It depends on what you like to do.
Venture offers the chance to get to a first-row seat to the future. To work with founders and to use numbers and analysis to make decisions about putting capital at risk.
It also comes with the stress of needing to raise money regularly, to have the hustle to be able to see entrepreneurs before others have a chance to do their homework, and the vision to see where things are going.
A (well-capitalized!) search fund allows one person (or a small team) to build a small or medium-sized company with a head start (read: not quite from scratch). The hard work is finding the company, not building it. The benefits are that (a) it's easy to measure your impact on the organization and its customers; and (b) the work is exciting and intellectually stimulating.
Both jobs are worth describing at length if you're asking for one or the other.
- If you care about the cutting edge of technology, VCs see more of it than almost anyone else.
- A search fund can tie up an entrepreneur with one company for a decade. A venture capitalist spends all day, every day working with different companies, across industries and sectors, learning how different businesses work.
- VCs can take board seats and get involved only when they want to. Search fund entrepreneurs must make a difference in the company each and every day.
- Diversified risk. With a single company and single founder bet in a search fund, there's a lot of risk. A VC has a chance to spread that risk around.
- The skill-building is more diverse and often more useful if your defining personality trait is being intellectually curious.
- Working for a well-known and respected VC firm gives you credibility going forward as well.
- You build a network, centered around other investors, a brand, and find peer relationships you might not have known existed.
- The math doesn't always work, but the financial upside can be far more significant as well, if you just happen to pick the next Snowflake.
- It's an interesting place to work, in an interesting environment, surrounded by intelligent colleagues.
And, ten reasons why the opposite might be true...
- As CEO and/or CFO, you have direct operational control over the company you acquire. This is different from being on the board or an advisor the way a VC firm typically interacts.
- You get to be a C-level executive more quickly. As in, almost immediately. In venture capital, you might be an associate and then a junior partner and then a partner. That's a slow, risky and uncertain way to get to the top.
- Because you personally bought and own (or co-own) the company, you make more money than an average venture capitalist, who doesn't bear the same risks you do, and who might be dispersed across any number of funds and LPs.
- You can explore a wider range of industries (read: not just SaaS companies).
- A VC firm exists to be a VC firm. You may find that unappealing. There's a powerful gravitational pull toward the next round, the next deal, the next management team. If you're running the company, you're on the ground, creating resilience, focusing on customers and actually adjusting the levers.
- Bootstrapping a search fund gives you the chance to find and work with mentors for a very long time, in a one-on-one relationship. The close and ongoing mentorship as an entrepreneur is rare in venture capital, where folks are happy to tell you what to do but often not the when or the how.
- Because you're buying a profitable company, it won't go away after a funding crisis. You're not just standing alongside a venture firm during its temporary moment in the sun. The changes you make have a chance to persist, for the people who work there to persist and for the community that is affected to persist as well.
- It turns out that a VC firm isn't a venture firm at all. It's a partnership. All deals, all investments, all influence need to be aimed at putting the needs of the partners first. Which means a tightrope walk and a series of tradeoffs that are almost invisible unless you're the person on the tightrope. Your operating company is really about the operating company. That's liberating.
- The work of running a search fund, finding the right company, doing the analysis and driving the acquisition gives you a chance to learn what it's like to run a company. Sounds obvious, but many miss that. It turns out that running a business is idiosyncratic and sometimes arcane. But once you see the problems as a search fund entrepreneur during your search, it's a lot easier to find the problems as a search fund CEO.
- And best of all, you get to keep owning (or co-owning) it. The average search fund entrepreneur is 32. That's great, because in three or five or seven years, you can sell your company and do it again. You're not forced to be a cog in someone else's machine, waiting for a decade for your carry to finally vest. You don't have to move your family to a new city every time you switch VC firms. And if you find a business that you want to keep, you can do that too.
If you enjoyed this, you can find more insights like this on the Feta Fund website.
