Running a VC Firm Used to Be Like a Law Firm. Now It’s Like Building a Startup.

I became a founder because I wanted agency over what I built, how I built it, and with whom I worked. It didn’t always work out – but I always learned something I brought to the next thing.

When I moved to investing in 2013, after about a decade of founding three ventures, I thought being a founder would make me a better investor because I could relate to entrepreneurs. I understood the chaos, the loneliness, the impostor syndrome. I figured I could spot talent and win deals with my background.

That proved true. But it wasn’t the real reason being an operator paid off. In the old days of venture, you could just write checks. Pick good companies, stay out of the way, collect the returns. The job of running a firm was almost incidental. The old VC firm was more like a law firm – a collection of independent investors who shared an office and some back office infrastructure.

That world is mostly gone.

Today, running a fund is actually more like building a company. You have to hire well and build real culture. You need marketing, ops, a brand that means something to founders who have a hundred choices. You’re managing people who have to stay motivated through a decade-long tunnel where nobody knows when the light shows up.

At Founder Collective, our CFO Joe DeFilippi is a fund partner – because we think ops and finance deserves a meaningful seat at the table. We’ve expanded our Content + Community team with Joe Flaherty and Jessica Morandi while keeping our small, and start-up-y feel and DNA, and invest in operations, systems and culture.

The challenge of the business, though, is if you hit something great early, you fool yourself into believing the building doesn’t matter (“it’s all about picking”). Some firms fortunate enough to have early wins struggle later – when it turns out you needed operating instincts to build the people and systems that endure through the ups and downs.

The VCs who’ve never built anything wake up one day with smart people, lots of capital, and a fragile organization. No one’s ever had to build morale from scratch.

Founders know that feeling. It turns out it was the best training for this job I didn’t know I was preparing for.

A16z, GC, USV, Sequoia and others saw this coming – hiring CFOs, COOs, heads of marketing, registering as RIAs. I was skeptical at first, and it comes with downsides like bureaucracy and turnover. But it heralded a new kind of VC firm, quite different from its predecessors.

I suspect much of the industry is learning this the hard way. Some GPs may exit the business – not because of performance, though that too – but because they don’t want or aren’t able to build lasting organizations. Firm building isn’t easy. It requires company building DNA. Kind of ironic, isn’t it…