What Should I Start Studying Now To Become A VC?

Before you ask the question of what skills you should have as a VC, let’s be clear on what goose you are chasing.

Let me burst your bubble here. The vast majority of venture capital (VC) has turned subprime after failing to produce viable returns to their investors, the limited partners. For the root-cause, I laid out in the first-ever State of Venture Capital in 2010 (since poorly copied), available in narration here: The State of Venture Capital.

My analysis after that demonstrates how 99.4% of venture capitalists failed (read: Why 99.4% of venture capital firms fail), and I agree wholeheartedly with Vinod Khosla (Khosla Ventures, former KPCB) the majority of venture capitalists add negative value to their portfolio companies. I’ve witnessed this personally on startup boards in Silicon Valley and other related exposures.

Subprime VC deploys a uniform and commoditized micro-private equity risk profile, supported by a failed capital efficiency thesis (The trap of “Capital Efficiency”), identified by spoon-feeding money to post-chasm execution (see Crossing the Chasm, by Geoffrey Moore) to “see what works.” Downstream innovation is seldom capable of producing returns worth a damn.

The result of the sub-priming of venture capital, with public crowdfunding to boot, is an excessive amount of false-positives and false-negatives, in which the majority of wannabe VC firms dance with wannabe entrepreneurs (those who submitted to subprime arbitrage) producing a hard to watch the samba. With the public as innocent participants sold a dream of excessive valuations short of converting to renewable socioeconomic value. Much of the world’s entrepreneurial intelligence and ingenuity now deployed to produce a trojan horse to convert advertising clicks cunningly. A business model not unlike that of cable television, and by now, we should all be aware of how that business continues to dig its own grave.

Go ahead, jump on the current VC bandwagon if societal foolery is your trade.

Despite VC having been cleansed somewhat by limited partner pressure since its earlier failings, most general partners of underperforming VC firms (KPCB mea culpa, DFJ etc)  have simply regrouped in new funds hiding behind the collusion of the old team and formed by the single-digit asset allocations limited partners can afford to lose chasing the next unicorn and anything else in its slipstream. Government eggs all this pageantry of populism on (Startup America is a bad idea), because the pursuit of wannabe innovation produces a massive tax-base short-term.

So, before you ask the question of what skills you should have, let’s be clear on what goose you are chasing.

To be a subprime VC all you need is money and a diversification strategy, not unlike trading on the stock market. A reason why I call most VCs today private-equity stock traders.

To be a real VC, you must have the ability to detect and align sizable financial risk with the unique foresight of the entrepreneur you fancy. You must have the courage to wager the trust limited partners have put in you as an investor with the upside of upstream innovation projected by the entrepreneur, to deploy a timely and better normalization of the status quo to make this world a better place. And so to be a consistent outlier investor, you must be an outlier because your judgment of foresight is truly the only investable attribute that separates you from the other money-pots.

So, to answer your question, I would not study. I would suggest you take a risk in life and see how your appetite for risk produces consistent returns the world – not just you – cares about.

Join Georges October 27-29 in London, at the 2021 Climate Change Forum.

Let’s lead the world by example with new rigors of excellence we first and successfully apply to ourselves.

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