67% of Founders Prefer VCs with Operational Experience, Craig Weiss Advocates Startup Background for Investors

A recent tweet from Craig Weiss, Founder and Managing Partner at Flagstaff Ventures, has ignited discussion within the venture capital community, emphasizing the critical importance of prior entrepreneurial experience for investors. Weiss stated, "Don't go into venture capital until you've at least attempted to build a startup." This sentiment aligns with a growing trend where founders increasingly value venture capitalists who possess hands-on operational understanding.

Weiss, a serial entrepreneur himself, brings a wealth of startup experience to his role as a VC. He famously led NJOY, an e-cigarette company, to a $1 billion valuation after successfully navigating complex legal challenges against the FDA. His journey from patent attorney to CEO and then to founding Flagstaff Ventures, an early-stage consumer venture capital fund, underscores his belief in the value of practical, operational expertise.

The call for VCs with operational backgrounds is gaining traction among founders. A 2024 report highlighted that 67% of founders prefer VCs with operational experience over those from purely financial backgrounds. These "operator-VCs" are seen as more capable of providing valuable guidance on critical aspects such as faster decision-making support, better hiring and team-building advice, and hands-on assistance during pivotal moments and crises.

While some studies, like a 2017 CB Insights survey, have suggested no direct correlation between a VC's prior entrepreneurial experience and their investment success, other research indicates that successful founder-VCs often outperform their counterparts. This outperformance is attributed to the added value they bring post-investment, stemming from a deep understanding of the entrepreneurial journey and the ability to empathize with founders' challenges.

The rise of founder-VCs signifies a shift towards a more founder-friendly venture capital ecosystem. These investors often advocate for more supportive engagement, fairer deal terms, and a long-term value creation approach. Their extensive networks and practical insights in product development, market entry strategies, and team dynamics are invaluable assets for the startups they back, fostering trust and relatability.