Is VC out of undergrad a good idea?

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Background: finance major at a private semi-target (e.g. BC/USC/NYU) in the US.

I’ve been lucky to receive a return offer with a sector agnostic early stage VC (seed to series B) on the west coast. Quite a new fund (>5 yrs), but the team is very credible (partners & advisors consists of well known startup founders, a couple of ex wall street dudes, and a couple of academics) and past associates so far have exited to top b-schools. As a FT analyst the job desc would presumably stay the same as SA: drafting investment memos/industry research and helping associates monitor & advise our startups. Not much modeling as it’s early stage. Strong interaction with partners as headcount is quite small & top heavy. Very little sourcing (deal flow quite strong).

Is this a good idea? I did an IB SA in my sophomore years and didn’t really enjoy it. I’m on the fence on traditional PE as legacy industries (barring energy) bore me, but really interested in growth equity/tech investing/entrepreneurship in general. Dream end game is to have my own/be at the top of a VC/growth equity fund. Short term targets are to joining/starting an early stage venture, go into a strong b-school, and get back to VC after. I really enjoy this gig but I’m hesitant on the thought of pigeonholing my self. Should I go back for IB or even join a startup instead for a more “concrete” & transferrable skill? I’d preferably stay for a long time, but are exits easy to come by? Not sure how valuable a finance major with VC experience is (might not be technical enough for startups/PE, maybe consulting?) Currently leaning on gunning for the offer. YOLO. Thanks for any help.

TL;DR: title. early stage fund in the west coast. OP has strong interest in tech and aspires to stay in the industry in the long run. OP is thinking too much about exits and afraid of pigeonholing. help thx.

Comments (9)

 
Aug 16, 2020 - 6:16am

I don't think anyone can really definitively say that this experience would hurt your long term career prospects, since it seems like, at minimum, you'll have the opportunities and mentors to further your growth. If you like what you're doing and can see yourself doing it for 2ish years, then just go for it. Figure out your next move around 1-1.5 years in and then prepare yourself to make that jump, unless you want to stay, then figure out what you need to do to get promoted. Seems like the founders and advisors are all probably well-connected people, and if you do a good job and get on their good side, I'm sure they'll make the introductions you want.

I don't see why it's so bad to pigeonhole yourself into an industry you have a strong desire to be in. Also, if you find out you hate it, you absolutely have bschool as option to pivot.

 
  • Analyst 1 in IB - Ind
Aug 16, 2020 - 12:57pm

As someone who wished he recruited for VC, here's my perspective:

If you do IB/PE, sure you'll have more transferable skills (how to model/run financial analysis), but what you won't have is an in to the community. The VC community is generally one that is closed off/small and hard for people to enter unless they were previous operators or worked in a top tech facing IB role that they could play off to get in to late stage venture/growth and slowly move down market.

That being said, the promotion to principal/partner is extremely hard in VC. Typically junior ppl leave a brand name firm to go down in brand but to make this position. If you don't start at a brand-name firm, it might be hard (but not impossible) to make it past associate role unless your own firm guarantees you a position.

As for the skills you gain from VC that people on this forum tend to dislike - sourcing is a crazy essential skill and is the job of most senior people in any job (MD's source deals in banking, Principals source deals in all investing), thematic research/coverage is extremely important if you want to stay in the industry long term (your knowledge will be so much higher than anyone in Tech IB), network is the biggest ( a lot of times VC's judge potential hires based on how connected they are and what doors they could open)

FWIW, lifestyle is also WAY better, and you could exit to most startups or B-school pretty easily if you work at a decent VC firm that is on track to raise several funds in the next decade.

 
Most Helpful
Aug 16, 2020 - 3:33pm

This could be argued either way. I'll give my quick thoughts on the pros and cons.

The cons:

  1. You're at an unestablished fund in the most competitive (early stage) segment of VC. Although I'm sure it would be a ton of fun to run and operate a seed fund. It's nearly impossible to differentiate yourself at that level besides having better connections/access, which...if you're not at a brand name, it's going to be a fight if you end up going against an A16z. Frankly, it'll probably kind of come down to luck as to whether you can find some unknown startup that makes it big and brings you along with it.

  2. By starting in VC, even though you'll build decent VC skills of a network and some knowledge of VC investing through an apprenticeship, you'll likely build few of the harder technical skills it takes to complete a transaction. I'm at a MM PE shop that does a little later stage growth and we've interviewed former VC guys/gals for mid-level positions. What we quickly realized is that without a stronger banking/consulting/PE type of background these folks, even with their "I invested in Airbnb" type of stuff on their resumes, would have no ability in helping us with even simple deals in PE, I'd venture this would be the same for late stage growth. Legal agreements, credit docs, even just stuff like working capital adjustments, building a clean excel model, etc were black boxes to these folks and fast forward 2/3 years and you'd likely be in the same position.

  3. VC is actually a pretty poor asset class when it comes to average returns across the universe of VC firms. I don't have the number off the top of my head but essentially the way it looks is, the top decile - quartile of firms do decently and the rest actually do very poorly. Not that it will have a huge impact on you as an analyst, but know that it's not like you're starting at A16z or KPCB where the name will carry you to whatever you want to do. If the fund doesn't make it, but it takes you ~5 years to figure that out (which is very well might, VC feedback loop is extremely long), you'll end up with the skillset of a glorified SDR after a few years.

Anyways that's why I'm down on VC to start your career, here's why I like it

Pros:

  1. VC is tough to get into at any level. The fact that you already did banking and didn't love it and have a VC gig lined up is a big deal. If you know you want to try out VC for a few years, it's better to do it now than do banking for 2 years and have to re recruit with the hopes of getting a better name firm. The reality is, unless you think you could do banking at GS TMT or the likes, you're probably not getting into a top VC/Growth Equity firm anyways

  2. VC is all about network and if you trust yourself to be able to infiltrate the Silicon Valley bubble as a junior VC, the earlier you start the better. You'll have to hustle though, the nice thing about starting as a bank is that you forever have that network of analysts you can call on. In VC, it'll be all you, trying to make friends and find people that can help you.

  3. Life is short to be miserable and VC is a fun gig. Even if the fund blows up, you'll figure it out. It's a higher risk but higher reward option. If the fund does manage to do well, there's a chance you could move up and be a Principal/Partner level by your late 20s/early 30s.

  4. Sounds like the fund is off to a good start and if the B school exits are strong, you really don't have too much downside. I'd just make sure they have enough capital to continue to run for at least a few years so you can get some deals under your belt.

If I were you, I'd probably take the VC job. I would make sure to vet the firm you're joining carefully though. Do reference checks on the Partners, ask them about who the investors are, what is the vision for the fund, etc. Now a days, any mediocre investor/operator can scrap together $10-20M for a first time fund, not to mention that actual good investors who are doing the same thing. I'd really need to have some conviction that the partners have a differentiated strategy or just a massive information/access advantage ie Bill Gurley is the founding partner... to have some comfort that the fund has some runway and will be able to place the right bets on the right companies. Anyways, best of luck.

 
Sep 12, 2020 - 9:34am

I went to a top-quartile Asian VC firm straight after undergrad. There are definitely some clear pros and cons: 

Pros:
1. Learning curve - There's so much to learn, and it's a steep learning curve. If you are by nature curious and always seeking knowledge, you'll have a great time.

2. Exposure - Oof. From meeting billionaire LPs, top-class founders, other VCs, you'll make connections with people that wouldn't give you the time of day if you weren't in VC.

3. Comp. - Not as much as PE, but the money is great. Especially if you take into account co-investment opportunities with the fund.

4. Lifestyle - Don't have to go to the office, you work WHEN you want to (except when a partner assigns you something), you work on WHAT you want to (mostly).

5. Brand & Exit opps - Top tier fund -> H/S/W is very possible. Or to another VC. Or a hot startup, corporate, consulting, etc. You'll have options.

Cons:
1. Lack of feedback - A lot of what you learn are bits and pieces mentioned in conversations or the rare moment a partner says an insightful comment. Apart from that you have to learn things by yourself. Not a lot of handholding.

2. Shark tank - Venture can be a cold world. You have enemies in other firms everywhere, and your friends can quickly become your enemies. Can be tiring to keep an eye out for who can screw you over.
3. Politics - Always there. You'll have to learn how to play the game, which can be annoying if you're focused on results. Important to remember that influencing people is just as much as important as working on things that move the needle.
4. Imposter syndrome - You'll never know how good you are until you exit. And that can be a decade later if at all. Until then, you'll feel like a fake investor.

5. High pressure - From everyone. Your partners, your investors, your founders. Nobody will respect you until you earn it. And even then you'll be under pressure to perform to the best of your abilities all the time. You have to be always on. 

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