If you are reading this newsletter, it’s highly likely that you know several VC General Partners, probably talk to some of them often, or maybe even aspire to become one, one day. You’ll then probably have noticed how, unlike many professions with clearly defined career paths, the road to becoming a GP is anything but linear. From entrepreneurial backgrounds to financial expertise, every GP’s journey is unique. This is also part of the fun: you are not simply filling a predefined role; you are crafting your own path, using your very own personal skills and experiences to shape your own approach to fund management.
This was the case for several IAG business angels: after very varied experiences in different industries and roles, and after years of investing as business angels, many of them fell in love with the idea of managing their own VC fund. To be precise, over 30 within current and ex-members of IAG made venture capital their profession, by launching their own fund or starting working in one as a GP. Today, 20 Italian VC funds are managed by people coming from IAG’s network of angel investors. All these funds collectively have now over 2 billions of assets under management and have done more than 450 investments so far.
Show-off moment is over! Besides our pride in listing these numbers, realizing this let us to deepdive if there were some common elements and experiences of the many possible paths towards becoming a GP. Spoiler alert: there are. But don’t get us wrong: we are not saying every GP should go through a business angel phase, nor that every business angel has the potential to become a GP - but we’ll get back to that in a second.
So, where to start building your GP career? One could begin with taking a glimpse at the biographies of renowned GPs - which immediately reveals the multitude of roads that lead to venture capital. Some come from traditional finance backgrounds, having honed their analytical skills in investment banking or private equity. Others are former entrepreneurs who have built, scaled, and sold companies, giving them firsthand experience in what it takes to succeed as a founder.
Take Marc Andreessen, for example. Before co-founding Andreessen Horowitz, one of Silicon Valley's most influential VC firms, he had already made his mark by co-creating the Netscape browser. His success as a founder gave him unique insights into evaluating startups from both a financial and operational perspective. Similarly, Doug Leone and Michael Moritz of Sequoia Capital both transitioned into venture capital after building experience in other fields - Leone with a background in sales and engineering at companies like Hewlett-Packard, and Moritz as a journalist covering Silicon Valley before becoming one of the most renowned VCs in tech.
The bottom line: there is no one-size-fits-all path to becoming a GP. However, there are some non-negotiable steps you need to take before jumping headfirst into your new GP role.
1. Work on your ability to pick the next success story.
Having some degree of entrepreneurial experience seems to be paramount in doing so: whether you've founded a startup or been closely involved with one, understanding the highs and lows of building a company is crucial. Successful GPs often have the ability to evaluate a founder’s potential not based on a business plan but on the intangible qualities that define entrepreneurial success. This is where gut feeling plays a key role. However, it’s not enough to rely on instinct alone; you must train your intuition by learning from past successes and failures, either your own or others’. Being able to evaluate founders is also a key competence: assessing a startup's chances to scale up often boils down to evaluating its leadership. Can the founders execute their vision? Are they resilient enough to pivot when needed? Experience in recognizing these qualities is a critical skill for any GP (we wrote more about this here if you want to dig deeper).
Both these capabilities need time and dedication to be developed properly - and you don’t get a chance to work on them in most finance jobs, nor in the corporate world. You do a bit if you are an entrepreneur yourself, but the risk in this case is you might not get a chance to see enough founders succeed or fail to train these skills.
Here’s some proof that we’re not the only ones to think so:
"The most important thing we do as investors is make judgments about people. We spend all day long with founders trying to figure out whether they’re going to be able to succeed. People are the No. 1 variable in this business."
Marc Andreessen, Co-founder of Andreessen Horowit
2. Build and nurture your own network - it will be your personal competitive advantage.
One of the most critical assets for any GP is a wide and robust network. Whether it's other GPs, Limited Partners (LPs), or successful entrepreneurs, these relationships are essential to open doors to quality deals, strategic partnerships, and funding. This will take time as well: attending industry events, joining venture capital networks, working alongside experienced investors and having lunch with exited founders will become part of your daily routine. And, rest assured, it will pay off: your network will be your personal competitive advantage when you will be sourcing deals, raising capital, searching for advice from seasoned professionals.
"The best way to get into venture capital is to start building your network of relationships with entrepreneurs and investors. The people who build their own networks are the ones who ultimately succeed."
Fred Wilson, Co-founder of Union Square Ventures
3. Acquire technical skills - you can’t just improvise being a GP.
As a GP, you need to understand how to structure and manage a fund - and you need to do it better than others if you want to raise funds. This includes knowing how fund models work, building a fund that suits your investment thesis, and understanding the economics of fund management (e.g., carry, management fees, etc.). Fund modeling acts as the foundation for your fund's success, and mastering your model is crucial to create a fund that achieves significant returns. A solid grasp of quantitative modeling enables accurate forecasting of your portfolio’s performance, helping you make better decisions.It goes beyond simply inputting figures into a spreadsheet; it’s about comprehending how your fund size, investment amounts, and portfolio layout are all interconnected.
You’ll also need to refine your ability to structure an investment team that complements your strategy. And of course, you’ll need to excel in the mysterious art of fundraising, as it’s often a time-consuming process that you will want to optimize.
“Venture capital is not just about picking the right investments; it’s about creating the right fund structure and building something that will last.”
Michael Moritz, Partner at Sequoia Capital
How do you do all that?
The quickest way to become a GP is by demonstrating a successful track record of investing. Whether through angel investments, syndicates, or early-stage fund participation, a solid track record will help you gain credibility with LPs. Even if you're not making large investments at first, building a portfolio of smaller, well-vetted companies can give you the experience needed to achieve the first point (your ability to select promising founders) - and at the same time build a reputation on the market.
If you're not ready to start your own fund, joining established investor networks could be the key to gain experience and insights while contributing to joint investments. It will allow you to gain familiarity with deal selection, learn how more experienced investors evaluate founders, keep up to date with the latest tech trends and have an ongoing dealflow of selected opportunities. Not only: it will also give you access to a wide community of people deeply involved in the VC scene: seasoned GPs, LPs, exited founders and other VC professionals. Where better to kick off your networking journey?
As for the third bullet point on our GPs-wannabe to-do list: taking courses on venture capital from internationally renowned organizations can fast-track your learning and help you navigate the technicalities of venture capital management. Unfortunately, there is still no in-depth course specifically for becoming a GP in the Italian market - something we believe could be very useful given the peculiarities of our market and the significant gap between U.S. VC and European/Italian VC. But we might have some very exciting news for those of you looking to become a GP starting next year... Can’t say more than this right now, but stay tuned!
If this was not enough for you, and you want to:
- know more about joining an investor network: click here or contact our Managing Director
- stay up to date on our new education opportunities: click here
Stay curious, keep learning, and,most importantly, begin building your unique path toward becoming a GP today!