How to venture in

May is around the corner. I’m aware February just started, but as a former MBA student, I know that the time from February to May just flies by at business school.

Two years ago I was thinking of my own career plan. Lots of resources are available online (thanks Google! — seriously, how was life BG, i.e Before-Google…?) but there are not that many comprehensive lists and interview tips.

So here I am at my attempt to help all the good candidates who want to start or continue their careers in venture. I’ll be brief and share some general tips, interview prep advice, useful frameworks, and a list of selected resources.

General tips

First and foremost, think about what you like, are good at, and want out of your job. I recommend you read my previous post on career advice. Don’t get into venture because it looks cool, do it because you’ve really thought it through and it’s something you genuinely like and where you can thrive.

Especially for my MBA friends, be comfortable with ambiguity and not knowing whether you’ll have a job until April / May. You might be lucky and get an offer before that. If you’re looking at internship opportunities, know that there is a high chance you won’t get a full time offer after the internship. But that’s OK, plenty of doors can open afterwards.

If doable, try to make at least a field trip to meet people on the ground. I don’t think this is an absolute must (my contrarian view!) but a nice to do, mainly for you to learn more about the funds you are targeting. It’s important to have a real feel of the culture. Try to get warm intros beforehand and be respectful of people’s time. Don’t take a no as a negative answer. Sometimes it’s not feasible to meet and discuss with everyone who reaches out, even if we’d really like to. Be mindful that VCs get lots of emails every day to consider potential investments, provide business advice, and share career tips. That’s why it’s helpful to make reach out emails comprehensive as well as straightforward and short.

Use your time as a student to do anything you fancy that is related to VC and entrepreneurship. Try to build expertise in a couple of sectors you like and find interesting from an investing perspective. Understand their market dynamics, key sub-categories, top players, most relevant metrics to consider, etc. Attend events, join clubs, talk to people doing the job (also to those who used to be VCs but are not anymore). Maybe consider a part-time internship — personally not my top choice, but it can open some interesting doors.

Get on twitter now if you haven’t yet. It’s a great way to get updates on market trends and top VCs perspectives. I also like medium, but you’ll need more time to browse good content.

And read a lot! (see some suggestions at the end of this post).

Interview prep: what to expect

Interview questions tend to focus on motivation, business acumen, and passion for tech. Expect questions such as why VC, why a particular stage (seed, early, growth), why tech, how to develop an investment idea, how to look at an investment opportunity, behavioural questions around your weaknesses and strengths, your personal interests, and maybe some situational challenges (‘tell me about a time when…’ type of questions).

In venture, we look for people who show a strong passion for tech and entrepreneurship and are genuinely excited to contribute to the way tech is changing and reshaping the world. We like people who enjoy meeting entrepreneurs who are invested in their solutions, and admire them for doing so. My personal motto is that entrepreneurs always come first, and I believe that a necessary (but of course not sufficient) condition to become a good early stage investor. Intellectual curiosity is a must. In venture you need to keep learning every day, and enjoy being challenged on an ongoing basis by entrepreneurs, colleagues, and other investors. Combining a good intuition with a data driven mindset is fundamental to make thoughtful decisions. Finally, you must love human interaction and building strong connections.

When thinking about investment opportunities, I always consider 3 main things: the market (size, growth, trends, competitive landscape), the business (product / service, traction and unit economics, long-term defensibility), and the team (vision, ambition, drive, previous experience). Then, it’s also important to understand the deal dynamics, such as round terms, funding history, and the use of funds.

Be familiar with the funds’ portfolio and investment thesis. Know their main investment verticals and a few recent investments. Pick a couple of portfolio companies that you find particularly interesting and be ready to articulate why you think they’re good investments. Maybe think of one portfolio start-up that you don’t like. Know what’s happening in the market and interesting recent deals lead by competitors.

Finally, be prepared to ask questions. The interview process is also an opportunity for you to learn more about the funds you’re talking to, their culture, market perspectives, new sectors of interest, level of involvement with portfolio companies, investment selection process, etc.

Some useful frameworks

Familiarise yourself with the funds’ investment criteria and read as many posts as you can published by investment team members. This should also be helpful to understand how the team thinks and whether this fits your thinking around investing.

Below I’ve summarised some interesting frameworks to evaluate different business opportunities. Note that I might have rephrased some of the content to summarise it in the best possible way, so I take full responsibility for that.

My colleague Rob Moffat, shared a while back his perspective on how to think about an investment opportunity:

• Team: Good ideas, driven entrepreneur, things done fast, learning and evolving, ability to create and capture value
• Market: Opportunity, big market ($bn market), where do the company sit in the stack
• Product: Disruptive solution (it’s not a “me too”); quality product (vs. high friction), what is done differently
• Business: Traction and growth, fundamental unit of value and to whom, how are customers reached

Keeping content sharing in-house, my former colleague Anna Boffetta tried to answer the key question around what investors want, and in doing so she suggested to look differently at 3 main categories of products or services:

• Core technology products should be differentiated by their uniqueness, efficiencies, and / or application
• Transaction & subscription businesses should be evaluated based on their user data (conversion, retention, churn), revenues, and opportunities for cross-selling and up-selling
• Network or community-focused companies should focus on cohorts (users visits, conversion, churn, CAC) and potential monetization opportunity later on (virality, growth)
• Finally, all businesses need to offer a great user experience, differentiation from competition, and sustainability

Fabrice Grinda, from FJ Labs, suggests considering the following business selection criteria:

• $1bn revenue potential
• Valid and understood business model
• Real shot to be one of the top players
• Scalable idea
• Little risk of disintermediation
• Rapidly growing market
• Know how to execute and excitement

If you’re interested about marketplaces, Andrew Chen from a16z put together this very comprehensive list of resources and frameworks. One that I particularly like is Andrei Brasoveanu’s (Accel) ‘10 marketplace KPIs that matter’:

• Scale: GMV (delivered vs contracted)
• Margins: gross margin and contribution margin (accounts for CAC and variable costs)
• Momentum: market share (by geography, vertical, product) vs segment market leader
• Activity: Liquidity, AOV (average order value) and potential cross-selling opportunities
• Engagement: NPS, reviews, messages
• Retention: cohorts, repeat orders, cohort consistency
• Concentration: sector, geography, product; potential fragmentation
• Acquisition: CAC, channel scalability, mix
• ROI: LTV, LTV/CAC, unit economics
• Cash

I promised a short post so I will stop my framework list here, but you can find very good posts online, especially on medium.

Selected resources

Finally, I’ve tried to summarise below the top resources to keep yourself up to speed on market trends, new deals announcements, and overall tech news.

Newsletters / resources:

• Techmeme
• LAUNCH Ticker
• Term Sheet
• CB Insights
• A VC by Fred Wilson
• VC funds newsletters
• Benedicts Evans (weekly)
• Lean Luxe (for consumer)
• John Gannon (for careers)
• TechCrunch and VentureBeat
• Crunchbase, Pitchbook, Dealroom (for companies data and rounds info)

People to follow on Twitter:

• Andrew Chen
• Ben Horowitz
• Benedicts Evans
• Li Jin
• Eric Feng
• Christoph Janz
• Kirsten Green
• Naval Ravikant
• Rebecca Kaden
• Or simply check out my twitter following @cayehr and see who are my picks!

Podcasts:

• a16z
• Master of Scale
• Recode Decode
• How I Built This
• 20 Minutes VC

Books:

• Venture Deals
• The hard thing about hard things
• From Zero to One
• High Growth Handbook
• eBoys

And with this, good luck, and more importantly enjoy the process!