As an operator turned founder turned investor I get asked often the pros and cons of being each. I often respond with a sports analogy — it isn’t mutually exclusive but do you enjoy being a player, the goal-scorer, or the coach? Because you need all of them in a game. While generalizing is practically impossible, this post is focused on providing a framework especially for the tech industry and for those considering a career change. Jumping across the choices is common in a fluid environment like Silicon Valley, in fact some of the most successful entrepreneurs had significant experience in one or both careers first. Speaking of the word “entrepreneur,” for the purposes of this article it will be synonymous with “founder” and “investor” with “venture capitalist,” as opposed to other types such as angel investor.
- stability — As an operator at a large company you should be maximizing stability ie that you will continue having a job tomorrow. If you have doubts then definitely look for options.
- equity — Unless you are an early employee or very high up in a corporate hierarchy, chances are your equity is low.
- salary — The way to maximize your compensation is typically through salary and if that’s not the case, then consider pushing other levers including bonus and benefits.
- guidance — A corporate framework almost by definition provides a high amount of guidance. Granted the specific framework may be very different, as the parody of corporate structures below shows.
- context switching — The bigger your company the more focused you will likely be ie less context switching and more about depth rather than breadth.
- stability — What stability? The startup financing cycle below provides a window into the roller coaster.
- equity — Yup, this is what you are maximizing. Starting something risky is the ultimate exercise in delayed gratification.
- salary — Founders famously forego salary at the early stages, especially before getting the first institutional investment. A good rule of thumb is that overall your salary at a startup is half of you working as an operator.
- guidance — You can certainly look at other startups, your investors + advisors + board members for guidance but a startup is inherently unstructured.
- context switching — There is obviously context switching on a daily basis but at the end of the day all activities are focused on the company’s success.
- stability — As a VC you spread the risk across multiple bets but remember power laws i.e. only a few startups that are very successful drive the returns. A firm’s reputation being a self-fulfilling prophecy is a myth, the table below exemplifies the norm that the same firm has uneven performance over time.
- equity — VCs will collectively take 20-30% in each of seed, A and B and 10-15% in later rounds. Smaller VCs will look for a way to maximize equity by ensuring prorata or even super prorata rights, larger VCs by muscling through with high amounts of cash and high valuations.
- salary — VC firms are themselves power laws ie the very top dogs get disproportionate amounts of salary and carry. So the mean, median and mode are actually quite sober relative to compensation across the tech industry.
- guidance — Same as being a founder, very low.
- context switching — Very very high. As a VC you are optimized for breadth and thus constantly learning + unlearning, whether it is to identify good companies or to help them meaningfully.
Summarizing the discussion below — there are obviously exceptions to all rules, this is my view shaped by my experiences and also what we subscribe to at Tau Ventures:
Originally published on “Data Driven Investor,” am happy to syndicate on other platforms. I am the Managing Partner and Cofounder of Tau Ventures with 20 years in Silicon Valley across corporates, own startup, and VC funds. These are purposely short articles focused on practical insights (I call it gl;dr — good length; did read). Many of my writings are at https://www.linkedin.com/in/amgarg/detail/recent-activity/posts and I would be stoked if they get people interested enough in a topic to explore in further depth. If this article had useful insights for you comment away and/or give a like on the article and on the Tau Ventures’ LinkedIn page, with due thanks for supporting our work. All opinions expressed here are my own.