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Angel Vibes or Institutional Vibes in Venture Capital – Choose One

I have had the pleasure and opportunity to work on my own fund, Precursor Ventures, for almost 9 years at this point. I have also had the opportunity to talk to a lot of people who want to start their own funds. Over time, I’ve realized that most of the conversations I have with new managers are not about their portfolio construction, strategy, or fund size. Most of these conversations center on whether the person wants to operate more like an angel (angel vibes) or to build something that feels more like an institutional venture firm that they can scale and will endure beyond them (institutional vibes).

Yes, I know there is a real risk in talking about vibes in venture capital. But I haven’t found a better way to talk about this topic other than using vibes as a proxy for what motivates someone to go out and raise a brand new venture capital firm in a world where thousands of firms exist. I now spend the majority of my time talking to new managers about what kind of firm they want to build as opposed to the strategy they want to pursue. One thing I’ve learned almost a decade into running my own firm is that the founding GP’s motivation and interest is the constant and the investment strategy can and should respond to the way the market develops over time. So knowing what you want to build and why is a fundamental question that all new managers have to answer for themselves.

So, what do I mean by angel vibes? Angel vibes are mostly about taking the things that make angel investors awesome and trying to scale those things up as far as you can go. When I talk to founders about what they love about their angel investors, the answers are consistent. Angels make decisions quickly. They bet on people before there is data. They are supportive to the end, possibly even to a fault. And most angels never talk about things like portfolio construction, reserves, or the business of raising a fund; the goal is to have a personal relationship with the founders and to behave the same way you would as if it were the GP’s own capital (because it really is their own capital for angels).

Institutional vibes are different. And by different I don’t mean better or worse – it’s just a different orientation. Institutional vibes are about creating an institutional firm that will have rules, processes, and infrastructure that will allow you that firm to scale, raise more capital, and perhaps even persist beyond the original founder(s). Institutional vibes are about thinking about what it means to build a firm that’s bigger than the founder and that embraces all of the benefits and constraints of having outside capital. It means caring deeply about portfolio construction, reserves planning, and all of the things you have to do to run a successful, professional venture capital firm. It also, generally speaking, means embracing building and managing a firm that will be larger than a single person and will start to feel more like a small-to-medium sized company than a cottage, boutique firm. There’s no opting out of firm building and management if you have institutional vibes.

Whenever I meet people starting venture firms, I try to get a sense for whether they have angel vibes or institutional vibes. I say this not to say that where you start is where you will finish; I have many friends who started with angel vibes and decided to build and scale institutional firms and vice versa. But it’s the one thing that I encourage everyone to think about when getting started because this is one of those core, fork-in-the-road decisions that will have major impacts on the type of firm you build.

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