Becoming a GP at a major venture firm is a golden ticket for life. The initial whiplash can be extreme: You’ll find yourself skiing in Aspen on the weekdays (the weekends are just too crowded, after all), swapping Aritzia for Balenciaga, and shopping for timeshares in Sun Valley.
It’s a luxurious life. So why would anyone ever leave? I’ve been digging into that question for the last few weeks, as I noticed more and more examples of dealmakers at blue-chip firms leaving to spin up their own funds.
Vic Singh, who spent the last 15 years building seed VC Eniac Ventures, announced that he was starting a new firm last month. Cowboy Ventures’ former partner Amanda Robson is raising her own seed fund. A trio of star GPs— Kristina Shen of a16z, Ethan Kurzweil of Bessemer and Mark Goldberg of Index Ventures— have left their respective firms to co-found a new venture fund.
I spoke to three others, all partners at established firms, who have recently left their lucrative jobs to raise a first-time fund—despite 2024 being the most unforgiving LP fundraising landscape in the last decade. All asked to keep their plans confidential because of regulations that limit how private funds can be advertised.
Leaving a well-established firm to launch an upstart fund is daunting in the best of times. Not only does it typically come with a short-term salary cut, it also means tough conversations with both founders and LPs, often with no guarantee that your old firm will sign off on your investment track record.
But increasingly, seed investors are buying into the trade-off because they want the upside: they’re taking more financial instability in the short run and betting that it’ll pay off in the next bull run.
Red tape, golden handcuffs
Venture has a reputation as the financial industry’s swashbuckling, rebellious and risk-taking youngest child. But as venture funds ballooned, they became more institutional and bureaucratic.
“I have many friends weighing this choice right now and expressing frustration at how large and hierarchical these venture firms have become,” a VC who recently left a large multi-stage firm told me.
The VC game is all about the upside. But with the 2022 bubble burst, most funds of recent vintages will be lucky if they pass the ‘hurdle rate,’ which is the LPs’ preferred return on investment that a fund needs to hit before partners start racking up performance-based carried interest, or carry.
So if you’re a star seed investor, you might be seething with frustration at how your fund made its biggest bets at the market’s top. Your carry is underwater, in part because it was blended—tied not only to the deals you’ve led, but also the late-stage and growth investments made from the same funds. You likely don’t have much control over your upside, as the deals you’re sourcing don’t meaningfully move the needle on a mega-fund.
At the same time, you’re hearing from peers that 2024 could be one of the best vintages yet for seed investing. So you’re thinking it’s time for you to give your two weeks’ notice.
That could be very profitable long term, but it will almost certainly come with an immediate drop in your take-home pay. “The short-term salary hit is very real,” a VC who recently left a large multi-stage firm told me.
Perfect timing
That salary cut is an especially tough pill if you’re from the generation that joined a blue-chip firm in the mid-2010s and got access to carry for vehicles that rode the last wave.
Say you joined Sequoia Capital in 2016. You start accruing carry into its 2016 vintage fund and subsequent vehicles. Fast forward to 2024, and you’re getting paid out of funds that led checks into DoorDash in 2016 at a $717 million valuation (IPO’d at $32 billion), Snowflake in 2018 at a $1.7 billion valuation (IPO’d at $33 billion), and OpenAI in 2019 at a $1 billion valuation (valued in a 2024 tender offer at $86 billion)— and countless others.
GPs have to wait anywhere between three and seven years for their carry to fully vest. By then, “some of the star GPs have such expensive lifestyles that it’s prohibitive [to leave],” said Vaibhav “Dr. V” Agrawal, who recently left Lightspeed Venture Partners to build a new venture firm.
But if you have conviction in your talents as a seed investor, and you can stomach a brutal fundraising process, there’s potential for tremendous upside.
The top-decile emerging venture managers who raised funds between 2010 and 2014, during the tough LP fundraising environment in the aftermath of the global financial crisis, netted IRR of 35%, compared to around 31% among their top-performing established peers, according to new PitchBook research on emerging managers.
Whose deal is it anyway?
Still, you have to actually raise the fund first, and many venture firms impose a huge disincentive to partners leaving: they often won’t sign off on an individual’s investment track record.
“Not everyone can walk away with deal-by-deal attribution, especially if you’re a principal. Even though you might be on the memo or the deals team, even if you did sit on the board, there’s another GP whose name is actually on the deal,” said Megan Maloney, who left her job as a principal at General Catalyst in 2022 to launch early-stage VC Dria Ventures.
Firms often say that they do this for confidentiality purposes, or because they see sourcing deals as a team effort.
The ultimate solo GP fundraising hack is having the full weight of a blue-chip firm behind you. Courtney McCrea, managing partner at Recast Capital, a fund of funds that invests in emerging managers, cited Peter Boyce II, who left his job leading General Catalyst’s seed program in 2021 to launch Stellation Capital. “I’ve invested in 105 venture funds in my career and his was the fastest process I’ve ever seen. He closed on $40 million in 30 days,” said McCrea.
“It was in part because the senior people at GC anointed him,” she added. “Most folks don’t have that.”
Featured image by Chloe Ladwig / PitchBook
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