After two years of working at the earliest of early stages, I’m excited to be moving onto my next adventure with Hedosophia 🚀
Looking back, here are 20 things I learned from 2 years working in early stage VC…
On the Job 💼
Being a VC is the least scalable job in the world 🌎
1000 decks, 100 meetings, 10 deep-dives on DD and 2–3 investments per year… allocating capital in the most inefficient of markets, you need to optimise your workflow and prioritise, systematically.
Meeting the right founder, in the right place, at the right time involves an uncomfortable level of serendipity 🍀
Whether organising events, automating outbound or building a network, you need to design in serendipity, using data to double-down on high quality deal sources.
Feedback loops are as important to investors as they are to founders ➰
Pattern recognition comes from taking meetings, tracking companies and socialising ideas with other funds. It gets you up the learning curve of knowing when to say yes/no to a deal
Founders massively appreciate the same courtesy of receiving quick and candid feedback.
Inspiration at work comes from two things: Autonomy and Competence 🌁
Combined they foster an experimental, open-minded culture.
Partners, founders or organisations that don’t promote one or recognise the other will fail to attract and retain top talent.
On Dealmaking 🤝
70% of your best deals will come via personal network and referrals, (most likely other VCs) ☕
Building a network is easy but getting others to share dealflow requires generosity (with your time and thought) and reciprocity.
Share at least one deal a week.
FOMO can be a good thing 🤦
Track the deals you didn’t see each quarter and (try to) care less about the ones you looked at and passed.
Follow-on funding rounds aren’t necessarily a sign of future success. JOMO (Joy of Missing Out) also helps train your intuition on good versus bad opportunities.
Too many founders (and some investors) treat negotiations like the b-school “lemon game” 🍋
When negotiating price, focus the discussion on value, not on valuation. When negotiating terms, be sure to address trade-offs inherent in the Founder’s Dilemma.
Closing a deal is like closing a complex enterprise sale 👨🏫
Once you get to terms, spend less time investigating and more time selling your value add to founders by means of “show not tell”.
An investor sales playbook can be a useful tool to help improve the deal process for founders, on-board new investors faster and ultimately improve deal conversion.
On Founders 🦸
Founders need only three things from their investors: 💶 Cash (at the right time and at reasonable terms) 📲 Advice (the best that equity can buy) 👥 Network (introductions to customers, investors, partners and talent).
Everything else is superfluous.
Grit = passion + perseverance towards long-term goals 🏃♀️
When evaluating a first time founder’s chance of building a massive business, look for mastery experiences in their lives that demonstrate deliberate practice and a growth mindset.
Beware of founders whose vanity, side projects or public image trump all else… 💇♂️
… nothing should come above an underlying passion to build real value in a market or sector they know and love, deeply.
Above all, (and it may surprise you to what extent) founders value speed ⚡
-Speed of conviction
- Speed of execution (deal or otherwise)
… and very simply, the courtesy to respond, speedily
Deals can be won ahead of far more established funds, by moving with skill and pace.
On Trendspotting 🚂
Observing microtrends is an important part of what gives VCs courage in their convictions 📈
It also helps to nurture inbound, build affinity with founders and move fast on deals
Beware of products offering a vitamin, not a cure 💊 + avoid convoluted sales processes 😬
Nice to haves rarely get the hook or retention to build a venture scale business.
Each additional step in the buyer’s journey halves your conversion rate to a sale.
In what often feels like a sea of generic product offerings, look out for the “magic trick
The simplest of features can be the start of something 10x better
When evaluating early stage opportunities, don’t under-estimate: 1. Upside potential from small entry markets or 2. Unfamiliar consumer painpoints
Empathy is an important part of a VC’s tool-kit and may help you recognise both.
On Unicorns 🦄
Never pass on a deal for reasons of price alone 💸
A good investor keeps their discipline on valuation when target equity stakes are required but a great one recognises the 5% of cases where you need to pay up.
VCs too often pressure investments to grow at all costs, and in doing so, cause many to blitzfail 📉
Savvy founders not targeting unicorn scale outcomes usually select themselves out of VC funding as an incompatible growth trajectory.
A disproportionate amount of time and money goes into chasing ‘unicorns’ at the expense of startups capable of achieving mid-level exit outcomes
By applying value add support and improving the success rate of founders targeting mid-level exit outcomes, early stage funds can deliver above average returns to their LPs.
In every other case, returns in venture capital are power law distributed 📊
Data consistently shows that 10% of portfolio companies drive as much as 100% of all fund returns.
It’s a numbers game, and don’t forget it!