Long Term Success in VC?

6mo

Most Helpful

What were some things you did right?

Stayed curious, enjoyed digging deep into tech, experimenting, learning to code.
Aggressively networked and met new people in my industry (ventures, VCs, etc), you're only as good as your network in this industry.
Honestly, when I first started in VC I think I made just about every mistake you could make, just don't make the same mistake twice.
Early in my career joined a brand new ("emerging manager" they are called in the industry) early stage VC, learned every part of the business and how it works, but felt like I was drinking from a fire-hose everyday, never had a day where I felt comfortable at work until years later.
Left VC for a while to build credibility as an operator, and got to see other investors and how they work.

What are some things you wish you knew?

How to create mental checklists and tests for my work to ensure really high attention to detail (as there isn't time for others to review your work).
How to read, model, and interrogate a cap table (and correctly infer what messed up thing has happened at the company to make the cap table look the way it does).
How to rigorously manage my time when there's no structured direction but high expectations.
That a good generalist is just a specialist in everything.
Learning to say "No" to time consuming initiatives that may be useful, but add little marginal value. Time is your most precious asset, and you need to be building on your pipeline and network every day.
That strategic investors (corporates) are a double edged sword that will happily kill a portfolio company in different creative ways to acquire IP or talent for cheap.
How to politely interrupt a founder, and get answers you want without wasting time.
To (almost) never let the founder lead with a pitch (with slides). Have a mental model on how to assess the venture at this stage, and ask questions to fill in the gaps in that model, don't waste time on a call looking at slides, you want more of a conversation, and in some cases a demo, not a pitch.
Not to be embarrassed to ask dumb questions. If I had to give one piece of advice, this would be it.
To avoid the impulse to give generic advice (I took on a role at a startup for a few years before I went back to VC, and being an operator showed me that 80% of the advice I used to give founders was mostly useless bullshit, and the remaining 20% is hard-fought from experience). If you do give advice, share stories from personal experience, or things you've seen that have worked from other founders, and try your best to communicate the foundation for the advice you're giving, don't try to make a decision for a founder, just give them the tools.

What helped you stay in VC for the medium to long term?

Since I got a VC job early in my career, I actually left VC to get more experience in other areas. I tried launching a startup, I joined a venture-backed startup, I worked at an incubator, I had a consulting business for startups, and eventually looped back to VC. Being credible in front of founders and having real experience or insights to strengthen your advice or investing judgment really makes a big difference. Someone smart once said that "VC is your last job, not your first, and for good reason". I don't fully agree, but I get the spirit.
There's no real job security, so you need to constantly improve your skillset, knowledge, network, credibility. It's very difficult when you start, and you're never in a position to coast, even the big names are always active. That said, my perception is that work-life balance is much nicer than PE or IB and you have more autonomy.
Learn to reason from first principles: start with the basic facts, build up your areas of understanding, identify areas to validate, and identify areas where you need to build conviction. If these things make sense for the stage of the company, then your ability to build the right type of conviction drives your alpha. You want to be non-consensus, and right. That means being able to develop your own ideas and learning to defend them. This is a hard skill, and you can never avoid some degree of uncertainty, but you need to make a decision.

Hootie

Prospect in IB-M&A

Anonymous

6mo

Thank you - this was really helpful! Not OP but I was wondering if you could expand on this point: How to rigorously manage my time when there's no structured direction but high expectations? How have you worked on managing your time (assume it's split between networking / diligence / research work) and what are some advice / tips you might give to a younger self (newbie in the industry)?

6mo

Since there is less structured direction, you need to both (1) set good personal objectives and (2) manage your time effectively. For objectives, try to align them with the core functions of the firm (sourcing, diligence, closing, portfolio support, LP relations, and LP sourcing), and be transparent with your principal/VP/partner about how you're spending your time above the work they give you. As a junior you'll be mostly doing sourcing and diligence, so I would focus your energy on building out that network and being present at events where those companies are, then provide notes on people you've met and useful market knowledge you've gathered to your team.

On the management side of things, you likely won't have structured tasking, so I recommend setting up something like Asana for yourself, and do personal agile sprint planning where you track your velocity of work (points). Make sure to clearly scope work and set deadlines, and get immediate clarity if something is unclear to you, surprises are fun in your personal life, but you should be as predictable as possible in a work context. Once you have this in place, it'll be easier for you to communicate your bandwidth and how you're spending your time to senior people at your firm. It also makes it easier to promote you as they see you helping push team objectives, but try not to overstep your boundaries, nobody at the firm expects you to be convincing LPs to invest in the fund, and you are more likely to do harm than good.

Hootie

Analyst 1 in VC

Anonymous

6mo

HootieMcVenture
What were some things you did right?

Stayed curious, enjoyed digging deep into tech, experimenting, learning to code.

Aggressively networked and met new people in my industry (ventures, VCs, etc), you're only as good as your network in this industry.

Honestly, when I first started in VC I think I made just about every mistake you could make, just don't make the same mistake twice.

Early in my career joined a brand new ("emerging manager" they are called in the industry) early stage VC, learned every part of the business and how it works, but felt like I was drinking from a fire-hose everyday, never had a day where I felt comfortable at work until years later.

Left VC for a while to build credibility as an operator, and got to see other investors and how they work.

What are some things you wish you knew?

How to create mental checklists and tests for my work to ensure really high attention to detail (as there isn't time for others to review your work).

How to read, model, and interrogate a cap table (and correctly infer what messed up thing has happened at the company to make the cap table look the way it does).

How to rigorously manage my time when there's no structured direction but high expectations.

That a good generalist is just a specialist in everything.

Learning to say "No" to time consuming initiatives that may be useful, but add little marginal value. Time is your most precious asset, and you need to be building on your pipeline and network every day.

That strategic investors (corporates) are a double edged sword that will happily kill a portfolio company in different creative ways to acquire IP or talent for cheap.

How to politely interrupt a founder, and get answers you want without wasting time.

To (almost) never let the founder lead with a pitch (with slides). Have a mental model on how to assess the venture at this stage, and ask questions to fill in the gaps in that model, don't waste time on a call looking at slides, you want more of a conversation, and in some cases a demo, not a pitch.

Not to be embarrassed to ask dumb questions. If I had to give one piece of advice, this would be it.

To avoid the impulse to give generic advice (I took on a role at a startup for a few years before I went back to VC, and being an operator showed me that 80% of the advice I used to give founders was mostly useless bullshit, and the remaining 20% is hard-fought from experience). If you do give advice, share stories from personal experience, or things you've seen that have worked from other founders, and try your best to communicate the foundation for the advice you're giving, don't try to make a decision for a founder, just give them the tools.

What helped you stay in VC for the medium to long term?

Since I got a VC job early in my career, I actually left VC to get more experience in other areas. I tried launching a startup, I joined a venture-backed startup, I worked at an incubator, I had a consulting business for startups, and eventually looped back to VC. Being credible in front of founders and having real experience or insights to strengthen your advice or investing judgment really makes a big difference. Someone smart once said that "VC is your last job, not your first, and for good reason". I don't fully agree, but I get the spirit.

There's no real job security, so you need to constantly improve your skillset, knowledge, network, credibility. It's very difficult when you start, and you're never in a position to coast, even the big names are always active. That said, my perception is that work-life balance is much nicer than PE or IB and you have more autonomy.

Learn to reason from first principles: start with the basic facts, build up your areas of understanding, identify areas to validate, and identify areas where you need to build conviction. If these things make sense for the stage of the company, then your ability to build the right type of conviction drives your alpha. You want to be non-consensus, and right. That means being able to develop your own ideas and learning to defend them. This is a hard skill, and you can never avoid some degree of uncertainty, but you need to make a decision.

Not the OP but is great advice, thank you for sharing. I was wondering if you could elaborate more on the two items below:

How to politely interrupt a founder, and get answers you want without wasting time. Question: How do you successfully do this?
To (almost) never let the founder lead with a pitch (with slides). Have a mental model on how to assess the venture at this stage, and ask questions to fill in the gaps in that model, don't waste time on a call looking at slides, you want more of a conversation, and in some cases a demo, not a pitch. Question: What is the difference between a demo and a pitch with slides? Do the founders typically have slides that they reference, and how do you let them know to do a demo instead?

6mo

Generally founders want to talk about what they want to talk about, and it's often not what will make or break a decision for you to invest. Related to this, formal pitches usually eat up a ton of time, and often focus on the wrong things. The solution is to have a mental framework that you can follow, and ask questions around this framework, I typically preface the discussion by saying I prefer something more conversational rather than a formal pitch, below is an example of how I use my framework:

1. Write down the following headings on a notepad: Product/Problem; Market; Competition; Technology/IP; Regulatory; Traction; Financing; this roughly parallels some of the key headings in our diligence memo.

2. Before the meeting, review the pitch deck, website and/or crunchbase/pitchbook of the company, and any other relevant high level reading (~10 mins max), and under each heading put bullets with the answers that you have already. This doesn't need to be thorough, just enough that you're not starting with nothing.

3. Write down any critical questions that occur to you in this review that will help move the needle on any of these categories (or the investment as a whole).

4. Once the call/meeting starts, break the ice, then give a casual overview of the meeting, usually a brief intro of our fund followed by a discussion about the company; for early stage companies the question I like to start with is "can you tell me a bit about your background, and why this particular problem?". OR if I'm tight on time I'll usually start with "here's my understanding of what you do, can you let me know if I've missed anything important?"

5. Once you've established the specific problem they are solving, and how they are doing it, then go and validate other headings, including commentary on big areas of concern.

6. Finish with a financing discussion, see where they are in their process, and offer to help.

Sometimes founders like to ramble, and there's a few ways you can interject, for example you could say "appreciate the added detail on X, just in the interest of time, wanted to learn a bit more about Y", or "sorry to interrupt, you said X, just wanted to get clarity on Y". There's a few ways to do this depending on personality and whether they are technical or more of a business type. Apply active listening techniques such as paraphrasing what they said back to them, or asking for clarification if they are vague about something.

Hootie

opbwalaloo

Senior Monkey

6mo

Super helpful context--

Somewhat related question.

I'm in two very prelim discussions around hybrid roles with a small seed / early stage VC's--focus would be around helping portcos scale but also some time allocation on traditional diligence and general fund admin. (Both are very small) Trying to gauge the right way to structure the opportunity--my goal is to "break in" and parlay this into more of a traditional role in the VC ecosystem. Is there precedent for this kind of entry, what type of comp structure should I look for, and what the longer term payoffs would be? Context is a I'm post-MBA with 4+ years in growth strategy consulting. This will require a paycut but the option value from a career standpoint seems worth it.

HootieMcVenture you seem seasoned / have perspective from a lot of different facets of the ecosystem, so welcome your POV. Thank you!

Authored by: Certified Consulting Professional - ConsultantCertified Consulting Pro

6mo

Hard to say exactly without knowing a bit about the funds, but the roles you are positioned for here are effectively “platform”, ie your responsibility is to support their ventures, and on diligence it seems like you act as more of a KOL “key opinion leader” rather than an analyst. That means you don’t get much exposure to the core work of a VC which is (1) sourcing and (2) diligence. Effectively you’ll be a part time consultant. Now I don’t want to dismiss the value of the relationship and the exposure you’ll get, but it might be hard to sell that experience for a proper VC role, and a more impactful role might be to act as a venture partner (if you have exp, it’s non operational, and your job is to source deals), or offer to join a VC as a scout, and part time help source deals. A little bit of that experience with a reputable fund and you will be able to sell that experience into a proper analyst or associate role at a VC fund.

Hootie

opbwalaloo

Senior Monkey

6mo

Thanks Hootie--appreciate the POV. Most of my work as a consultant has been in the diligence space primarily for Growth / LMM / MM PE funds so I'm familiar with key diligence questions mostly from an outside in POV (albeit at a later investment stage). My work there is the manager / director level (again, 3-4 years post MBA), so this would mean stepping back into more of an IC role with the payoff being access/exposure. More context on the funds, both have raised their second funds of around 25-40 AUM and basically have a founder/lead GP and junior analyst/associate already on board. Given their scale/AUM they don't have a ton of $$ to invest in new roles but also may be looking for more scrappy support.

1.) When you say a more meaningful role would be as a "venture partner", are you saying I would need to come in with actual VC investment experience? (Won't pretend I currently have, but I am familiar, have connections, and can do self study / training)--also (and this is pure bet-on-myself optimism) I have confidence I'd do well sourcing deals--plays to a lot of my strengths (a sentiment which has been echoed by senior people in the VC community).

2.) Acting as a "VC scout"--am I understanding that basically this is an offer of free labor to help purely with sourcing deals to prove myself and use that to parlay my way into a proper role either with the funds I'm already in discussion with and/or elsewhere? How long does this typically take? Context, I'm not on the younger side so this is more pivot-y for me and don't think I can make the move to start over in a pure analyst role.

Appreciate your added perspective / thoughts on the above and how best to position myself

Authored by: Certified Consulting Professional - ConsultantCertified Consulting Pro

1 reply

m_1

Human

6mo

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