Hey, founders between gigs: What now?
If you exited your last company for airplane money and are now independently wealthy, congratulations! You can go golfing in New Zealand, or if you want to build another company, just self-fund. If you want outside capital, most VCs will be glad to fund you, including Versatile VC.
Unfortunately, most founders are not in that position: 9 out of 10 startups fail. Even if you achieve a high valuation, you might end up like FanDuel’s founders: their investors got the benefit of a $465m exit; the founders got zero.
As someone with “founder” on your resume, you have an extra challenge in getting a traditional salaried job. You’ve already shown that you really want to lead a company and not just rise up the ladder, which means some employers are less likely to hire you. One research paper found,
“[F]ormer founders receive fewer callbacks than non-founders; however, all founders are not disadvantaged similarly. Former founders of successful ventures receive even fewer [emphasis added] callbacks than former founders of failed ventures. Through 20 interviews with technical recruiters, we highlight the mechanisms driving this founder-experience discount: concerns related to the applicant’s capability and ability to fit into and remain committed to the wage employment and the hiring firm.”
So what should you do? Especially if your life partner and/or bank account are burnt out on the income volatility of startups?
We’ve been in this situation ourselves, both after exits and after shutting down a failure. If you’re interested in working with the private equity and venture capital industry: there are relatively few jobs directly inside private equity and venture capital funds, and those jobs are highly competitive. However, there are many other ways you can work with and earn money from the industry. Not surprisingly, the tighter your relationship with the firm, typically the more money you will earn.
Historically, most people working in private equity were former investment bankers and other finance professionals. However, as the industry has evolved, more people realized that value cannot be created through financial engineering alone. A BCG study of 121 investments found that operational improvement drives 48% of value creation in PE-backed companies. PE funds now often upgrade and/or complement management.
To identify funds that you might work with, we suggest you start by identifying the firms which are investors in companies with which you have a history. Second, more broadly, look for investors in the industries in which you have expertise. You can identify institutional investors through one of multiple online databases:
|All Investors||Private Equity||Venture Capital|
For further reading:
- Should Your Startup Pivot, Persevere, or Plank?
- Life After an Exit: How Entrepreneurs Transition to the Next Stage
- I Asked 100 Founders, CEOs and VCs About Career Transitions — Here’s What I Learned
- How Second Time Founders Can Win and Avoid Common Mistakes
- Salary or startup? How do-gooders can gain more from risky careers
- The Burden of the Nondiversifiable Risk of Entrepreneurship