Mark Suster has a new post out today over on his blog Both Sides of the Table. The subject? The ethics of sourcing roles for junior associates at VC firms. I've seen a ton of threads on this forum asking about exit opportunities at places like Summit Partners, TA Associates, TCV, Insight Venture Partners, and others. What's the one thing they all have in common? A sourcing model.
For the uninitiated, that means that as an associate you spend between 75% and 100% of your time "smiling and dialing" - cold calling entrepreneurs and trying to unearth investment opportunities. Your goal is to find a diamond in the rough - a company poised for growth, unknown, just waiting for the rocket fuel from an extra $20mm in the bank. If you do turn over one of these nuggets and get an investment done, you might spend a bit of your time working with the portfolio company, but don't count on it. I've spoken personally to guys that have spend 2-3 years at Summit and done nothing but call - no deals.
Mark describes this business model as "total disrespect for entrepreneurs" - at best a waste of time for CEOs, and at worst a predatory practice to mine for competitive information. I want to turn this over to the WSO community - anyone out there working the phones for a living? Is it turning out the way you expected? What's your take on the sourcing model?
I wouldn't recommend it for highly analytical or introverted people. I think that if you have to use sourcing (i.e., cold-calls) to get a deal, then you're probably doing something wrong. The best VCs, like many of the best financial firms out there, work primarily via networking.
no such thing as analytical or introvx or etc, analysis or not doesnt matter, cepuxuax, outx infix any nmw and any s perfx
...well I know TA and Summit are fairly well respected funds that use a sourcing model. I think this quote is most telling:
Yeah, you're right, some bigger names do use it. But it's definitely not for everybody. Actually, what CaliBanker was talking about sounds like a more sophisticated and interesting approach towards finding new deals. Use your head and build relationships (as opposed to mindlessly dialing numbers).
Interesting to see his perspective. I was actually offered a position like this outside of the US but I decided against it. I think that working at a startup is much more worthwhile but the risk and low pay for the first few years is something very few Ivy-league grads could stomach.
As my long term goal being VC, I think sourcing is complete shit for seed -> B level founding rounds. There are a ton of great VC's (Suster, Fred Wilson, Brad Feld, etc.) that live the stuff they invest in. If you really want to be a VC as fresh grad, banker, consultant, or whatever hop on with an early stage VC backed company or just start one instead go work at one of those call centers. If you're talented to get an offer from one of those shops, you could probably figure out how to get a startup going.
I worked for 6 months in a VC Shop (top 10) as a Summer Associate in Paris and the sourcing was maybe only 10-20% of my time...
From friends who still work in London or Paris, it seems that this sourcing technique is inherent to the U.S. Market.
I would like to come back to VC but not to do cold calls all the time...
I'd say it depends on the nature of the sourcing role. If you are given a calling list and expected to go down it one by one, then that role doesn't seem very fulfilling or interesting. However, if you're given a subsector and expected to be resourceful and look for opportunities that fit your fund's profile in that space, that type of sourcing role can be an interesting learning experience. In the latter scenario, you find conferences and reach out to companies with an actual thesis in mind (and hopefully and informed sense of what they do and why you find them compelling). I work for a growth equity firm and when I'm not doing any deal-related work for the partners, I'm expected to spend my time identifying new opportunities, whether that be emails, calls, or setting up in-person meetings.
CaliBankerSF - thanks for your contribution, I guess this is what juniors do in most reputable firms.
For the top VCs - deals come to you. Speaking firsthand as someone who has spoken with Sequoia, GV, etc etc + Corp Venture
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