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Great VCs come from a range of backgrounds

The most successful venture-backed companies are those with great entrepreneurs, disrupting a market at just the right time. Clearly the capital and claimed expertise of VCs do not on their own create a winning company.

The entrepreneur and founding team are the most critical building blocks. After all, entrepreneurs can be successful without venture capitalists, but the reverse is obviously not possible. Venture capital amplifies the success of the best startup companies, and also in marginal cases, the capital and support of a good venture-capital firm can make the difference between a positive or negative outcome for all concerned.

Not a Dying Species

Over the past 10 years, there have been some fundamental trends which have had a big impact both on the venture-capital industry itself and the ability of venture capitalists to support entrepreneurs. Firstly, the capital required to launch and grow startups has dramatically fallen during this time, driven by the proliferation of open-source software and the emergence of cloud-computing platforms and new marketing channels like Google GOOG +1.60% FacebookFB +1.44% and the Apple and Android ecosystems. Now startups often can launch and begin to scale their businesses with a fraction of the capital that might have been needed in the past. A more recent trend is the widely discussed phenomenon of angel investing and the arrival of crowdfunding platforms such as Kickstarter and AngelList.

Many commentators have therefore declared that venture capital will become redundant. The argument goes: “Why would you raise lots of venture capital when so little is needed to test an idea and this quantum can be readily sourced from angel investors or Kickstarter?”

While this is a good narrative supported by valid arguments, it ignores a key point. While the costs of launching a startup may not require venture-capital funding, this rule also applies to all a company’s current and future competitors. Very few startups can rely on a unique technological advantage to protect their position. The key competitive defenses that startups must erect are the network effects generated by reaching a certain scale and building a great brand that resonates with customers.

To achieve both of these before your competitors do, rapid scaling is required. This is the true role of venture capital in the modern startup ecosystem. The venture-capital industry no longer dictates which ideas and businesses get backed at startup stage, but it does and will continue to play a pivotal role in growing great technology-based businesses.

Diverse Backgrounds

Considering the changing nature of the investing landscape, what credentials, experiences and skills must a venture capitalist now possess to succeed? Should all venture capitalists ideally be former entrepreneurs? Possessing insight and empathy for founders as they cope with the challenges of growing a startup can be a winning calling card for a venture capitalist.

Many entrepreneurs proactively seek out entrepreneurs-turned-VCs for precisely this reason, and many venture-capital partnerships rightly place great emphasis on their own entrepreneurial credentials. This is definitely part of the formula for what makes a good venture capitalist. Successful venture capitalists come from diverse backgrounds — journalism, banking, consulting, large tech companies, even politics.

Transparency, respect and similar goals are each crucial for an entrepreneur and a venture capitalist to build a constructive relationship. In some of the most productive relationships, the entrepreneur supplies a depth of knowledge of a given industry and the venture capitalist brings a breadth of insight obtained from having worked with many different companies. At our firm, we expect entrepreneurs to have excellent knowledge of the specific industry they operate in, either through past experience or copious amounts of research that they have undertaken. We therefore generally trust them to have the best ideas and understanding of how precisely to craft their product or service to attack a particular industry.

The venture capitalist, by contrast should bring a range of insights and connections from the different companies and industries to which they have been exposed. Also a broader set of experiences in international expansion, channel and reseller partnerships, M&A, IPO, compensation and HR expertise can be provided by an experienced venture capitalist.

The reality is that no individual venture capitalist will bring this whole spectrum of skills and knowledge. Venture capital is a team game, and the best venture-capital partnerships provide support and a range of services to their companies. A venture capital A-team would certainly comprise one or two successful entrepreneurs, but there should also be room in the van for people who bring skills and insights from outside the startup ecosystem.

* This article first appeared in The Wall Street Journal's Accelerators blog.