Does operational experience help a VC?

The folks at PEHUBWire have done some research into the backgrounds of the 100 most successful VCs in the US, as defined by Forbes' Midas list.  See the link above for the detail, but the headline is that of the top 100, 54 had no operational experience, 25 had low level operational experience (John Doerr and Mike Morritz are in this group) and 21 had been C-level execs.

Their conclusion:

What does this all mean? Basically that a venture capitalist's resume is not necessarily an indicator of his or her future success. Plenty of operators and ex-operators have done well, and plenty of each have done poorly. It's easy — and arguably intuitive — to say that one is better than the other, but that doesn't make it true.

I think the reason that that VCs come from a wide range of backgrounds is that the skill set to be successful is very broad, broader than can be found in either operational or non-operational roles.  So all comers into VC have a lot to learn to be successful.  Ronald Cohen, perhaps the father of UK venture capital put it his way in his recent book The Second Bounce:

In private equity you have to be financially trained and to have an understanding of management, but you also have to have a strategic brain while being sensitive to tactical and people issues.

For me the main thing to think about when evaluating whether you want to work with a VC is whether you would like to see her on the opposite side of your board table every month for the next five years – and to establish that the two big questions are personality/cultural fit and whether you share the same vision and values.  (I wish these last were my own words, but in fact I borrowed them from a post Fred Wilson wrote a month or two back about building long term relationships.)

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- Tan Yinglan
yinglantan@stanfordalumni.org
yinglan_tan@hksphd.harvard.edu

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