AMA: 2nd Year Associate at a VC fund - Breaking in With a Fund of Funds + IB background

The Stranger's picture
Rank: King Kong | 1,969

About

After taking a relatively non-traditional path (broken out below), I'm now in my second year at a well-regarded corporate fund focused on that invests in healthcare (HCIT / Devices / Services) companies across the full life-cycle (seed => LBOs alongside PE megafunds). Happy to share thoughts on the space in general, my day-to-day, or the lessons I learned making the journey to this point.

My Background

Undergrad @ top 50 public school (non-target) => MSF at a semi-target => Sponsors at a MM IB => top-tier HF FOF => Current VC fund

Ask me anything

I will do my best to respond to all questions but there could (probably will) be some lag here in there. If your questions are specific to your background or recruiting situation, I am also a mentor through WSO's service and would recommend you go through that channel (it's a great resource in general).

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WSO Podcast:

Member @The Stranger explains why he has always been in a rush. From finishing college in just 20 months, to landing a key internship before his MSF in order to position himself to break into IB, to prepping for buyside interviews -- he was always moving fast until the unexpected happened. Some great advice in the podcast on positioning yourself for your next career jump and life in general.

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Comments (25)

Aug 2, 2019

Thanks for doing this OP! I'm considering joining a top tier HF FOF (have an offer) and would ideally like to end up in a consumer tech focused VC. Most people I've spoken to have told me to continue to get operating experience at high growth startups if i want to end up in VC, which is why I've stalled on making the jump.

How did you make the transition from the FOF?
Most folks on WSO talk about how FOF doesn't really give you exposure to the modeling skills that are critical for other investment roles; curious if you Fund gave you opportunities to build that skill set or if you showed experience in it through some other initiative.

Aug 2, 2019

Happy to DM with more specifics if you'd like

Aug 2, 2019

Right, I'm going to try and answer in a general way (for the benefit of the community), though I will answer your specific question as well. I think there are two relative areas of consideration when you're evaluating the value of switching jobs to get into VC (or any other specific endpoint) - 1) what is the value of your current role vis-a-vis VC and 2) What kind of exposure will you get at the new gig?

For me, #1 was easy - I was not in a geographic hot spot for VC and Sponsor coverage banking is of almost zero value in the VC recruiting market.

For #2 - what made this role exciting for me was that it offered me the option of moving to a bigger market (NYC), comp was good (needed this as a hedge since VC associate roles are lower paying), and this FOF had a VERY significant PE co-investment practice. I was in board rooms for multiple $500mm+ global private companies during my time there. This is hard to replicate and I would include this as a key piece of diligence if I were in your shoes.

We can speak specifically to your situation via DM but I probably wouldn't leave an operating role (at a start-up / high growth public company) for a FoF unless I had reasonable confidence around my ability to do at least some direct investing. The only other thing that might be of similar value that I can think of is if the FoF has an in-house, quant-heavy hedging strategy (you could probably parlay this as domain expertise for a fin-tech or enterprise tech VC).

Hope this helps!

    • 3
Aug 2, 2019

That's very helpful, thank you! I just sent you a message as well

Aug 2, 2019

What skills do you think are critical for a VC associate? Hard skills mostly.

If theres one hard skills you could improve, what would it be?

Whats compensation like?

Is there opportunity for advancement at your firm? Whats your next step?

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Aug 2, 2019

1) From a hard skills perspective, the key skill at the associate level is liquidation modeling. That is, you need to be able to do waterfall modeling across several different scenarios and translate that into returns. You also need to be able to build a functional 3 statement operating model (these tend to be MUCH less complicated than anything you would see in IB). Even though it's not that applicable, the other big one people screen for is coding / data science skills.

2) I don't know if it counts as hard, but I would love to know more about growth / marketing analytics. It's not critical as a VC associate but it's critical to being to drive growth post-investment (for more senior deal makers) and it helps you speak in the same language as founders.

3) Cash comp for VC associates tends to be in the $150-$200 range in top tier markets (SF/NY). Nobody's getting rich at the lower levels of the VC pyramid.

4) It's a 2-3 year and out program at my current firm. As far as next steps go, I'm looking at either senior associate / VP level roles at a bigger fund or a mid-level manager role at a Series A / Series B start-up. I tend to think the latter will do more to improve my investing skills, while the former is lower risk.

Let me know if any of the above is unclear.

    • 3
Aug 2, 2019

Interesting responses (jumping in here) -

Do you feel that not having a data science or coding background puts one at a disadvantage now? Is that something VCs would welcome giving you the chance to learn and pick up?

How are the hours like?

You mentioned being a manager at startup in series A/B might be better for your investing skills - why's that?

Aug 2, 2019

Thanks for the AMA!

  1. Can you talk about what the day to day work was like at your FoF HF and now your VC firm?
  2. Things you liked and didn't like about each of your past experiences?
  3. How did you pivot yourself from HF to VC? Do you think it's a common move?
  4. What are skills you've gained in these experiences?
  5. What's next for you? What are your medium and long term goals?
  6. Most important aspects to focus on when trying to transition roles (e.g. networking, learning about the industry)?
  7. Aspects where you think you've done well in your career? Aspects where you feel you should have done better?
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Most Helpful
Aug 4, 2019
JDS07:

Thanks for the AMA!

  1. Can you talk about what the day to day work was like at your FoF HF and now your VC firm?
  2. Things you liked and didn't like about each of your past experiences?
  3. How did you pivot yourself from HF to VC? Do you think it's a common move?
  4. What are skills you've gained in these experiences?
  5. What's next for you? What are your medium and long term goals?
  6. Most important aspects to focus on when trying to transition roles (e.g. networking, learning about the industry)?
  7. Aspects where you think you've done well in your career? Aspects where you feel you should have done better?
  • The day to day at my FoF was about 30-50% prepping for and processing meetings (we had to create equity research type notes with summary + analysis) for existing and prospective managers. Another 20-30% was spent on analysis and reporting for the funds I covered. The balance was typically spent on some pretty interesting special projects - for example, I spent a lot of time with our CIO doing an intensive statistical analysis of the risk factors that predicted success for our co-investments.
    At my current fund, I would say about a third of my work is related to process new, low probability meetings with companies - we are inundated with in-bound deal flow just like every other VC. Another third is spent on diligence etc. for live deals (new opptys + current port co acquisitions / fundraisings). The rest is typically high level industry analysis - taking a look at a new space, evaluating its attractiveness, and identifying the best players in it, etc.
  • At my FoF, the best part was exposure to some super smart people (people managing 15bn+ funds) and the flexibility on my hours (as well as being encouraged to pursue almost academic levels of independent research). My chief complaint was around the fact that we actually invested in new managers pretty rarely - maybe 2 a year? This is not to say we wouldn't be working to launch new funds with existing managers or take a lot of meetings, but with a portfolio of $20bn that's been around for 15 years, the opportunity set and our needs didn't overlap all that often. Oh, and our sole LP had some ridiculous processes that created a ton of work (despite our effectively having total discretion for the portfolio).
  • At my current fund, I find the whole venture process and exposure to bleeding edge innovators to be super addictive. We run lean teams so it's great a great learning environment for me. My chief complaint has to do with our being a corporate fund - while we have full discretion to chase what deals we want, having a dual mandate around finding things of strategic importance to our LPs as well as generating attractive returns sometimes compresses our focus more than I would prefer.

    1. It is not a common move. As I noted above, the co-investment experience was a big factor in helping me make the switch. I also was coming from a personal place of passion about the sector (healthcare) we focus on, which is differentiating in a market filled with purely prestige focused people.
    2. I think the biggest skill I've gained is how to ask the right questions of smart people. Whether it's a blue chip fund manager or a double Ph.D founder, I've gotten comfortable being on the other side of the table of someone who has both a general intelligence + subject matter advantage on me and conducting myself in a way that gets answers to the tough questions without being combative. I personally think this is an underappreciated part of the business and am working all the time to get better at it.
    3. See my response to you above.
    4. I'm going to say networking but I want to condition this a little bit. If you're doing it right, networking should also be a learning experience - if you're prepared (have read about the industry, that person's experience etc.), it should be relatively easy to ask open-ended questions that demonstrate this and give them an opportunity to teach / correct you. This may be my personal bias, but I love it when people trying to break into VC call me and are invested enough to actually learn. An example was someone on WSO (who was trying to break in from a Midwestern FoF) who sent me a mock VC portfolio they had been using as a leave behind in their networking efforts. It gave me something concrete to help with and we were able to skip a lot of the tedious BS networking and chat about our views on the ecosystem.
    5. Probably the best thing I've done in my career is select for groups / roles where I was guaranteed to be surrounded by people smarter than I am, and in a position to learn from them. I think this makes some people uncomfortable but it's invaluable. My big learning from all this is that there is no rush. I'm far from where I thought I would be ten years ago, but it's also worked out (for the most part) for me.

    Cheers!

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    Aug 7, 2019

    Thanks!

    Was it a tough decision to leave your FoF for this role? How exactly did you come upon it?

    HH send out so many opportunities now - was your strategy to talk to many firms to get a feel of what you wanted to do?

    How important was geography to you (e.g. being in the Bay area for the VC edge)?

    Realized I should have asked this earlier, but by a "corporate fund" do you mean something like GE Ventures? Where a big focus is on finding investments that directly aid the main business as opposed to a complete free-for-all VC fund?

    How often is your team making investments? What is your IC process like and your role in it?

    How important is firm prestige / brand name, in your view? I'm deliberating over some offers between potentially learning more staying where I am now and a better name elsewhere but with much worse culture.

      • 1
    Aug 2, 2019

    where can we learn the liquidation and waterfall modeling you describe able, as well as the other hard skills?

    Aug 4, 2019

    I think lots of VCs are willing to teach the specifics as long as you demonstrate a strong conceptual understanding of how this works. My best advice on this sort of thing is to scour the internet for models + prompts (I think Macabus might have something) and work them till you get it. The other thing I would recommend for everyone interested in VC is to read Brad Feld's venture deals AND to take his online course by the same name.

    Oh also subscribe to both his and Fred Wilson's blogs. They are great for venture generally and also will get into the weeds on valuation / fundraising / dilution mechanics pretty often.

      • 2
    Aug 4, 2019

    I am currently working in ECM ... what do you think my pathway is to VC?

    Also what type of hours are you pulling?

    Aug 5, 2019

    unrelated, but how was your ECM experience?

    Aug 6, 2019

    It's good, the group is industry agnostic so get to work with a variety of companies from software to waste management, learn a lot about the markets and the work is challenging. There is no modeling so its not good for PE but I think it is a great experience. Plus solid work / life balance at the same salary

    Aug 6, 2019

    Honestly, your ECM experience is at least as relevant as my IB background was. Have you been able to work on any private fundraisings? If I were you, I'd see if you can find a role at a start-up as an intermediate step - you should have experience and connections that could be attractive to a start-up at say the Series A stage.

    As far as hours, I'm at about 50-70 hours a week? Average is probably closer to 50.

      • 1
    Aug 7, 2019

    Thanks for the AMA. I'm in a similar position now, working at a corporate fund.
    Are you looking to move to an independent VC firm?

    Aug 7, 2019

    Appreciate your help! What type of position should I look for in a start-up. I was more thinking along the lines of getting a role at a FANG or something like that in strategy, product management etc.

    Also what does your day-to-day entail / what skills are most important? Is it more qualitative in analyzing companies or do you have to do modeling, do you talk to the entrepreneurs etc.

    Aug 8, 2019
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