Help Fill Knowledge Gap Between TMT ER and GE/VC

I currently work in TMT ER with a rather broad coverage spanning multiple industries, forcing our team to ramp knowledge of various industries, supply chains, competitors revolving around our space including many private companies. 

I have developed an interest in the GE/VC space and I am very aware of the lack of deal-experience in my career. However, these would be minority investments, so I believe the knowledge gap is smaller than if I was trying to learn buyout PE/LBO deals. 

I am very comfortable with 3-statement modeling/operational modeling and I know that I need to have a good grasp of structured/preferred equity and cap tables. What else would be missing from my ER experience and does anyone have some resources they suggest to learn more?


Transitioning from TMT Equity Research (ER) to Growth Equity (GE) or Venture Capital (VC) is indeed a shift that requires some additional knowledge and skills, but your background in ER, especially with a focus on TMT, provides a strong foundation. Here's what you might need to consider to bridge the knowledge gap:

  1. Understanding of Early-Stage Companies: In GE/VC, you'll often deal with companies that are in earlier stages of growth compared to those typically covered in ER. This means you'll need to be comfortable evaluating businesses that may not have established revenue streams or might be operating at a loss.

  2. Deal Sourcing and Due Diligence: Unlike ER, where the focus is on publicly traded companies, GE/VC involves sourcing deals and conducting thorough due diligence on potential investments. This includes understanding the market potential, competitive landscape, management team, and unique risks associated with startups or growth-stage companies.

  3. Valuation Techniques: While you're comfortable with 3-statement modeling, valuing early-stage companies often requires different approaches, such as the Berkus Method, Risk Factor Summation Method, or the Venture Capital Method, especially when there's a lack of historical financial data.

  4. Investment Structuring: As you mentioned, a good grasp of structured/preferred equity and cap tables is crucial. You'll need to understand the implications of different funding rounds, dilution, and term sheet conditions.

  5. Portfolio Management: GE/VC involves not just making investments but also managing a portfolio of companies, which includes ongoing support, follow-on investment decisions, and exit strategies.

  6. Networking: Building a strong network is key in GE/VC to source deals, find co-investors, and gather industry insights.

For resources, consider the following:

  • WSO Courses: Look into Wall Street Oasis courses that cover venture capital, private equity, and financial modeling for startups.
  • Books: There are many books on venture capital and growth equity that can provide insights into the industry.
  • Online Resources: Websites like TechCrunch, Crunchbase, and PitchBook can keep you updated on the latest trends and deals in the GE/VC space.
  • Networking Events: Attend industry conferences and networking events to meet professionals in the GE/VC industry.

Remember, your analytical skills and understanding of the TMT sector are valuable assets. Leverage them while building on the areas mentioned above to make a successful transition into GE/VC.

Sources: What am I expected to know as an incoming ER SA?, Biotech equity research possible with ZERO finance experience?, 3 Key Tips for Getting an ER Interview, Would you rather be in a TMT group or M&A group? Why?, TMT Internet Industry Outlook Report

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