Comments (26)

Dec 25, 2017

Hey everyone, I've been a long time lurker and I feel like now is a good time to give back.

Later stage VC / Growth equity is a great segment of the buy-side where you can learn about companies, business models and markets, and along the way, source a deal.

Dec 25, 2017
ilc22:

Hey everyone, I've been a long time lurker and I feel like now is a good time to give back.

Later stage VC / Growth equity is a great segment of the buy-side where you can learn about companies, business models and markets, and along the way, source a deal.

First of all, happy holidays and I hope you are enjoying your end to 2017!

I would like to know about your story. Where do you come from? What did you do to get there? Do you have any aspirations to go further?

Dec 25, 2017

Happy holidays to you too.

I'm going to go less into the details about breaking in and more about the job. I did come out of undergrad and through some networking was able to get myself a first phone interview. I did not break in through OCR, but I know some firms will and are targeted to specific schools (Ivys, NESCAC schools, top public schools etc.)

If you're really interested in VC / growth equity just reach out to an associate or analyst from one of the firms. From my experience these folks are willing to talk, and if they are impressed with you and get the feeling that you're really interested, you may be able to move on to the next phone screen or onsite interview. Don't make the conversation purely transactional. Demonstrate genuine interest and ask good questions. It's OK to ask if the firm is hiring analysts. The goal is to gain the right for the next conversation, Sourcing 101

Dec 27, 2017

Deleted double post

Dec 25, 2017

Thanks for doing this!

What's your background, and what's the normal entry path for people coming into growth equity?

Also are you enjoying the work? Talk about sourcing deals and how you became good at it

Dec 25, 2017

See the above post on getting in.

I really am enjoying the work and am learning a ton. I don't have a traditional consulting or banking background so there was a steep learning curve when I got here and I am still developing. What's great about the software industry is that (a) its the fastest growing market and (b) every single industry uses software one way or another. Through point B you end up learning about different markets.

I think the most important things to become good at sourcing are:

Be willing to grind: it is a numbers game. There is a ton luck and timing involved. For every interesting company you find, there are 10 really lame ones and ones that aren't a good fit for your firm. Doing 500-1000 calls a year (varies for firms) isn't for everyone. You need to be willing to endure the grind in order to find the right opportunity for your firm. Having a lot of "n" is very important for sourcing. You need to build the phone skills, understand how to ask good questions and develop commercial instincts.

Be intellectually curious: It's hard to source without any structure. Without structure it's hard to find companies, break into them, have good conversations and leave lasting impressions on the CEOs/executives. By being intellectually curious, you will think about certain markets and sub-markets where you want to spend time. Once you've identified the area you are going to dive into you focus there and build knowledge about that market. This allows you to know all the industry players, industry experts, find conferences to source, etc. It's pretty cool to jump on the phone with the CEO and actually have a nugget of competitive/market intel that he/she hasn't hear before. That's how you gain the right to the next conversation/meeting.

Be creative and proactive: I mentioned this above, but you need to have strong commercial instincts and be proactive. If you find an interesting company and the CEO say's she's not interested, don't necessarily take no for an answer. Come up with a compelling response as to why the CEO wants to jump on the phone and see if she bites. If necessary, bring up the company to a VP, Principal, Partner and be prepared with reasons why the company is interesting and have game plan. Not every company will concede but you'll be surprised to see how many are willing to chat after they see a differentiated, non-stock email/responses to rejections.

The last point is critical: you provide a ton of leverage to your bosses if you come in with a well thought out game plan on what to do next. I think this is universal and is applicable to all types of jobs and projects, not just for VC/PE and sourcing.

At the end of the day, I find my sourcing skills to be differentiated in the market. Not many people can say they've had thousands of conversations with software companies. Like modeling and consulting, I developed this part of the trade and was able to move up the ranks just as a banker or consultant does.

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Dec 25, 2017

Hey thanks for doing this. Just some quick questions to get this going:

1) How big is your VC/Growth Equity firm? Is the AUM range similar to those of General Atlantic, Bessemer Ventures, Summit, etc or is your fund much smaller?

2) Did you join as an analyst straight from undergrad? If so, was the analyst program well structured in terms of training and responsibilities outlined?

3) Was the analyst to associate an internal promotion? Either way, how has your role changed? Less sourcing, more deal execution?

4) Are most of your associates ex-IBD analysts / MBB consultants or is it less structured?

5) If you went into VC/Growth Equity from undergrad, were you considering banking or consulting at all?

Thanks!

Dec 25, 2017

Also if you don't mind, how is the compensation and work-life compared to your friends in banking?

Dec 25, 2017

All in analyst pay at my firm is comparable to banking. All in, it's definitely lower than that of top bucket analysts at bulge bracket banking shops. At the end of the day, I was definitely not complaining about pay and certainly not comparing it to my fellow peers at banking firms. I think compensation is variable across firms. I will say that Associate pay is standard in the industry and less than those of traditional LBO shops like Apollo and Blackstone.

I'd say work-life balance is probably better than banking. From my observations, your pulling more 9-midnight plus hours in banking and in the VC/growth equity area 7-8 to 9. Face time still matters, but not nearly the same degree at a bank. Your work product is very important (just as it is in IB) and is what's most visible to Partners. Your expected to be a lot more productive vs. sitting around as an IB analyst and waiting for pitch deck edits.

Dec 25, 2017

I'm going to be vague on some of these for anonymity's sake:

1) My firm is comparable to many of the VC / growth equity firms you see out there. AUM is between 500-2bn. I'd say GA and Bessemer are on the higher end and my firm. If you had to bucket my firm, upper-mid market is a good way to describe it. The firm has invested and continues to invest in companies that all the VC / growth equity firms want to invest depending on their asset class.

2) I did join out of undergrad. When I first got here, the program was fairly unstructured. I think this varies among firms. They usually all will have some type of formal 1-2 week training with various "retreat" like training programs sprinkled throughout the year. With all that said, it's not comparable to a 6 week IB bootcamp that you see with all the analysts programs out there. There is a ton to learn on the job and on your own. What I really enjoy is how entrepreneurial the role is. You really get to, with some direction of course, build your own path and learn what you want to learn and source the companies you want to source. My firm has done a great job in enabling development by offering access to amazing resources and driving mentor ship across all levels from analyst to Partner. From a sourcing perspective, there is no better way to train than to jump on the phone and talk to companies!

3) It was an internal promotion. At my firm I saw the responsibilities shift from nearly 100% sourcing and gradually balance out between sourcing and execution. If you source a deal opportunity where people want to spend time, often times you'll get to do some deal work. That doesn't necessarily mean financial analysis and modeling. Market is a big part of the diligence process, especially in VC/Growth Equity; it's usually easier to get your feet wet here vs. diving right into the quantitative aspects of the job. With all that said, sourcing is still a critical part of the job as an associate. You can argue it becomes even more important to find high quality deal opportunities as you build tenure at the firm.

4) In most cases across the board associates come from the banking/consulting path vs. analyst to associate path. With that said, I've seen more firms willing to promote analysts internally or from other similar firms. Again, the sourcing skill set is fairly differentiated and is attractive to VC/Growth equity firms.

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Dec 25, 2017

You menitoned that many of your colleagues have backgrounds in banking and consulting. Curious whether anyone at your firm has come from an investing background like public equities?

Dec 26, 2017

I think for the analyst position you can make the move from many roles if you know a firm is hiring.

I think public equities HF/AM --> Associate is rare, but I've seen it happen before. If I had to peg odds, they'd be low

Dec 26, 2017

are you at Qualcomm Ventures doing cold calling?

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Dec 26, 2017

I won't answer where I am from.

At my firm there definitely is cold calling, but probably not as much as you would think. Cold calling is used for when companies don't respond or have gone silent on you after already have engaged with you. Cold calling is never going to be me by first choice when reaching out to folks, which is different from other sales (inside/outside) jobs.

Dec 26, 2017

Someone PM'd me a question about email/cold call approach. I am re-posting my response so I can share with others. Glad to take PM's but if the question is relevant for this thread i'd rather answer it in here.

My cadence when reaching out to the company is as follows:

  • email - I usually cite something interesting about the company. Could be from a press release, new executive hires, launch of a new product etc. Maybe you actually have some nuggets of insight on the company, competitors and/or you'd like to share in exchange for a conversation. I usually send several emails before cold calling
  • cold call - I cold call if I think the company is worth spending time to cold call. If the company looks like it's growing fast or is interesting, I'll take the time to learn as much about the business and come up with a compelling reason to reach out. I'll make sure I'm prepared to actually deliver the quick message live or over voice mail.
  • warm call - these I have no problem doing at all. If you get a neutral to positive response from a CEO and then he goes radio silent, I have an opening that gives me a good reason to call. If a CEO leaves his number in the signature, it's fair game.

You'll be surprised at how willing CEO's are willing to chat. The odds are still less than 50%, but if you tailor your approach your hit rates are going to be much higher. Tailoring your approach means spending the time to do research on the company, the person you are targeting and the market where the company operates.

Important: the CEO generally cares way less about what firm you work for (some exceptions of course) and they care way more about his company, his employees, his customers, his competitors, his board members, etc. That means approaching your emails/calls in the same way.

They key is to be politely persistent and somewhat stalk-ish (at least for your top priority companies).

Dec 27, 2017

Thanks a ton for doing this! I'm an undergrad junior who will be joining MBB for the summer, but see myself being interested in VC/Growth Equity long term. My question is 2-fold:

  1. How often do you see consultants make the switch to your field, and generally what helped them in the process (I.e. Did they primarily do TMT work in consulting)?
  2. How common are VC/growth equity positions that focus on creating value in portfolio companies/commercial due diligence/other "consultant skills"?
Dec 27, 2017

1) Consultant to VC/Growth/PE happens all the time. While they may not be model junkies like their peer bankers, they have a very desirable skill set. Through their work they have strong interpersonal skills and commercial instincts. I've work with a bunch of different folks (associate to Partner) who used to be consultants at MBB, and i'd argue they are more impressive than their fellow bankers (they are all talented too). As long as you're smart, I think it's a lot easier to learn how to model and conduct financial analysis (in VC/Growth equity, not necessarily in traditional MF LBO shops) than to learn how to source, work with executives, interact with other VC/PE firms, etc. I'm obviously biased with this point given my path here. You hear this all the time - EQ really matters when you make the jump to VC/PE.

2) Many funds across all asset classes have an operational/consulting function. You often see this when firms have operating partners. The type of operating/consultant structure varies across funds. In many cases, as an associate and above, you are doing portfolio work: implementing GTM initiatives, executive hiring, selling the business, M&A, creating BoD materials, etc. This isn't limited to just folks who have consulting backgrounds. I'm doing portfolio work as we speak and I had neither a consulting nor a banking background.

Another thing I can't stress enough: As a result of being a long term WSO lurker, I've noticed a great deal of emphasis on the idea that financial modeling = success, job satisfaction, value, etc. I urge people to adjust their view. Financial analysis is becoming more commoditized; it is a must have in the PE industry. In pure VC, you're never doing deep hard core financial analysis. As an investor in VC/Growth, you're constantly evaluating management teams and asking yourself:
- Is the Founder/CEO capable of growing this business and can I work with him as a minority investor?
- How do I best position myself to win this deal opportunity?
- What are the market dynamics that will allow this company to achieve a certain level of growth over the next 5-10 years?
- What are our competitors doing?
- Is the current go to market strategy the right one for scaling this business?
- What key management roles are missing in this company? What kinds of people do we want leading sales, HR, product, etc.?
- etc. etc.

You're not going to answer these questions by being able to put together a pristine LBO model with a complex capital structure. You need the qualitative data in order to have the inputs for the model. In VC you're evaluating the actual code and product, in Growth Equity you're evaluating market and growth potential and in PE you're evaluating if you can increase price and gross margins. That all requires qualitative work and judgement, which goes into the model inputs.

This is the same in other industries. If you're an MD at a BB or MBB or CEO you're definitely NOT doing modelling. You are managing new and existing relationships to generate business. You are leading others. You're relying on your subordinates to conduct the necessary financial analysis because you've already demonstrated your analytical aptitude and much more.

Note I'm not discounting financial analysis, it's just not the be-all end all. My general advice to a college student is to work on building the interpersonal and leadership oriented skill sets, along with everything else. One of the best and easiest ways to do this early in your career is to network and do so effectively and with purpose.

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Dec 27, 2017

Thanks!

Dec 27, 2017

Hi ilc22,

Thank you for doing this. I really appreciate it! I'm currently in the interview stage for the Analyst position at an early stage VC. I have some questions for you:

  1. Do you have any favorite VC blogs, newsletters, twitter handles, etc that you follow on a daily basis?
  2. Do you mind to describe your thought process on assessing the founders? Especially if they're the first time founders. One more thing, how do you remove the bias of comparing them with "Serial Entrepreneurs"?
  3. Given that I'll be in the early stage VC (hopefully), what are some of the common traits that you see in the founders that are able to make it to the later stage VC?
  4. I'm thinking about 80/20 here. So, in your opinion, what is the 20% of your works that lead to the 80% of your outputs? Is it market research, networking, email, etc? Also, what are the desired outputs that VC Partner expect from their analysts?

Thank you again for doing this. I'm so excited when I saw Patrick posted about this thread.

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Best Response
Dec 27, 2017

1) There are many, many different people, blogs, etc. you can follow
- Enterprise Irregulars / David Skok (Matrix Partners) - really good stuff. Covers content for specifically software founders and is aimed at helping companies scale, primarily those in their early stages (0-20m ARR)
- SaaStr: another SaaS start up aimed blog. Great podcasts too
- newsletters: Finimize, Pitchbook, Fortune Term Sheet, Axios Pro Rata
- Any top tier VC firm like Sequoia, Bessemer, Battery, Andreesen will have a twitter page. Many of the Partners at these firms will also have twitter page. As you go up in the asset class, that is less likely.
- and much, much more

  1. My experience is limited as I am just an associate. It takes many, many years to be good at evaluating founders/CEOs. From my experiences and from observing some of my Partners, you want founders who have a clear structured vision of the company. You want humble founders who are self-aware enough to understand what they're really good at and what they aren't good at, which means they know where there are gaps in their executive team. If you have a start up team with a highly talented VP Sales, CMO, CHRO, etc. that is usually a reflection of the CEO's ability to build a team. This obviously varies across companies of different stages, so keep that in mind. In general, not all the time, strong first time founders are usually product oriented and have strong domain in their market; they are weaker in operational and tactical execution. I'd like to make a distinction between Serial entrepreneurs and professional CEOs. Successful serial entrepreneurs are those who have had success in a certain domain and have continued to do well within their guardrails. These types of folks are the ones that get the hi-profile VC funding (Reid Hoffman, Paypal --> LinkedIN, Peter Thiel, Paypal --> Palantir, etc.) Professional CEOs are folks who are strong operators and are hired alongside a product focused founder (who is now the CTO, CPO, President, etc.). Again, you see a lot of late stage growth companies with these types of CEOs because they know how to manage a company that is doing 50-100m ARR, which is WAY different than a company doing 20-30m in ARR. At the end of the, being able to judge folks takes time and experience; I am certainly early days there. I will say though, the insufferable ones are much easier to figure out.

3) I kind of answer this in point 2, but I'll reiterate that it's generally hard for founders/CEOs to scale up and down. If you are a product focused founder, it's more likely that you'll have difficulty in managing a company with 500 people and doing $50-100m in ARR. If you are a F500 CEO, chances are you're not used to managing a 15 person company that's pre-revenue. If there is a common trait, it's wisdom (failures and mistakes) and experience. Again, I am very limited in experience here.

4) I would focus on being structured in how I find and generate opportunities. I've found success in picking a couple of markets and going really deep into them. This means understanding the different sub-segments of a market, laying out the competitive landscape and it's incumbents and disruptors, figuring out the key subject matter experts in the industry, figuring out the different types of customers, etc. Once you find a type of market, then you go all in: conduct market research (talk to customers/partners of companies, review surveys, read Gartner/Forrester), talk to industry experts, attend conferences, and ultimately talk to companies. The more and more conversations you have and become more "in the know", the easier it'll be to understand what types of companies are interesting and have strong, engaging conversations with those companies since you are knowledgeable about their market.

5) Desired output in VC: find high quality deal opportunities! While doing that, provide as much leverage as possible to the Partner. For example, when working on a deal you should think about laying out to Partner:
- The game plan for winning over the founder
- The diligence plan: what are the key questions we need to answer in order to feel comfortable about doing this deal and how do we execute on finding answers?
- Are there people who we can talk to in this industry or in our network that'll give us a a valuable perspective on the deal and market opportunity?

By laying out a thoughtful game plan, you'll build a ton of credibility with the Partner. The key is to give the Partner something to react to. So instead of asking the Partner: "do we want to do this deal?" You should say "I still don't know enough about this deal, but I think we need to think about XYZ in order to come up with the right answer. Here's how I think we can go figure all that out." That statement gives a Partner a chance to REACT and chime in with thoughts. By the way, it is completely fine if the Partner disagrees - just another learning moment for you

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Jan 1, 2018

Thank you so much! I really appreciate this!

Jan 1, 2018

I might have missed this but where do you see yourself going in the next 5 years or so?

Jan 7, 2018

I really don't know. I've really enjoyed my time so far and have a lot more to learn. I'd love to be where I am at now, but if not, I can see myself working at a company (maybe portfolio company) or at another VC/growth equity firm.

Nov 14, 2018

Hey thanks for taking the time. Really appreciate it.

Feb 1, 2020
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