Thread by Eric Tarczynski

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In 2017, I knew zero people in VC.

I took out $50,000 of loans and slept on couches/in cars.

By 2022, I managed hundreds of millions, and had backed startups like Ramp and Anduril.

The five most important lessons learned building a venture firm *truly* from scratch:
1/ Logo-hunt early

This is one of my few regrets.

On Fund I, we didn’t chase hot cos raising rounds led by household names.

Instead, we stuck to our knitting, leading rounds and buying outsized ownership in cos we had conviction in and had sourced through our infra.
1a/ Original view: if we do what we said we’d do — lead rounds/concentrate, back great talent, bring a unique model to market — that'd be enough.
1b/ Turns out, when you’re building a venture firm truly from scratch (limited track record, no Ivy, didn’t work in venture prior, etc.), *logos + investing alongside name brands matter far more than anything else.*
1c/ LPs care: logos are a proxy for access and credibility.

Peers care: they use them to evaluate how sharp you are.

Founders care: they immediately head to your website and see who you've backed.
1d/ Fast-forward to today.

Fund I has matured, with companies like @memorahealth, @HallowApp, etc. – where we wrote the first check – and all valued in the hundreds of millions.

Raising capital these days isn't an issue. And we’ve built a 20-person team from Index, GC, etc
1e/ But it took five years, and made raising Fund II far more difficult.

Logo-hunting would’ve saved us time in the early years.
2/ Reputation is everything

In venture, reputation and brand are the most important parts of building a firm.

Early logos are just one piece of the puzzle.

You need to invest heavily in relationships with well-respected GPs, founders, and LPs.

Concretely, that means:
2a/

-- Send them relevant, high-quality deals for free

-- Become Twitter friends

-- Go to events
-- Co-invest with them
-- Cold email them
-- Grab coffee

Do whatever it takes, because relationships are currency in more ways than one.
2c/ Example: one of the primary ways LPs will evaluate you is by aggressively diligencing with their existing VCs.

They’ll ask if Partner X has heard of you, worked with you, if they’d bring you into deals.

This requires awareness at the min and ideally years of collabs.
2d/ The *best* way to build your reputation is by sending deals to investors that make them lots of money.

Example: we once gave an LP the opp to co-invest in a seed that became a unicorn.

They made millions, and their evangelism has paid reputational dividends for years.
2e/ This is the mindset you need to adopt.

Having well-respected partners at top venture firms vouch for you is the single best way to raise capital and build a reputation.
3/ It takes a village

This is deceptively simple.

Venture is a network-oriented business at its core.

There are dozens of balls to juggle at any one moment:
3a/

-- Hundreds of (mostly unsuccessful) LP meetings to raise for your next fund

-- Getting critical hires over the line for both your team and your founders

-- Deal chats with VCs

-- Negotiating term sheets + wiring money

-- Dealing with quarterly financials
3b/ And so much more.

You need to be able to both:

-- Constantly context-switch and

-- Have earned trust with an enormous cross-section of parties, convincing people at each turn to partner with you as you build your firm.
3c/ A broad coalition is necessary, but a handful of deep relationships is also a must.

Because a few VC leaders pounding the table has pushed us forward more than dozens of others passively supporting ever has.

When done right, your village will become your best leverage.
4/ Don't do it for the money

When I was starting out, I vividly remember a friend telling me that, done correctly, venture is a “get rich slow” game.

Five years in, more prescient words have never been spoken.
4a/ I started paying myself in January 2022.

You read that correctly. I continue to be the lowest-paid person at Contrary, too.

I expect it’ll be nearly a decade before I really start to see upside.
4b/ We’ve received a few small distributions from portcos, and expect to receive more in the next 1-2 years, but are yet to enter carry mode.

This is typical for a fund focused on seed deals in its early days, and most new managers I know are hustling hard.
4c/ To be clear: venture is one of the best jobs in the world, and a true privilege.

But if money is your sole goal, traditional PE and hedge funds (or joining an existing, larger venture fund that's printing mgmt fees) are far more lucrative. Look elsewhere.
5/ Do it for 20 years, or not at all

Most startups have a sense of whether they’ll be successful within 3-4 years, and have defined outcomes within 10.

In venture, it's diametrically opposed.
5a/ In 3-4 years, you'll barely have an understanding of whether you’re competent.

You’ll have completed just one feedback cycle in 10 years.

That lack of feedback translates directly to the general pace of venture firms – it’s slow. Everything is slow.
5b/ Building a brand, credibility, and a track record takes time.

5 years in, it routinely feels like we’re getting off the starting line.

The reality is that if you aspire to build a generational venture firm, 10 years is just the opener.

Expect to do it for 20 to 30.
6/ Ultimately, building a venture firm — like anything worth doing in life — is hard.

You’ll see constant rejection, especially in the early days, and if you don’t come from a credentialed background, it’s even harder.
But spending each day meeting and partnering with ambitious founders @contrary is an incredible privilege that I wouldn't trade for the world.

To the next five years.

writing.erictarczynski.com/p/five-lessons-building-venture-fund
7) @bizcarson said I needed to add a seventh, which is learning to tweet.
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