Insights From a Recovered Venture Capitalist

Venture capitalists are like great swim coaches. They guide the companies in their portfolio through the water, helping to refine their technique so they can swim faster and more efficiently toward their goals. But great swim coaches aren’t necessarily cut out to be Olympic swimmers, just as VCs don’t automatically make ideal CEOs.?

In spite of the clear overlaps between the animating principles of VCs and CEOs (a strong inclination for innovation, for example), there are key differences between the two disciplines. So, for any VCs interested in making the jump to company leadership, or vice versa, here’s what you need to know.

VCs ideate. CEOs execute.

Venture capitalists look for opportunities to invest in companies with great potential for growth and success, and then they nurture those companies with capital, advice, and introductions. And because they see a lot of companies, across all kinds of different industries, they gain a lot of insight and knowledge - which means they’re well-positioned to share great ideas with company leadership. But, unlike the CEOs who run these companies, they don’t execute.?

CEOs can receive lots of great guidance from their VC partners, but when push comes to shove, they’re in charge of making the decisions. They shoulder ultimate responsibility for every aspect of the company’s operations, which means they’re the ones who are ultimately accountable to all stakeholders - employees, the board, investors, customers, etc.?

Want to seek out potential winners? Be a VC. Want to invest in your own potential? Be a CEO.

VCs are risk-averse. CEOs are risk-prone.

By most metrics, 75% of startups fail. For venture capitalists, whose whole goal is to profit from their investments, this statistic is a clear indicator of the right investment strategy: diversify your portfolio. With multiple companies in the fold, VCs spread out the risk, and can still secure financial success in spite of a few failures.

CEOs, by contrast, have to be much more daring. They don’t have the luxury of spreading out risk among multiple companies, because they’re building a portfolio of one. So, they have to focus on creating growth with every available dollar of capital, and they have to have a mindset of infinite possibility. When you’re a CEO, there’s no other company to fall back on - so you’re driving as hard as you can with what’s in front of you.

If you’re feeling risk-tolerant, lead one company. If you’d rather take the sure bet, try the venture capitalist life.

VCs float at 10K feet. CEOs live in the weeds.

Both venture capitalists and CEOs think a lot about what makes a company function well, but they evaluate different areas of the business to make these determinations.

Venture capitalists care about the market side, more or less. They consider what factors could make a company investable and viable - and what metrics are useful for making this judgment. And, of course, they take a look at the market itself, to determine if it’s ripe for disruption.

CEOs narrow in on the company they’re running. They think about how they can cultivate the best possible market entrant, which means building strong company culture, making sure all stakeholders have a voice, and putting in place structures that will outlast their own tenure at the organization.

I spent 7 years working as a venture capitalist before I made the jump to a CEO and founder role. In other words, I was coaching swimming, and then I jumped in the pool! And though the skills I picked up as a VC were incredibly valuable, I couldn’t have successfully made the transition from a supporting role to a leading role if I hadn’t learned how to shift into a CEO mindset.?

So, if you’re considering a move in either direction, take the time to understand the nuances and put yourself in the headspace of each role.

With the right mindset, you’ll find success in either career.