A fortnight in venture capital: Day 1
A frequent enquiry from friends, former colleagues, founders and those looking to enter the industry is: “what do you do all day? Is it just Shark Tank?” Here’s a chapter of the 3 part series detailing my rough movements in a vaguely typical few days.
Morning
I normally try to get to the office reasonably early to give me a chance to read the seemingly never-ending stream of literature the industry creates (irony?). Monday mornings normally involve catching up on Azeem Azhar’s Exponential View and reading through a bunch of tagged articles sourced from Twitter, Mattermark and A16z regular newsletters.
Covering Note: Equity Venture Partners has a dedicated advisory arm helping startups across a range of consulting mandates. These can include non-exec director services, capital raising or M&A assistance, financial/data modelling work and a vast range of anything and everything to lend a hand. This is relatively atypical for a VC fund, but we feel that our advisory arm underpins our investing capabilities and helps to ensure we’re delivering on our promise to add value to our portfolio companies. As you can see below, most days are spent leaping across both sides of the VC table.
Over the weekend we sent a financial model to one of our longer-standing advisory clients so 8 to 9 is spent tidying this up and dealing with a few clarifications to round this out. Coffee and breakfast is enjoyed at our desks as the team shares weekend adventures. For completeness, the EVP coffee order is a few flat whites, a soy cap, a cap with 1 and a long black. Note: the team is relatively addicted to coffee and is transitioning to a new locale following the departure of our longstanding favourite barista.
Coffees in hand we sit for our Monday morning catch up (10am). This runs as per just about every other business and involves a quick run around the team to see how everyone is keeping themselves busy, align on any key actions for the week and allocate dealflow across the team. Our team has an incredibly flat structure. You’re just as likely to see one of our principals neck deep in excel workbooks as a junior running a transaction or talking strategy with the head of a 500+ person company. It is rare to actually be formally delegated a piece of work and generally everyone is expected to anticipate what needs to get done. Our team is the closest thing to a sporting environment within any business context I can imagine. The genre of startups ensures that everyone is 100% committed and motivated to grow and succeed, with directions articulated in broad terms rather than commanded. While US VC’s certainly tend to have more hierarchical structures, this type of team approach is common across the relatively fledgling Aussie VC sector. Note to grads…
In the lead up to Xmas when seemingly everyone wants to raise money and/or close deals, our inbound dealflow has reached absolute capacity. 11:30 to 12:30 is dealt responding to and tagging emails with investor presentations or teasers attached. The embarrassing reality, during busy periods, is that only a handful of these emails progress past our inbox into Trello which we use to track opportunities and assign roles internally. While there is no formula or threshold, long covering notes tend to be skimmed over, 50+ page IM’s written by brokers won’t even be skimmed and emails with gimmicky subject lines won’t be opened. The best inbound opportunities have a concise and direct tone with a handful of bullet points outlining the absolute key messages. Normally they have a teaser or 1-pager with more details attached. Remember, in some weeks we receive over 50 new opportunities. Associates who are typically the first stage of the VC sieve simply don’t have the bandwidth for long-winded sales pitches.
Of the 7 investment opportunities received, one looks particularly interesting — a B2B SaaS company based in New Zealand — and a call is scheduled for later in the week. We try to give direct and immediate feedback if possible, so I send 4 emails explaining why the opportunity is not a fit for our fund. The remaining 2 opportunities I want to run by another team member for a second opinion.
Afternoon
After lunch we have a quick sit down to align on preparation of materials for our next Investment Committee meeting. While the Investment Team meets informally almost daily, and is constantly discussing the moving mechanics of any given deal, our formal Investment Committee only meets in person monthly. 4 of us quickly agree on the best opportunities to present. Our fund runs a form of 2-step authentication with any approved deal normally passing the committee twice (normally once in person). Each meeting long form due diligence reports are tabled outlining an internal investment thesis for the business in question, a range of founder and company specific considerations, some historical and forecast financial data and most commonly a detailed product demo or description describing the value proposition of the startup. In addition, preliminary snapshots grading forthcoming opportunities against our fund’s mandate are prepared. We prefer to invest in lines, not dots, and where possible, like to track investment opportunities for months in advance of any deal being struck. These snapshots detail startups the Investment Team has identified on the looming horizon but are yet to go through any formal due diligence process. For those interested, more on this process will be detailed in part 6.
It is worth noting that the day is typically filled with phone calls and impromptu catchups that make getting any real work done during typical business hours difficult at best. I only mention this, as in my former roles I would often go weeks with no formal or informal client interaction. Typically juniors were confined to their high-rise habitats to apparently ensure they wouldn’t spontaneously combust in front of the client. Today is de rigueur with a good 2 hours spent on the phone across 5 different founders. More than any other day-to-day task, we find ourselves as confidants, mentors and general listeners for executive-level employees within our portfolio companies. Any VC has to have the ability to jump across businesses and issues with aplomb and possess a deep-seated disposition to meaningfully help; always.
3pm and we have a kick off meeting for a new workstream with an existing advisory client looking to raise capital in 2017. These are typically my favourite meetings and involve high-level strategy musing as much as anything else. As part of any pitch deck, founders need to be able to succinctly articulate a narrative that both presents a compelling business proposition at current, but paints a picture of what their specific blue sky opportunity might evolve into. With this particular founder we debate at length the nuanced positioning of the 3 key strategic pillars he is seeking capital to deliver on. Founders so rarely have an opportunity to work on the business as they are normally all consumed working in the business. Rest assured, this type of meeting always brings an “ah huh” moment for the founder, serving to redirect their laser focus to the most pressing priority. Startups, by definition, have unbounded potential and panoramic breadth of opportunity. When one can do literally anything, selecting the next key initiative that will most obviously lead to goal accomplishment can be the hardest part.
For the meeting I have prepared a valuation workbook to align on expectations (this does not normally run smoothly) and we establish a timeline for the next 6 months of the process. Capital raises take time. We tell founders to expect 1 to 2 months of heavy lifting before going to market (investor presentations, teasers, due diligence items, financial models etc), 1 to 2 months of investor conversations and then 2 months of legal shenanigans. After the meeting a colleague and I convene on next steps and we assign responsibilities across the key materials to be prepared.
Evening
It is certainly hard to not live in my inbox and 5 to 6 is spent dealing with emails that all seemingly require an urgent response. A couple of team members (supposedly including me) are heading to startup related events, so we quickly debrief on the day as they head out the door. It is not uncommon for investment opportunities or transactions to move 180 degrees across the course of a day. So we all try to informally keep each other in the loop. Today a particularly large transaction is facing a major headwind and three new investment opportunities are entering the early throes of DD. I think there’s this thing called Slack that might help us? ;)
I’m late for a demo day at one of the universities and quickly make a move. I catch the last hour of pitches and see a few familiar faces in the audience. The Aussie ecosystem remains astoundingly small… Note to grads…
I head back to the office to round out some prep for tomorrow (Tuesday). An urgent investment opportunity has materialised from possible to probable over the weekend and we are meeting with potential co-investors tomorrow. 9 to 11 is spent neck deep in a hard to decipher internal financial model and in preparation of an internal cheat sheet to assist the team attending the meeting. Head home and fire up wordpress. Until Day 2.
