Venture firms are making more hires — here’s what that means for entrepreneurs

• 
  HBO
  

  With the increase of capital in Silicon Valley, venture firms
  are bringing on more partners.

• Some entrepreneurs say that the process of raising capital
  from bigger firms has grown increasingly bureaucratic. 

 

There’s an increase in the number of venture firms making new
hires, and it’s having a ripple effect on how entrepreneurs raise
capital. 

A new report from compensation data firm
J.Thelander Consulting shows that 80% of venture capital and
private equity firms brought on new members in 2018, a 14%
uptick from last year. Much of this has to do with the amount of
money flooding Silicon Valley’s funds, as a vanguard of
established firms rake in several billions to be deployed over
the course of the next few years.

With more money to manage comes an often necessary obligation:
more people to manage it. For founders, the addition of more
partners to venture firms often means more opportunities to pitch
their fledgling businesses. One founder who declined to be named
told Business Insider that he had pitched a top tier firm
multiple times in the hopes of securing funding. Even after
facing rounds of rejection from the same firm, there was still
plenty of reason to persist.

“As an entrepreneur, you’re
literally talking to one person who might be interested in the
company, and the rest of the partners will have no idea,” the
founder said. “If one partner said no and they pass on you, you
just have to find another way in. That’s how big these VC firms
have gotten.”

The sentiment is echoed by
investors, who report that there’s often a lack of coherence
within established firms. “You’re seeing less and less
communication across partnerships,” one investor said.

More money, more politics

Another venture
capitalist who heads up a small fund said that they’d invited a
bigger firm to join a deal multiple times, and each time, the
various partners passed. As the round was about to close,
however, the same firm suggested interest — this time by a
different partner: “It was just that the right partner hadn’t
seen the deal.”

When founders seek out top tier firms, many express that raising
money is only one part of the goal. Almost as significant is the
coveted endorsement and connections a blue chip firm like
Sequoia, Andreeseen Horowitz, Kleiner Perkins, Softbank, or NEA
can offer.

But many founders say that dealing with bigger firms when they
are in the early stages of building a company brings headaches of
its own. “With more people comes more politics,” an early stage
entrepreneur pointed out. Another founder compared working with a
bigger firm to “dealing with congress,” where conflicting
personalities often come into play. 

“Venture is becoming more and more commoditized as capital is
becoming more commoditized,” said one founder. “More money means
more hires, and an increase in bureaucracy.”