Over the past decade the Venture Capital industry has found itself heavily covered by the press globally. What once was a Silicon Valley phenomenon has now exploded in several other parts of the world, facilitating economic development in many developing countries by providing capital to early stage ventures that wouldn’t be considered by more traditional forms of capital (e.g. bank debt / PE). Venture Capital is an engine that drives innovation and fuels society’s collective imagination.
With legendary examples of VC firms (Andreesen-Horowitz, Kleiner Perkins, Sequoia etc.) that supported founders who eventually remodeled the way the world functions, it’s easy to see why people are so charmed by the industry.
But what does it really mean to work in VC? Why are some of the brightest young minds flocking towards VC over careers at Goldman Sachs and McKinsey?
Long story short – being a VC is pretty great! You are paid to meet new, interesting people and have the choice of partnering with some of the smartest companies around! You are not in the driver’s hot seat yet are placed in the heart of the action. But, as with most things, there’s an asterisk that we also must acknowledge before jumping into this VC ocean.
When asked, most people working in this industry will tell you that their favorite part about the job is meeting inspiring, talented people – all trying to change the world in different ways. The diversity of conversations you have as a VC, on a daily basis, forces you to open your mind to possibilities you would otherwise never think about.
However, this is typically just a small chunk of your work load. A significantly larger chunk of your time is spent prepping for these meetings – doing research, analyzing data, preparing reports and presentations etc. Your value as a VC to these companies and founders goes way beyond the money being invested. Depth of knowledge and accessibility to a wide network are what differentiate you from your competitors in this industry.
When you’re first starting in a fund, it’s important to build your own brand regardless of role and title. A lot of the work in the beginning involves actively reaching out to your extended network and fending for yourself when it comes to searching for deals and making yourself visible. It is crucial that the founders and other investors you’re meeting know what you’re interested in, what you bring to the table, and what your hypotheses are in the areas you’re talking about. Needless to say, initially, things can be slow. People typically don’t know you and will need more in order to prioritize having a conversation with you. However, once you invest enough in building your personal brand, these conversations start becoming easier and more inbound.
It is then simply about finding a needle in a haystack. Well, “simply”…
With recent record highs in the amount of venture capital chasing early stage startups, it’s no surprise that there is a shift in power dynamics towards the best founders, who now have a choice in where to take money from. A well-defined, thoroughly fleshed out investment thesis then becomes your North Star – allowing you to find founders and companies that are the best suited partners for you and who you are the best suited partner for.
Therefore, your weeks typically consist of a handful of founder meetings for diligence, some legal meetings to support with closing deals and negotiating terms, 3-4 internal meetings with your portfolio, 1-2 investor meetings with other VCs/ angels, occasional board meetings (if you’re on a board as a director or observer), and 2-3 events that you attend to ensure people know who you are and what you’re up to. With all day events and calls with founders in different time zones, being a VC isn’t limited to 9 – 5, providing a demanding but flexible schedule.
Part of the reason why it’s so difficult to break into this industry is that your ability to succeed is closely linked to your ability to spot trends and read people. Therefore, to be well prepared for the job means being well aware of what is happening around you, especially in the industries you are investing in. Everyone you meet gives you some insight into sector trends and what’s hot versus what’s not. Top down and bottom up thematic research provides better understanding of customer, technology, infrastructure, and channel readiness – all essential in the investment decision-making process. Events and conferences are important to validate your hypotheses and concerns.
One of the biggest sources of disappointment you see in young professionals joining VC funds is the percentage of their time that goes towards operational management of the existing portfolio of a fund. This is the less sexy part of the job but also (some might argue) the more crucial part. The fund’s track record and the team’s ability to be able to raise another fund, is dependent on the kind of returns they are able to show their investors. Therefore, along with managing the above-mentioned aspects, a strong focus on exit opportunities is key! The expansion of VCs scope to include operations also creates new ways that young professionals with operational expertise can get involved in the space.
Most funds’ portfolios looks at them for help along the whole-nine yards of business operations: financial support, legal services, sales and marketing advice, headhunting, strategizing, etc. You spend a lot of your time helping portfolio companies with their areas of concern – often helping them brainstorm new opportunities of growth from them!
All-in-all, VC is a very satisfying profession – one that requires a ton of passion, dedication, and perseverance to succeed. It is commonly referred to as a ‘get rich slowly’ profession and can sometimes be a rather costly route to innovation. The industry is moving towards both consolidation as well as expertise concentration – it will be interesting to see how boutique focused funds in areas previously considered tech deserts compete with large diversified funds for high-potential startups.