Making a Transition into VC?

Hello everyone,

I've been working in commercial real estate tenant representation in NYC for about two years now, and I'm interested in making the transition into VC. I've spent my time focused on the tech industry, and have brought in two deals, having assisted a trading company, and a tech PR company grow. I also attend a ton a tech events, and interact with a large number of tech executives.

My passion is to assist companies grow, and I believe I'll have a greater impact at a VC firm. Does anyone have any experience making a transition to VC from a non-finance background?

What sort of skills are needed for an entry level position at a VC company?

What's the day to day like?

Any recommendations on which firms to look at?

I'm fully willing to do as much work as possible to learn, including weekends and nights.

 
Best Response

I'll paste a portion of my reply from another similar thread about 15 below yours on the first page right now.

APAE:
(i) Put yourself on as many generic venture lists as you can manage. Good ones are Pro Rata (from Dan Primack, the don of tech newsletters), Term Sheet (what Dan spent six years editing at Fortune, now written by Erin Griffith after his departure), StrictlyVC, and Launch Ticker (from Jason Calcanis, arguably the most prominent angel, sort of this younger generation's Ron Conway).

You'll get daily emails (sometimes morning and night). If you read them thoroughly and start building any kind of tracking or bookmarking system of your own, this is 30-60 minutes daily that will keep you up to speed on what's happening. Over a couple years, you'll have an immediate grasp on useful things to know, like the rough intervals between certain hot companies' raising rounds, average round sizes in specific verticals, and updates on who is currently where (it's good to know when investors are changing shops).

(ii) Absorb as much quality long-form content as you can. At the beginning, the immediate value is that you simply know what some of the smartest minds in venture are thinking. Over the longer term, you will be able to critically evaluate someone's thesis in light of your own insight.

Top-notch ones to start with include the First Round Review, Benedict Evans' blog, Fred Wilson's blog (AVC), all of Paul Graham's essays, Bill Gurley's blog, Marc Andreessen / Ben Horowitz's (look at A16Z.com), and Stratechery.

(iii) Go talk to people. The best way to learn is from people doing what you want to do. VC operates religiously on warm intros, so figure out who in your immediate network can make an email introduction to someone at a fund where you'd have an interesting conversation. Make sure it's always a double opt-in, otherwise the person you're trying to reach will very likely file you away in the 'avoid please' box.

Ask smart questions. This means it's better to not ask for meetings or calls until you can participate meaningfully in a conversation. This is the difference between you asking "please tell me about your experience" and "I've enjoyed studying your portfolio, congrats on the Series B so-and-so raised; did you see any compression in SaaS unit economics as the company nailed down the model and enters the growth phase?"

For that latter one, you'd need to know a) what 'unit economics' means (for a quick primer, read this), b) what the current barometer for 'good' unit economics reads, and c) that a company raising a Series B is expected to have finalized its business model to the point that there aren't really unknown variables at play and an investor can expect X dollars to turn into Y revenue. (This is what "growth stage" refers to, in that the business has left the "early stage" (solving unknowns) and is now focused on market share capture.)

(i) and (ii) prepare you for (iii), and over time, (iii) starts informing how you view all that you learn in (i) and (ii); it becomes a self-reinforcing loop.

Good luck. Your goal is very doable, and if you work hard at getting smart, you shouldn't have trouble moving over. The problem I see from people trying to switch from finance to venture is that they remain stuck in the banking recruiting mindset. You can't grind your way through. Simply meeting a raw volume of people doesn't matter. You need to meet the right people and you need to interact with them in the right way.

This last paragraph really points at a piece of your mindset I think may be a bit wrong. It's not about the volume of people you meet or events you attend, it's the caliber of your interactions that matter.

You have three questions; let's break them each down.

  1. "What sort of skills are needed for an entry level position at a VC company?"
  2. "What's the day to day like?"

Both of these are addressed pretty well in another post I made in another thread:

APAE:
Is it an analyst or associate role?

The two are very different in VC. Analysts respond to partner requests for industry research, deal diligence, portfolio company support, and board meeting prep. Associates are primarily focused on sourcing: getting out into the community to advance the fund's brand and maintain/boost dealflow.

If you're an associate, you shouldn't ever really have a concern over your career prospects if you're doing your job correctly. Why? Because you are so knit into the community that not only is your access to dealflow stellar, but your access to career opportunities is as well. You should be seeing (and being asked for help filling) job descriptions for your portfolio companies, your friends at other funds' portfolio companies, and even roles at other funds.

If that's true, then basically every two years, you know you can hop into a role at another fund or startup with more pay and the exact set of responsibilities you want. Switching between funds typically happens when someone doesn't see as clear a path to promotion as they want (i.e. after three years as an associate out of undergrad you might switch to another fund to gain the Principal title / or after five years as a Principal somewhere without getting a seat as a partner, you may switch to a firm about to announce a new fund as a partner there).

You shouldn't be too worried about the fund you're joining imploding as long as they're still in the investment period of their current fund. They have management fee income and will be able to pay you. The only time I'd be concerned is if the firm was in the harvest period of their latest fund and had either chosen not to raise a new fund or tried to and failed due to lack of investor interest.

In short, for skills (some of these are traits):

  • independent research (you need to be very self-directed and also efficient; it's like drinking from a firehose)
  • active listening (pulling out the heart of what someone's telling you, being able to ask successive questions that elucidate the truth or data that someone may not have stated explicitly)
  • communication (you need to be able to articulate your ideas or learnings succinctly and accurately)
  • project management (you will have an unending list of deliverables due, both internally and externally, and you have to balance the mini-crises that pop up that require immediate attention as well as the longer projects you're working on steadily)
  • pathos (it's hard to win in venture as a low-EQ person)
  • humility (you will be proven wrong time and time again, whether by one of your partners showing you how your entire analysis was wrong or a founder you're meeting for the second time discovering just how little you really know about his sector; you need resilience and low ego)
  • passion (if you aren't genuinely excited about how technology is reshaping the world, you won't wake up early and stay up late cramming as much into your head as you can; there literally are not enough hours in the day to do everything that needs to get done inside a fund, and if it isn't something you love, you'll get lapped by the people who have it)

For more on the day-to-day, I'd read pretty thoroughly on Medium. Tiffany Zhong (who essentially had a self-made Thiel Fellowship-type role at Binary Capital) wrote a long one. Here is a fairly thorough GSB case available for purchase. You can find more on this with cursory research on your own.

  1. "Any recommendations on which firms to look at?"

Anyone that will take you. I'm not being glib; it's a small industry. Your odds of getting into a First Round or GC or USV are comparatively lower (given that those are prominent firms with stellar track records who have their pick of strong college grads willing to take a $70k/year entry-level role in the industry, associate candidates who've spent 1-3 years in a fast-moving startup, or seasoned operators who've been managers at a mid/large-sized tech company and are looking to switch hats). That means you need to draw up a list of every fund you can identify that invests at the stage you're interested in.

Here are a couple other threads on venture I commented in that I found in my history:

Good luck.

I am permanently behind on PMs, it's not personal.
 

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Changing your attitude in the first place?! VC is somehow entrepreneurship at the highest level and if you need someone to tell you how to reach your goal instead of finding out your own way, you'd be doomed as entrepreneur and hence in the VC.

Anyway, try to study the more profiles of the VC analysts, associates, and so on you find on the web (e.g. VCs, LinkedIn, interviews). Find the common traits, do a HAVE/HAVE NOT comparison and understand what you lack.

Generally speaking, VC is providing companies capital and skills. As junior hire, you will requested to do a first analysis of the investment opportunities and to work on the invested companies. As for the first, you require:

critical thinking knowledge of what's going on in the industry. While you'll hopefully develop the first at HBS, the second one is something you have to work on your own. Re the second one, I think it's more a matter of dedicating time and energies to study the specific situation and find similar cases to solve issues.

 

So first off, congrats on HBS. That should open up a lot of networking opportunities in VC.

Second - it’s generally quite difficult. Buyside post-mba in general is difficult because it’s highly desired but a lot of places run lean and only hire as needed (ad-hoc) vs. classes like IB or consulting. Just like with PE, it’s ideal to have come from a VC background pre-mba. And even then, it’s tough. Also, roles available in the summer may not translate to FT opportunities because the VC shop doesn’t actually have a need for analysts / associates / sr assoc (some are probably just providing a summer slot to keep a good relationship going with top bschools for future hiring needs, or really just to get some summer labor/help).

That said, while I didn’t speak with HBS alum specifically, I was previously contemplating b-school as a way into VC (without prior VC background going in) and spoke to some people that were successful in landing offers. The people that do have to REALLY hustle. They had to do their own homework and understand the industry and trends (read TechCrunch or CB insights or Fred Wilson’s blog, and podcasts daily), network their ass off so they make their own connections with VCs in the area, get involved with the local startup ecosystem and scene (e.g. volunteer their time as advisors for university run accelerator programs or local accelerator or incubator programs), and so on. One guy I spoke with said he offered to provide a VC a lot of free research and work (in the form of industry summaries, forming his own investment thesis, identifying interesting companies that fit that VC’s stage and interests).

They essentially had to demonstrate how serious they are to wanting to be in VC. While not having prior VC backgrounds, it also helps when they come from some finance, ops, startup type background. Tech consulting could work. You just need to talk to how you add value.

The folks I spoke with were at a MBA business schools">M7 or similar type school, so I imagine HBS would be “easier” in that it could provide more opportunities. But I don’t think it would be any different in terms of there being limited VC spots for FT. I think you’ll have to really network with the startup and VC scene in Boston, and get involved so that when you DO get an audience with interested VCs, you can talk the talk.

 
Gangster Putin:

1. Have you finished your MBA or do you still only have undergrad?

2. Is it possible to break into early stage funds or is it later stage funds that do the lion's share of recruiting?

3. What was your game plan as far as networking?

  1. No MBA, but I was working in a post-MBA role at MBB consulting. I know it's not the same, particularly to many VC's, but it's relevant.

  2. VC recruiting is interesting in that anything is possible. If I understand the story right, there's actually a semi-famous girl out in SFO right now that joined a mega fund out of high school. That aside, later stage funds definitely hire more junior folks. There's just more work for them to do. I was talking with a partner who had been brought in to run a growth fund for a good firm on the east coast. He had 2 associates working with him, compared with 2 associates assisting the other 6 partners doing earlier stage work.

  3. My original game plan was to just talk to as many people as possible that are plugged into the tech scene. Conversations with founders help me develop my portfolio of interesting startups and potentially connect me to their investors. I do whatever I can to convince VC's to talk to me, ask interesting questions, and put interesting startups in front of them. I've actually set up 3 startup VC conversations in the little time that I've been doing this.

The game plan kind of shifted a month or so back. I got a ton more traction than I expected from working with recruiters, so I've been mostly focused on the processes that I got into through that.

 
wannabeconsultant999:

What skill set would you say is most important and necessary for becoming a VC Analyst? What jobs besides MBB and IBD/PE would you say are good to break into VC?

Great question... I don't know a lot about the differences between the analyst interview process and the associate process. To the extent that they're the same, the biggest thing VC's will be looking for is demonstrable passion for technology. In terms of specific skills, they'll generally expect you to have pretty good analytic capabilities. To be completely honest, actual skills seem a lot less important than your credentials and how you come off in a conversation.

A survey a few years back listed the top most common backgrounds for VC partners at top firms. Oddly, F500 was the single most common at 58%. Of course, that's a little misleading, as many people will have some sort of corporate experience; that doesn't mean it's the best way to get a job in VC. Startup leadership/founding was up there with 50%, not unexpectedly. MBB was next, at 33%. Finance (IB/PE) was actually last, at about 25%. Without those 3 or 4 backgrounds, you're basically down to networking your way into a job, so it doesn't really matter as much what your background is.

Frank Slaughtery:
are you looking at early or growth and nyc, sf or boston?
Yes, yes, yes, yes, and yes. I know the traditional advice is to focus, but I've found that counter-productive. Of those, the only one that I haven't gotten traction in is Boston. You're going to be starting at Booth in the fall, right? I'm actually in the final round for a CHI firm.
 
Gangster Putin:

I forgot to ask this question in my previous post, but do you have knowledge of what European and Asian VC recruiting is like?

No, not really. Sorry :(
Frank Slaughtery:
i can see the logic in casting a wider net since the number of seats can get very narrow if focused on a specific stage/city. what differences have you seen across SF, NYC, and Chi? Yup I'll be at Booth next year - I'm curious to hear more specifics about the CHI firm you've been speaking with. PM me if you aren't comfortable posting in the thread about it.
San Francisco definitely has blinders on when it comes to the rest of the country. For better or worse, Stanford degrees are over-valued and the general opinion is that if you're not already in the Bay then you're not worth talking to.

NYC is similar, but in a very different way. There are more late-stage firms and they're more finance background friendly. NYC has a generally less open culture than the west coast... entrepreneurs are less willing to share their ideas with you and VC's are a little more likely to pull the busy card.

Chicago (and any smaller market) is generally much more open. VC's are successful by being open to as many opportunities as possible and being very approachable.

I'm happy to talk about my experience with the CHI firm, but I'll hold off until I get a decision one way or the other :)

 

I would advise against this approach. The current "en vogue" thinking in the startup world is lean methodology. Assume you don't know **** because, no matter how much experience you have, that's the reality. Ship as much as you can as fast as you can and iterate on your business model until you get some traction. Then, when you have something more than an idea, go raise money.

Also, don't expect VCs to know anything or add any value to your business. Even if they're former entrepreneurs the market changes so fast that if you're not in the game for even a few months, you're experience is outdated. They're there to give you capital, not run your business.

 

Talk to customers, figure out what they want and what they will pay you for (bonus points if you get them to pay you real money in advance). Then build it as quickly and cheaply as possible. Most of what you try will fail. It's better to find that out in 2 weeks than 2 months or, God forbid, 2 years. Once you hit on something with some meat behind it, you can make the product better, raise a bunch of money and take over the world.

Ries' Lean Startup is probably worth reading but be careful not to get bogged down in reading/preparation. You will never be ready and there's always more for you to learn. While you were doing market research your competitor just built that awesome idea you had and sold it to Yahoo for $100MM. (If you insist on doing prep work you'd be far better served by becoming technically competent than becoming an industry expert)

The natural tendency for a lot of us Wall Street types is to overanalyze and overprepare. That's something I'm constantly working to overcome as an entrepreneur. I'm not saying be undisciplined and sloppy, but you need to get comfortable with experimentation, uncertainty, and failure.

The world has come a long way in understanding how startups work and the "lean" approach seems both intuitively correct and empirically sound so I'm inclined to think it has some staying power. Of course, you'll find your own way and reach your own conclusions.

One final note of caution: there are a lot of people running around doing "lean startups" on the side and using it to justify releasing shitty, half-finished products. Don't be one of them.

 

Brilliant post, and for that, a silver banana. Thank you very much for the detail. Both the 2nd and 3rd paragraphs resonated especially well with me and made a lot of sense.

With the lean approach, do you still go through the formal business plan strategy (like the in-depth ones that are usually estimated to take about 50hrs to put together) or do you just put one together as you go?

 

most VCs aren't hiring right now. VC is a net negative busienss..given the economy, their portfolio companies must be doing horribly (well, most). many of them are getting blown up as a result. Some VCs aren't even getting committed capital from their limited partners. it's messy.

note that VCs usually hire when they raise capital for a new fund. as you can imagine, i don't think any vc's raising a new fund right now.

 

I would suggest targeting tech-focused growth equity firms or the growth equity groups of firms that are traditionally known as VC firms. It's going to be very tough to get into a top notch VC firm as a VC associate (these positions are extremely rare), but getting experience in mid to later stage tech investing would allow you to utilize your banking skills while getting exposure to the tech environment.

My background: previously worked in the tech group at a top tier MM firm, now am in the growth equity group of a northeast VC firm with between $3B - $6B AUM.

Firms to consider... not an exhaustive list or ranked in any way: Battery, Spectrum, Bain Cap Ventures, North Bridge, Polaris, Redpoint, TA, Summit, Volition, Norwest, Insight, TCV, General Atlantic, Bregal Sagemount, ABS, General Catalyst, Highland, JMI, LLR, Mainsail, Accel-KKR, Primus, Susquehanna, Vista, Westview, Openview, etc.

 

Read these forums. Partiularly, read the VC Vernacular forum. Specifically, read Jimmy Dormandy's thread. When you've read everything on the VC forum and JD's thread, and when you've read everything those threads have told you to read, then you should be asking these questions. Really, you need to do a lot of reading and a lot less asking questions for probably the next 3-6 months.

Also, here you say you want to do HF: //www.wallstreetoasis.com/forums/hs-college-financing

I have a feeling you don't know what you want to do, so you're looking at the most prestigious/sexy industries. Get over that high school bullshit. For one, it's obnoxious. Two, you're going to spend a lot of time cleaning up after yourself if you convince yourself you want to do something you don't.

So... start reading, stop asking questions. :)

"You stop being an asshole when it sucks to be you." -IlliniProgrammer "Your grammar made me wish I'd been aborted." -happypantsmcgee
 

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