Why VCs are becoming founders

December 8, 2010: 10:55 AM ET

Armed with pedigrees and degrees, some entry-level venture capitalists are finding it's more fun and lucrative to be on the entrepreneur's side of the term sheet.

By Jill Priluck, contributor

In early 2009, Bartek Ringwelski was spending his days working at Canaan Partners, a venture capital firm in Westport, Connecticut, where he analyzed pitches and learned startup basics. But after he received 100 responses to a Craigslist post for a cleaning person, he began spending his nights and weekends on an idea: a startup that would rate one-person businesses, which account for at least 15% of the workforce.

In May of this year, after raising $50,000 from friends and family, Ringwelski launched SkillSlate, a site that organizes handymen, dogwalkers, massage therapists and other solos through profiles and ratings the same way dating sites corral singles. This fall, the company announced that it raised $1.1 million in funding from Canaan Partners, First Round and angel investor Jason Finger of SeamlessWeb, among others.

There's an old adage that venture capitalists don't make good entrepreneurs. Historically, entrepreneurs who cash out after years of hard work become VCs, rather than the other way around. But given the financial crisis and the constriction of the venture capital industry, more and more VC firms are "walking dead." The result? Junior VCs are sometimes choosing to flee their plush offices for the rough and tumble world of the startups they used to be tasked with evaluating.

"What's happening to the VC industry is what they've done to everyone else. It's being disrupted," said Chris Dixon, the VC-turned-entrepreneur who co-founded Hunch.com and the Founder Collective, which invests smaller amounts in Internet startups. "The odds of a junior person becoming partner have decreased dramatically," he said.

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