Memoirs of a Junior VC
During my MBA, I’ve held two VC internships, the second of which finished this week. Lately I find myself having a lot of coffee chats with aspiring investors, all asking about my experiences in these roles. In the spirit of paying things forward, I thought I would take a few minutes to share some of the major lessons I’ve learned over the past year.
To be clear, this is not a “How to get into VC” post. There are hundreds of examples out there from better writers than me. Plus, if you read even a handful, you’ll quickly find there is no “best” path.
It’s much harder to find tips on how to be a good junior VC on the interwebs, especially in an internship role. In that light, here are a few things I’ve picked up that you may find useful:
- You will be terrible at venture at first. This may sound obvious, but if you ever manage to get a VC role, just admit this to yourself and get ready to sprint. VC is a pattern recognition game, and unless you are focused on something very relevant to your past, the learning curve in venture is STEEP! I went into my internship with a high knowledge base of how venture is structured, term sheets, financial modeling, etc, and I still felt like I was drowning. Don’t get me wrong; it’s both exhilarating as well as terrifying. If you get the right role, you get to spend all day learning about new technologies and meeting inspiring people, so it’s a privileged position. Still, it can be mentally and emotionally draining, especially when you’re surrounded by talented investors. And by no means am I suggesting that I’ve now figured it out. One prominent London VC told me it took him about seven years before he knew he was any good at this. It takes time to build your patterns.
- Have an opinion and share it often. You may have a formal thesis developed or just a hunch you want to explore, but you’re of no use to a VC if you’re not opinionated and willing to prove yourself right. VC is a hits-driven business, and the best bets are usually the ones that sound craziest at first. Even if you’re completely wrong and spend six weeks figuring that out, you’ve still been valuable to a GP since she probably doesn’t have the time to do deep dives anymore. Taking a contrarian view on something is even better. It shows you’re thoughtful and look at markets in a different way than most.
- End every meeting by helping the entrepreneur. The best single piece of advice I can give you. Always operate with a pay-it-forward attitude, every day, no exceptions. Early in a career this is hard, but there are always options. I’ve made introductions, provided candid feedback, held pitch practice and even quality checked financial models for founders. This is a really easy and rewarding way to stand out.
- Never pass on a deal without writing down why. I’m a big believer in feedback, and any good entrepreneur should always be looking for ways to improve. Physically write your reasons down, and make sure they are honest, valid and respectful. If you didn’t get the vision, that’s a reason. If you think the market is too small, that’s a reason. The only thing better than a “yes” is a quick “no”, and your feedback could help a founder reach a “yes” with the next investor much faster. One word of caution though: not everyone asks for or wants feedback, so I typically hold off giving my Junior VC opinion unless I’m asked for it.
- Play to your strengths and outsource your weaknesses. There is no one perfect VC profile and the best funds tend to have their teams balanced across several skills sets. Know what yours are going in take every opportunity to show those off. I naturally gravitate towards analysis and commercial aspects of a pitch so I actively lean into those areas when evaluating a company. I realize how critical it is to have strong technical talent in a startup but I don’t have the background or skill to assess that. While I could spend time taking CS courses (I did a little…it was hard) it was much more efficient to seek out experts around London who were willing to lend their perspective. Forge a handful of well-balanced, symbiotic relationships and help each other out. It’ll make your day-to-day much easier and you never know who will raise a fund in a few years.
- Specialize, specialize, specialize! General VCs have their place, and if you’re a Fred Wilson or Mark Suster, your name is strong enough to add value. For everyone else, you need to have something that makes you smart money, and that means specializing. I left consulting with the belief that generalist strategy firms are dying. In my opinion, venture is no different. You should aspire to be the go-to person in your firm or market that people think of when they’re evaluating a company in your focus area. This could be a technology or an industry vertical; just make something your thing, and earn your 10,000 hours.
- There are no bad meetings. Quite simply, there is so much to learn that even unfundable companies offer value to you. Learn about pitch style, cap tables, burn rates, market sizing and the million other things that go through a VC’s head in the first five minutes of meeting a company. Take EVERY SINGLE meeting that comes your way, even if you just sit and listen. I’ve gleaned some critical insights while watching other VCs dig into a startup’s pitch. Offer to take notes so the GP can focus on the conversation. Then study those notes like you’re prepping for an exam.
- Don’t use a one-size-fits-all metric approach to startup evaluation. MRR doesn’t equal MRR across sectors or business models. I was going to write more in depth about this, but this post is better. The key thing to remember here is you need to measure a company with the right ruler. If you approach evaluation using the wrong metric for that business model, you piss off the entrepreneur, hurt your own learning, and risk missing an opportunity for your fund.
- You’re only as good as your reputation, so don’t be an asshole. Self-explanatory. While you may not have much of a reputation built yet, you represent all the GPs who run the fund. Your actions impact their reputation, so take it seriously. One special call-out to my fellow MBAs - the tide for venture has changed and having a b-school degree is actually viewed as a handicap by many funds. (Riddle me bamboozled). When you enter the venture/tech scene, go into every situation assuming the person across from you thinks you’re a pompous ass. It’s your job to prove them wrong.
- Get off your laptop and go talk to people. I wasted so much time trying to learn what machine learning is via Google. I can get more out of a one-hour coffee chat than 3 days of reading Nature articles. There’s no substitute for learning from actual experts. Do your homework so you don’t embarrass yourself and are able to ask good questions but push yourself to take meetings before you think you’re ready. A VC is only as good as her network, so start building yours ASAP.
To summarize: be selfless, humble, curious and engaged. If you can honestly strike that balance then the rest should take care of itself.