Sequoia’s Doug Leone to Mike Arrington: Why You Want to Be a VC is Beyond Me

Leone then told Arrington, “You’re joining the abundant side of market, instead of the scarcity side of the market…Why you want to join [the world of venture capital] is beyond me.”<p>Because by being a VC not only is someone else doing the work but you are spreading around risk over many possibilities rather then investing years in 1 idea you have.<p>And of course it makes sense which is why many successful entrepreneurs after their one or two hit wonders go into investing and don't start another risky business. They only need 1 hit to stay on top and can have many failures in the ideas they invest in.

"Too much money is already chasing startups, including from Europe, Russia, and the likes of Goldman Sachs, Leone then told Arrington, “You’re joining the abundant side of market, instead of the scarcity side of the market…Why you want to join [the world of venture capital] is beyond me.”"<p>Is that really the case ?

<i>The firm also seems to prefer investing in very young entrepreneurs. Leone said it typically invests in people who are age 25 or younger these days. [...]<p>Leone called the shift a thankful one, explaining that if you want a founder to serve as the VP of product or in a very important technical role or as the CEO, it’s possible to have such conversations, whereas it’s “different conversation” with a 45-year-old founder who’s “bent on being CEO.”</i><p>Read: We'd rather fund a young person who's thankful just to get funding and doesn't know his rights, because it's easier to ask for onerous terms and to boot him later.

Maybe I'm missing something, but VCs take a management fee, correct? So, if you raised a $200M fund, and your management fee was %5 a year, then you'd be bringing in $10M a year before you even get started. If you have 5 partners, that's $2M a year each.<p>Then, if you make some good investments, your firm gets a cut of the returns, plus being on boards often results in stock options in the company, etc. etc.<p>It seems to me that being a VC is the catbird seat of leverage. You invest other people's money and get a cut of the results.