How I moved from academia into technology venture capital
Sharing some insight and learnings from my ‘nontraditional’ route into the industry.
Having recently read George Anders’ The Rare Find: How Great Talent Stands Out and my friend Vincent Jacobs’ piece on the background of junior VCs in Europe, I thought it might be helpful to republish an interview I did with the Ventured Life explaining my path into VC.
Prior to joining Playfair Capital in 2013, I did a PhD and MPhil in oncology as a Gates and Dr. Herchel Smith Scholar at the University of Cambridge. Before that, I earned a BA in biology from Williams College.
The Ventured Life (TVL): Tell us about your background and how you became involved in venture capital?
Nathan Benaich (NB): In high school and university, I was motivated to study subjects that taught me skills I could use to solve problems that impacted lots of people. The first incarnation of this ethos drew me to focus on science and maths in high school. I was convinced that medical school was the path for me. Arriving at Williams College, I jumped on the pre-med express train, signed up for a major in biology, conducted summer research at MIT on breast cancer, and even wrote a thesis in my senior year. I was passionate (and still am, actually) about translational medical research — how novel therapeutic approaches are spawned in the lab, spun out into startups, developed into products, and trailed in the clinic to hopefully improve patient outcomes. This drew to me into learning about how to build out an idea, recruit a team, find product-market fit, raise capital, and scale onwards.
Spending a year at Oxford as a junior afforded me exposure to these events in the life of a new venture in ways not available at Williams. This included vibrant entrepreneurial societies, new friends bouncing crazy ideas around, and regular talks from successful founders. But as I learned more about the trials and tribulations of life science entrepreneurship, namely long cycles of development, capital intensiveness, and the gauntlet of clinical trials and regulation, I grew fonder of the technology space. In fact, Dropbox, Soundcloud, and the iPhone had launched when I was a freshman, and these consumer propositions were not only incredibly engaging, but also made life more enjoyable and efficient.
I carried my passion for technology and the significant impact it could deliver to peoples’ lives through my graduate school career in cancer research at Cambridge. I kept looking for ways to familiarise myself with different programming languages, technology approaches, new startups and incumbents, as well as the venture capital landscape to accelerate my learning. When my research group moved down to London from Cambridge while I was writing my PhD in my third year, I had the chance to immerse myself into its vibrant tech scene. I met many entrepreneurs and investors over coffees, beers, meetups, and pitch events. Having set my sights on the investing side of the table, I was drawn to the team at Playfair Capital due to their refreshingly entrepreneur-centric approach, unconstrained (geography and sector wise) investment remit, and rapidly emerging brand as go-to investors for ambitious early stage founders. I was fortunate enough land a seat on the investment team and haven’t looked back!
TVL: What specifically about scientific research prepared you for a role in venture capital?
NB: The investor role is as much a quantitative science as it is qualitative art. Different experiences in your academic and professional careers help develop skills that can be applied to this job. While I don’t think there’s any particular path that is ideally suited to working in or running a venture fund, my tenure in academic research taught me a few useful things.
Formulating a data-driven thesis. In venture, funds differentiate themselves by virtue of their investment thesis, the experience of their investors, and previous fund performance, amongst other things. Given the life cycle of a typical startup from birth to maturity/exit (5–10 years), investors must analyse today’s world and build a picture of where we’ll be as a society and economy years from now. Because this is a gargantuan task, investors tend to focus on specific sectors (e.g. financial services) or technologies (e.g. big data). Having a background in research science makes you more comfortable analysing present day trends, generating forward looking hypotheses, and building value in the short term with a view towards a long-term future target.
Ingesting, integrating, and applying new information quickly. While the outside world may perceive academics to be slow moving, you quickly learn that if you’re not moving at top speed, someone else on the other side of the world will beat you to publishing the same result. This means that to thrive, you must learn to constantly scour new data for insights and learn novel skills that can be integrated within your own work. This process of information retrieval, digestion, integration, and application is important when working in any fast-moving industry. Venture capital and technology are no exception.
Domain expertise. Venture capital investing, especially at the earliest stages, is so much more than a pure financial transaction. Firms tout their all important “value add” as a differentiation factor between one another’s when competing for the same deal. Where does value add come from? More likely than not it’s from domain expertise. This derives from the investors’ previous experience as a operator of a relevant business or within a similar industry, or else from having invested in the space and helped build companies that way. Domain experience can also come from academic work too. Either way, it’s important because advice is best given from someone whose been there and done that.
TVL: What are the major challenges or opportunities that arise from being a relatively young investor like yourself?
NB: Being young in this space is great. Because technology moves extremely fast, it means that likely to be much more up to speed than those who are seasoned. It also means that you connect on a more level playing field with entrepreneurs (assuming that most of them are young too). Depending on firm structure, one is able to have more responsibility than would otherwise be afforded to a young person in a traditional financial institution. This is important because being thrown into the deep end and learning as you go is a skill to master in itself. The challenge resides in not having had the illustrious operational or investing career of others in the industry. But that comes with time.
TVL: From your experience how important is the relationship between the VC firm/employee and the entrepreneur, and how does one ensure a productive relationship between the VC and startup?
NB: It’s key. There needs to be trust and a willingness to be open, collaborative, and value one another opinions. The most interesting part of investing, in my opinion, is the opportunity to work closely (in many different capacities) with inspirational founders who have set out to build something new and impactful. To realise this potential, the investor and entrepreneur need to be willing to meet/speak regularly, through good and bad times, and be open with one another. In a productive relationship, the investor will be one of the startup’s biggest advocates, and the founding team will vouch for their investor within the ecosystem. This virtuous cycle builds great companies and means strong teams gravitate to a select number of outperforming venture firms.
TVL: What advice do you have for entrepreneurs in selecting the right VC to work with?
NB: There are a few criteria to consider when selecting a VC to partner with, bearing in mind that these relationships last for the better part of a few years. Here are some:
Track record: has the firm invested in successful companies in your space and had a material role in their evolution? Do the founders speak highly of the firm and recommend them as partners? Is/are the partners responsible for these successful investments still around and active at the firm?
Brand recognition: is the firm regarded as top-tier in your space/geography/company stage? Will it provide you with positive signalling in the ecosystem? This is largely a function of track record and partner profile.
Partner experience: do the investing partners (those who will sit on your board if they’re lead investors) hold experience that can be leveraged to improve the odds that your company succeeds? This can be in the form of previous operational experience as an employee in a company doing similar work to yours, or through investing/helping build such a company.
Industry/corp dev connections: how well integrated is the VC within the industry in which your company operates? Does the VC have strong relationships with corporate development teams of large incumbents who could acquire you later down the road?
In-house support services: does the firm have a team of individuals who can be deployed at your service for specific ends? E.g. developers, marketers, human resources, finance, strategy. Not many firms do, but those who offer these services see them used to helpful ends.
Fund vintage: when was the latest fund raised? How many years are left in that fund’s life cycle for new investments and what is the horizon on the next fund being raised? You don’t want to be on the tail end of a fund’s investing life without knowing that the next one is on the cusp of being raised.
Terms: pay close attention to the heads of terms being proposed in a term sheet. Invest time into understanding what each material point means to you and whether they are ‘market’. Otherwise, push back with explanation or seek another investor.
TVL: You mention in a recent blog post some of the technology themes you are most excited about. On a more holistic level, what are some of the major trends you feel are occurring in tech?
NB: Technology products are becoming increasingly easier, quicker, and cheaper to use as a result of our decreasing patience to expend effort (time, money, brain power) to reach a desired end. We’re seeing this play out in the mobile space with consumer products and services. If an app requires more than two or three interactions with the user interface to procure the expected experience, it’s over. I actually think this is great, because technology exists to facilitate, not complicate, our lives. Getting in and out of technology as quickly as possible leaves us with more time to live in the present.
Technology is also become more advanced to the point where previously tedious, arduous, and/or repetitive tasks can be automated by machines. Billions of (un)structured datapoints generated by users or made available on the web can now be processed efficiently to surface insights that were previously obscured. Data and product silos are being bridged via application programming interfaces for the collective benefit of the ecosystem. The open source movement continues with significant momentum such that developers can build on top of/use each other’s software platforms/components. Finally, consumers and to a certain extent enterprises are becoming more liberal with their sharing of personal data to improve the performance of the products and services they utilise and deliver. These are some trends I see in the industry that are particularly exciting.
TVL: Finally, what advice do you have for scientists interested in making the transition into entrepreneurship or venture capital?
NB: Work on something that truly energizes and challenges you. If that’s building a company to develop a product that serves an unmet need that a large group of people demand, pursue it. Get stuck into your target customer’s problems, understand their psychology, figure out why current solutions just don’t cut it, and where the low hanging fruits reside for quick wins. Then figure out how to build a scalable solution where your solution becomes increasingly valuable as more people adopt and invest in using it.
If instead you’re passionate about scouring the world for the brightest entrepreneurs with the boldest ideas and helping them live out their potential, shoot for venture. Consume the wealth of literature out there on successes and failures. Understand why they’ve happened and what were the key inflection points. Figure out what signals were present along the journey that serve as data points for you to develop pattern recognition. Use these to refine the set of factors you look for in new investments and keep refining your process.
Either way, both venture capital and entrepreneurship are part of the same ecosystem and you’ll frequently see both participants recycle within it. Having experience in both will only help you!
Nathan joined Playfair Capital in 2013 to focus on deal sourcing, due diligence, and helping our companies grow. Nathan is particularly interested in artificial intelligence and machine learning, infrastructure-as-a-service, mobile, and bioinformatics. He led, originated or participated in Seed through Growth investments including Mapillary, Appear Here, Dojo, Festicket, and DueDil.
Originally published at http://www.venturedlife.com/nathan-benaich/