My Year in VC: Lessons Learned

I walked through the large doors of Boston’s Old City Hall into Underscore VC as an incoming junior at Northeastern University not knowing much about the mysterious inner workings of venture capital. A year later I’m leaving the venture world (temporarily) with a pocket full of valuable lessons and a mind full of memories.

Capital is a Commodity

Similar to the question an entrepreneur receives when building her product, venture funds need to ask themselves the same thing — what differentiates them? Rather than assuming it is a one-way relationship, investors need to have the mindset of “being selected.”

“VC’s and entrepreneurs are constantly dating.”

The questions that both parties need to answer is how do they think they’ll find the one for them (venture word: source type), how long are they willing to date (venture word: SLA), what do they look for in their partner (venture word: investment thesis), and who will they decide to marry (venture word: investment portfolio).

To continue the analogy, if someone pursuing you romantically offered the same thing as everyone else, they would struggle to catch your attention. Sure, they may be a great person, but what makes them so special for you? This is the question venture capitalists are now realizing they need to have an answer to, and I hope the entrepreneurs reading this leverage their power in the relationship to ask this question.

FOMO is Real

Imagine if the picture below was photoshopped so the soccer ball was the hottest investment opportunity and the little kids chasing it were VC funds. That’s a humorous way of looking at what venture investors feel and act like sometimes.

However, always chasing a ball is reactive and the good investors know the importance of being proactive while the best investors know that there are other balls to chase.

Most investors have felt the pain of missing an investment opportunity and have torn at their hair thinking, “how did I not see that?!” However, rather than relying on following where others are looking, true talent is when you are not afraid to defy the status quo and find a new ball — perhaps in a whole different field. This leads me to my next lesson learned.

Be A Self-Starter

Venture capital is a unique industry where sourcing takes many shapes and forms, and to be successful, investors must be willing to explore various channels to meet founders. Some investors may pursue a spray and pray approach by talking to everyone & anyone; others may take a more targeted approach by mapping out a domain to identify a whitespace, and others may leverage their network or pre-existing organizations to surface opportunities.

To some extent, it’s important to have your horse goggles on and find an approach that works best for you while being flexible in changing your sourcing style if needed. Most importantly, you need to know that no one is going to say “look here’ or “do this.”

If you don’t take action, nothing will happen. I’ve learned the necessity to embrace the ambiguity of sourcing and to move forward without a clear plan but having the discipline to do the work in whichever style I chose (for that month).

Ruthlessly Prioritize

With so many directions to go and sourcing being one of many responsibilities, it’s crucial for investors to be strong at time management. Rather than trying to do it all, focus on a few things to do extremely well.

To do this, it’s important to set SMART objectives and ensure your daily/weekly/monthly actions thread into the larger goals. If they don’t, then let go of them. It’s easier said than done, but a narrow scope of work will help avoid the feeling of being overwhelmed and discarding work that doesn’t move the needle.

Seek the Truth

The quote, “trust but verify,” has become ingrained in my mind. Investors should trust what the entrepreneur is telling them, what their colleagues’ opinions may be, and what their initial gut reaction is…but they need to verify!

Despite an entrepreneur living and breathing her company or an investor relying on pattern recognition from the many opportunities seen, the opinion that should be prioritized are from external domain experts and prospective/active customers.

Conviction needs to be built from the outside-in meaning get out of your head, away from the Google search bar, and pick up the phone to start talking to the true experts who will provide authentic, unbiased information.

Personal Touches

At the end of the day, venture is a people business. Going back to the relationship analogy, a great investment firm will give their entrepreneurs A+ treatment that doesn’t stop after the first anniversary.

Investors and entrepreneurs should not look at one another solely as the roles they hold, and instead, challenge themselves to look at one another through the lens a friend would. Rather than spending 100% of the meeting time on business, I’ve learned to become genuinely interested in the entrepreneur I’m talking with and learn about all of the hats she wears — an active cyclist, a worldwide traveler, a beloved parent, and more.

Again, would you want your romantic relationship to feel so transactional? No! Despite these personal touches not having a clear measure of ROI, the value they bring to the table is immense and this book helped me learn them.

I will be forever grateful for the opportunity to see inside the black box of VC, absorb lessons from other investors, and be given the privilege to hear from entrepreneurs. For those aspiring venture investors, begin by strengthening your soft skills and establishing empathy for the true heroes, the entrepreneurs, by building/operating yourself.