Q&A: Answering questions about working in VC

Oh and also what percentage of your work is sourcing vs diligence? And how do you differentiate yourself in the sourcing process?

All great questions. 

Recruiting is very different based on the fund's stage, size, and returns (by that last part, I mean that the best-performing funds tend to recruit more ad hoc). I met some of the investors at my fund over a year before I ended up working for the fund, and I wasn't looking for a VC job at the time. I got to know the investors over a year, and when a position opened up, they decided to bring me on. Very informal.

I'd read what's on Techcrunch for sure. Newsletters tend to be the best: Fortune Term Sheet, Axios Pro Rata, StrictlyVC, and then maybe some substacks of investors you like.

As I mentioned above, it wasn't on-cycle. There are some VC funds that recruit on-cycle like PE funds do, but most of the recruiting (especially at the more well-known, high-performing early-stage funds) is off-cycle.

PE is interesting, and I thought about doing it, but I think technology is really what will drive our economy forward in the decades to come, and venture put me front and center in the tech ecosystem

You mentioned that you met the investor at the fund before joining. What did you do before joining this VC find?

Consumer social is back again, mostly centered on new forms of community and the creator economy. Alternative proteins had their moment in the last two years with Beyond and Impossible, but I suspect it'll ramp up again -- think you're right that it'll be hot again

Small fund and no name are two very different things. Benchmark is a small fund, but it's arguably the best fund in the world. You probably know that, but just flagging for those who aren't as familiar with the industry.

I think most funds, however, are not worth joining -- just like any venture portfolio is driven by a few outliers, the industry is as well. Unless you have the opportunity to join a fund -- big or small -- with excellent deal flow where you'll build a great network, it's probably best to do something else (maybe banking or consulting, or better yet, a startup) out of school

It’s true that most associate positions are not partner track, but I don’t necessarily think that means you should turn one down if your long-term goal is VC. Instead, you can go into it with the goal to build some industry expertise and think like an investor, leave to go work in an operating role, then make your way back. 
 

Alternatively, sure, you can avoid VC altogether in the early days and instead leave banking for operating roles, hoping to move in later. The nice thing about an associate role is 1) you learn a lot, 2) you get to see a variety of interesting startups and can use that experience to figure out where to join, and 3) you can see if you actually like it as a long term option 

That’s not to say don’t do buyout PE. I’m a big believer that smart people should work on cool things that interest them, and that if they build the right network and are curious, fast learners, they can do anything 

Depends on your background. I have a friend who was an associate for 5 years at VC and left to be chief of staff at one of their portfolio companies. Also know a person who was a SWE for a startup that got to their B series funding and they joined a fund as an associate 2 years ago and just got promoted to principal this past fall. Asked them about thejr work and they said nothing’s really changed besides their title and comp. still does their own DD and sourcing but has a seat at the decision table for investments and is being mentored by a partner for partner track.

VC is very much an apprenticeship from what I’ve gathered. You can’t just dive into it at the partner level unless you’ve launched and exited a startup. You also can’t move up from associate unless you’ve got partners that want to see you grow and succeed and not just run deal sourcing and DD forever

To be honest: it’s very variable. 
 

Generally, the hours aren’t that bad - certainly not like banking or consulting. What’s different is that a lot of your “off” time is really quasi-work. You often hang out with people in your line of work: other investors or founders. The line between work and play blurs. 
 

Comp is very variable between firms. But for non-partners it’s generally in the low six figures. Some places let you co-invest. Others give you carry, although this is very rare for anyone but the principals and partners 

It’s not like banking where they care about your technicals. Very different. Aside from them needing to want to work with you, like you, etc...

You need to demonstrate an interest in the field and some unique perspectives on industries or companies you’d want to invest in over the next 5-10 years. And it helps if you can show that you have a network that helps expand beyond their own network, ie expand the universe of deals immediately. 
 

to that end, I’d think through several industries you find exciting. What problems need to solve? Why? What companies are solving them? Where are gaps in the market? How will you go about finding companies that might fill those gaps?

Having product experience plus a financial skillset is great. I’m sure you could get a great job. Startup experience is preferable but we’re nitpicking here - sounds like you have great experience (I had larger tech co / banking experience too)

You’re thinking about the strength of the team (can they execute), size of the market (could this company be big or important), quality of the business model (is there a path to sustainable economics, and is there something about this business that compounds over time), and qualify of the tech, if applicable. 
 

Most startups are going to fail, whether there’s stimulus or not. I too think that valuations are really high, but I’m not sounding the alarm on a bubble yet for two reasons. The first is that capital is so plentiful and yields so low that venture makes sense - they’re long-term bets with high upside. The second is that COVID has shown that we’re only at the beginning of the digital transformation in our economy, and software markets are much bigger than we thought 

I tend to focus on friends who are in the business and / or targeting junior people who are at funds who we’ve coinvested with. It’s tricky, because you want to find people you trust at funds that aren’t competitive - maybe they’re later or earlier than you are, or they don’t write lead checks, etc 

No, definitely not. There are definitely former bankers / sell side people who have had great careers (Gurley, Meeker) or who are younger and doing well. But it’s not a requirement whatsoever 

In early-stage venture, there’s a few key differentiators. 
 

One is experience with go to market across consumer tech and both bottoms up / top down SaaS. Investors who have been able to help companies sell and figure out the GTM motion are good. 
 

Another is deep industry relationships, both in Silicon Valley and outside of it. The best investors have both  

A third is deep investor relationships with later-stage funds that trust you. If you can help them raise a Series A or beyond, it’s a huge value add. 
 

A fourth is being someone who they are willing to work with for 10+ years. Startups are a long haul. If they only see you as a check and don’t like working with you, good luck. 
 

A fifth is a demonstrated history of being founder friendly and not trying to control the company. This is less common than you think 

I think CVC is ok, but I’d probably shoot for a traditional fund over a corporate one. The best senior people tend to be at traditional funds, so you’ll have the best mentorship as a junior employee there. Corporate funds are good too, but the investment process looks different - you’re not as sensitive to price, you might only invest in companies related to the parent company, etc. 
 

I have no idea on compensation because neither I nor any of my friends work in a CVC job. Having said that, my gut feeling is that it is comparable to what corporate development people make 

Some people in venture - especially junior ones - feel like they can build their brand and ultimately their network / source of deal flow by writing and tweeting publicly. When done well, I think this is a great way to go about. However, I often think these people are being performative and egotistical, writing for the sake of writing and frankly not saying anything important. It’s a hard balance to strike, but those who do it well REALLY do it well, and those who don’t come off as pretty transparent. 
 

Good PE investors have probably developed a sense of how early stage ventures might want to develop strong business models with unit economics that get better as they scale and with advantages that compound. If they can do that and learn how to think over a longer time horizon + evaluate founding teams, they could be good venture investors 

I don’t know. Valuations are definitely hot. I think some of these businesses need to grow into their valuations, and if they can’t, things could implode. Same is true for companies with bad economics but a path towards sustainable ones - if they don’t show improvement, sentiment could sour quickly. But broadly, yes, it’s never been easier to start a company, and software markets are way bigger than we ever expected. So I think good companies will continue to command strong valuations 

We really like founding teams rather than solo founders. It helps to have someone who can build the product and manage the team building it as well as someone who can fundraise, sell, manage hiring, and run go to market. 
 

Having unique experience and perspective in the area you’re building is a massive thing we look for. Finding people who can effectively sell and recruit is huge too. Building a business really boils down to having product vision, figuring out how to sell, and then hiring a team that can go scale all of that

Strongly doubt you’d be overqualified for finance

depends on the fund you're targeting but if you're in treasury management, stick with it for a year or more longer then pivot to a payments startup. These are hot especially around (Zelle, OCT/Push to Card/RTP/FedNow) any experience in this space will make you a hot commodity in the payment startup community. Ride out the startup and then pivot into a cushy VC job. VC, even in the later stage isn't as much financial engineering as IB/PE. CFA/MBA aren't really needed for VC but if you want to break in sooner than later an MBA at Harvard/Stanford can pivot straight into VC - albeit maybe not in the same techy/TM space you're in now and could be any sector of tech.