddled with board members from two VC firms who had no operating experience. One came from a management consulting background and another from a finance background. Although well intentioned, these guys exhibited exactly the stereotype you presented. They were pains in the ass with who spewed platitudes instead of real advice. The closest one came to real advice was to suggest I find a way to use our product to help the Chinese government censor the internet and track dissidents. Uh. No.

With all due respect to you, offbase, after two years crunching spreadsheets, reading Gartner and Forrester, searching through VentureOne, and ocassionally tagging along behind a partner, what advice will you have for the person who just spent two years building a product and a company? Your MBA won't help you because you didn't have the necessary experience to understand half of what they were teaching you when you were in school.

BTW, I scored a 37, but I'm too addicted to building companies. Sitting on Sand Hill would be selling my soul. I prefer to sell product.

[Amrit Hallan]

Hi Guy.

A very long, but captivating post. I'm sure I'm never going to be a VC because I have none of the qualities/pre-requisites you've mentioned above. But then, well, I've always been so unpredictable, but then again, when millions of dollars are at stake, you better be sure of what you're doing.

[SorenG]

Excellent and interesting. Dugg.

[Another Silly Associate]

Did it ever occur to you that a few years at a VC firm might be good preparation for starting a company? For those of us w/ a financial background, it's probably the best way to get a wide range of experience that can actually bring some value to the product guys. In two or three years, a person can talk to hundreds of small companies and get a feel for what works and what doesn't. They can see where opportunities lie and avoid overinvested pipedreams (podcasting anyone?). If, in two years, you can take your chances from the proverbial "1 in 10" to 2 or 3 in 10, I say it's worth it. Plus, you'll have some money saved when you knock your paycheck down 90%.

Of course, this only works if you don't have a wife addicted to a paycheck. Then you're screwed.

****************

No, it has never occurred to me. Maybe because it's not true. Trust me when I tell you that as an associate, you will not truly understand what it's like to work inside a startup. Sure, you tag along with the partner once a month and attend board meetings, but board meetings are staged events.

You want to be an entrepreneur? Then go get the crap kicked out of you on the firing line. But don't think you'll learn about entrepreneurship flying around in a Gulfstream.

Guy

[Sylvain Briant]

My father had always said me : "Start by the beginning" . It is what I do.
I am 28 y-old and after some years in projects management and executive job (business solutions or development) I've founded my enterprise (3mont. ago) to make my own business opportunities and grow my network.
Maybe when I'll be a "Guy Kawasaki" I'll join a VC firm :)

[Shefaly Yogendra]

Great test! Got 37 and working on that letter to KP and Sequoia! :-)

But since I am too young to die (and not too young to rock and roll), may be I should hold this off a little bit more.

[jkirker]

Guy, two sides to every story?

There are those who are "young at heart" and "young in age" and like shiny things. Then there are the old souls, wise ones, thirteen years young that spout wisdom so deep and profound they change you at the core - forever. (I have a niece like this ;)

For some reason there are those who posses a natural ability to envision the larger picture - you know, they innately understand the inner-workings of a clock, how the tiny individual pieces fit together to make the hands turn so you don't miss the game. These people just “GET IT” – young and old alike. Of course, there are also those who simply need George Parros, of the Ducks, to punch them silly before they realize how bad it hurts.

The idea that VC should be done at the "end of your career" is great however I think VC should be done when you can afford it financially, physically, emotionally and mentally – or, when you just want to sit around and play hockey all day - or – when you are willing to hang your balls on the line, in every sense of the phrase, and go back to work should you make some horrible decisions and visit George one too many times.

Go Ducks!

[carl rahn griffith]

pragmatic, provoking and no pretence (that's enough alliteration); an excellent read - thank you!

rgds

carl

[jason]

thanks for crushing my dreams...I'm not a good test taker!!!

[Russell S. Holliman]

I wish I'd had this score card when I was first shopping for a VC :)

[Offbase]

Guy, as an Associate at a venture firm, I take some offense to this. You paint a picture of "young people in VC" with far too broad a brush. You are right that some whelps get into venture for all the wrong reasons, which you list above. They are addicted to deals and probably career bankers or consultants that will return to those industries. Others enter the (generally) 2-year associate/analyst programs in order to shop and see whether VC is an industry they may want to return to down the line, or at the end of their careers. If an entrepreneur is not discerning enough to understand the junior VC's shortcomings and capabilities, then that calls into question their judgment. I understand that your readership is heavily entrepreneurs, and posts bashing "corporate types" get them all warm and gooey (see comments above). But please understand that many young people that want to get into VC understand they need to get additional experience. If they were all about the quick buck, would they be looking to enter an industry where liquidity events are 5 years off? No. They would go to a hedge fund and pull down in a year what some people don't make in a lifetime. (And if I'm not mistaken, you've hired some "young folk" at Garage in your time, haven't you?)

**************

Offbase,

If some people in the venture capital business didn't take offense to this post, I would be offended. :-)

Spending two or so years at a venture capital firm to decide if you'd like to be a venture capitalist in twenty years (after enduring the requisite pounding) just makes no sense to me.

Also, why did you capitalize the "A" in "associate?" Sales people don't capitalize the "s." Engineers don't capitalize the "e."

Guy

[Eric Jackson]

Outstanding!

[David]

Great post Guy! VC at the end of your career? You're a VC already...what does that mean...?

:-P

[Scott]

Love this post Guy!! (Go Sharks)

I would love to someday be apart of or run my own VC. The part I loved most was "You should become a venture capitalist after you’ve had the shiitake kicked out of you" I just turned 30. I've worked for a successful startup that was acquired, Started my own company that took on angel investments and is currently partnered with Apple (our software is in apples stores : ), i've worked for a large corporation, and now am working for another great start up. I've done maily sales/business development and feel as though I've gained amazing experience so far in my career. The funny thing is that I know I'm still a baby when it comes to experience. All this experience has come in only 8 years. Imagine what another 15 years will bring.......

Great Post Guy!!!
Scott

[Marcelo Calbucci]

By far your best post.

There is nothing like talking about something you know.

[darkmoon]

So true. I'm working on the first in my many startups currently. Closing on the age of 30, I'm practically an old geezer when it comes to technology startups these days, but it's not stopping me. Long term goals? If I'm ever successful in what I do, which I hope I am, I hope to be a VC to help bring into existence the corporations that I'm helping start currently.

I love how you put everything in real and pretty common sense terms. Sometimes, you just have to step back and wonder where business sense has gone and why people just look at the numbers instead of looking at the customer base. I've been told that this is the difference between Angel and VC but I've been good and bad everywhere.

Anyone that is looking to be a VC right out of school has another thing coming if they think that they have any sort of knowledge base on how corporations behave. One thing I learned at a young age: what they teach in school doesn't equate to what happens in corporate reality.

One day, I hope to be someone that helps and teaches and brings young companies out like my struggling one. Until then, I'll just keep reading the great things you write and learn from them.

Regards.