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Navigating the venture capital ecosystem: realities, risks, rewards

Understanding the entire startup ecosystem and how they all work together is the first step in getting into venture capital.

Accelerators: did you just come up with an idea? Accelerators help in the early stages of building out that idea and are considered a school for startups because they’ll connect you with mentors, coworking spaces, and sometimes capital. Common accelerators include YCombinator and TechStars, but here’s a list of over 50 accelerators.

Investors: are you ready to raise? Founders usually start with angel investors. They can be friends & family or anyone using their own money to invest in your idea. Venture capitalists, investors who form partnerships with other people's money to fund startup companies in exchange for equity stakes. One way angel investors can invest in your startup is through syndicates; a group of angel investor who put their money together to invest a larger amount.

Corporates: corporations like Google, Microsoft, and even Porche, will set aside capital for high-risk investments (like startups), purchase innovation, retain talent/ they form their own accelerators. Common corporate ventures: Google ventures, porche ventures

Governments: potential acquisition for startups when you get into the corporate ecosystem. 

Universities: through endowments, universities will help fund startups or equip them with resources. This is common in biotech because researchers can make new discoveries and build a company from it.

Service providers: startups need a lot of services, including legal, financial, marketing, sales, etc. There are service providers that will exclusively help startups. 

Venture Capital 101

Venture Capital is a way of investing in startups that the firm hopes will 10x their investment. They’re looking for the next Facebook, Uber, or Airbnb. Investment firms might come in at different stages of the companies lifecycle (preseed, seed, Series A, B,C etc…IPO), which we go into here.

Why not just go to the bank?

Venture capital’s niche exists because of the structure and rules of capital markets. Someone with an idea or a new technology often has no other institution to turn to. Usury laws limit the interest banks can charge on loans—and the risks inherent in start-ups usually justify higher rates than allowed by law. Thus bankers will only finance a new business to the extent that there are hard assets against which to secure the debt. And in today’s information-based economy, many start-ups have few hard assets.” - How venture capital works | Harvard Business Review

How an investment firm is set up 

Anyone can start a venture capital firm as long as they have millions lying around….which most people don’t. So, they need to raise, just like a startup would raise from a venture capital firm. The general partner/managing partner/firm founder (all mean the same thing) will raise Fund I. They’ll raise from limited partners (LPs): friends, family, angel investors, and if they’re well connected and established, from large institutions. Investors in venture capital funds are typically very large institutions such as pension funds, financial firms, insurance companies, and university endowments—all of which put a small percentage of their total funds into high-risk investments Once they raise Fund I and the capital is deployed to startups, they might want to raise Fund II, then Fund III.

Depending on how much capital the partner is hoping to deploy, that’s how much they’ll raise. If they want to invest in 100 startups and put in $25K for each one, then they’ll raise $2.5M. Fund managers have different ways of investing, so their number and investment strategy will vary from fund to fund.

What are the possible gains and risks?



The goal for managing partners is to triple their money in 10 years. If they have a 100M fund, then they’re trying to triple it to 300M  = 20% Internal Rate of Return (IRR)

Only about 10% of VCs get 20% IRR. Half of VCs are not even returning LPs money and then about 35% are doing between 1x and 2x. Expect to lose 1/3 to 1/2 of the investment. So if you invested in 10 companies, expect to lose half of that - you’re left with 5 companies. If 2/5 do well, you’ve made a 1x on your investment, if 3/5 do well you’ve 2x’ed, if ⅘ did well you’ve 3x’ed, and if 5/5 did well you’ve 10x or 20x or 50x return.This is also an emotional investment since you’ll be with founders during ups and downs. 

Fun network

Low Liquidity - from seed to exit, takes on average eight years and in some cases 15. Don’t expect to get your money back any time soon.

Learn new technologies

Less diversified as an investment. It’s not like the stock market and the check sizes are larger to be involved. 

Way to mentor founders

Less Control - you can’t control how the companies work

Why is breaking into VC so challenging?

My first introduction to Venture capital was at a pitch event. Founder after founder pitched to investors and I was immediately mesmerized by the passion the founders had for the mission, but also the strategic thinking that the venture capitalists had when questioning them about traction, product development, and business models. I went home and googled: "How to become a venture capitalist." One article after another mentioned how cutthroat the industry was because there wasn't a single route to take. And even if you did happen to get a role as an analyst, you had two years before it was time for you to find a new role or get your MBA to eventually become a Partner at a firm.

After a year of learning about the industry, I've made it my mission to make it easy for others to understand this industry. My next question was "why?" Why is it that <2% of Latinas are in VC and/or founders. Here's what I learned:

Access to capital: Historically, minority communities have faced significant barriers in accessing capital. Discriminatory lending practices and systemic inequalities have limited their ability to secure the funding necessary to start and scale businesses, but also invest in them.

Network effects: The VC ecosystem has long been built on networks and relationships. Early investors often came from tight-knit networks, such as alumni from prestigious universities. These networks, while valuable, may have inadvertently excluded underrepresented groups, including Latinas. Teaching first-generation Americans how to network and advocate for themselves is something that is often overlooked. 

Representation matters: The lack of visible Latina investors and founders can contribute to a cycle of underrepresentation. Without role models and mentors who share their backgrounds, aspiring Latina entrepreneurs and investors may feel discouraged or believe they don’t belong. 


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