Boss wants to start a VC fund and has handed me (24M) huge level of power, is this a poisoned chalice or should I run with it?

I am working at a wealth management firm, been here since finishing college (nearing 2 years now). Job has mostly consisted of providing portfolio recommendations, communicating with clients, providing market commentary etc. Very generic stuff

But the business has become quite active in alternative investments in the last year, acting as a placement agent. These would usually be pre-screened (bulk of DD done by a partner firm) but I would be tasked with conducting due diligence on these from our side.

The uptake from clients in alternatives has been so strong that now Boss wants to start a VC fund (targeted raise $15m). The issue is nobody at our firm has any VC experience.

He passed over the VC fund project to a team of 4 of us to run due diligence and filter opportunities. But the senior guy on this team has taken a step back (he's under pressure in his main role regarding his bad numbers) and is barely involved anymore, meaning it’s essentially a team of 3 of us, with the other 2 being wealth management background (financial advisors).

One of our three is… not great, more seems interested in taking credit for stuff than putting in work. Other guy is decent and enthusiastic but completely unqualified.

It’s at the stage now where essentially I have the most sway on decisions, and anything I push for or want to implement in terms of process or potential investment will be approved with minimal to no pushback.

Is this a huge opportunity or am I being set up to fail miserably? I feel like a bit of a fraud to be de-facto leading this at 24 and feel like I have no credibility. I have an academic background in finance and have passed CFA level 1 (lol), but how does that qualify me to do the things I’m doing?

I have no idea what a proper VC due diligence process looks like, no track record of anything in VC, no established network of deal flow.

I have stressed to the CEO that we should bring in someone with the requisite experience but it seems to be a cost thing where he doesn't wanna pay that expense if he can help it.

Debating looking for another job to be honest as I’m on approx $45k and would rather work somewhere where there are senior people I can learn from such as IB or another VC type role (if I could get either of those) as right now I feel like I'm not developing as fast as I might if I was learning from someone senior. 

Most Helpful

On one hand, this could be an amazing opportunity to jump into VC, but with heavy caveats.

1) How confident are you that your team can raise a fund (or is this all internal $$)? Even a $15M fund in this environment is not easy to raise, particuarly if you have no prior track record.

2) How confident are you in your ability to find, pick, and win allocations in deals? This is the biggest question. As a new firm with no brand, reputation, or network, it will be next to impossible to see and get into good deals. You will have insane adverse selection. You may be able to hustle or focus in a way that prevents this, but it's incredibly hard and you're fighting an uphill battle. Is the DD you've been doing on the direct side (companies) or fund side?

3) What stage are you investing in? Does that align with the deals you've been seeing before.

Without knowing more detail, my recommendation would be to *not* start a fund unless you can hire someone internally that has strong investing experience who can manage it. An easier path is to create a hybrid FoF & direct model, where you invest some portion of your capital (let's say half or so) into VC funds as an LP, and then co-invest alongside those folks into their deals/follow-on rounds. It's generally easier for folks, particularly ones who were on the placement agent or institutional side, to pick good managers, than to pick good companies. Also much less risk, as you'll naturally have far greater diversification across the underlying startups themselves. Over time, as you get more comfortable with your picking ability, you can increase the amount that you do directs vs. funds. This could be a good opportunity for you to start dipping your toes into VC/startup investing, while learning from other VCs (who would be your portfolio managers ultimately).

DM me if you want to take this offline. Have seen a number of orgs structured like this that have been doing well.


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