Venture Capital: From the Outside Looking In

Perspectives of a boring accountant making sense of a world in which unicorns exist

Photo by Austin Distel on Unsplash

I’m embarrassed to say that, until a few weeks ago, my knowledge of the VC industry was almost entirely based on HBO’s Silicon Valley. While my education at the hand of Erlich Bachman may have been crude, it was the catalyst that piqued my interest in learning more about this world of cap tables and growth hackers; a world in which unicorns and hockey sticks commonly share the same breath.

This post is the first of many in which I plan to dissect the venture capital industry and learn the ropes using, well, rational thought and data.

Pivot!

My current job title on LinkedIn reads “Senior Manager — Private Clients Audit” at a Big 4 professional services firm. Loosely translated: “chartered accountant who’s spent the last 7 years doing deep-dives into the operations and financial statements of a bunch of companies across the world.”

Or “corporate slave” — whichever you prefer.

Why the intrigue when it comes to VC? Well, in my case, the entrepreneurial bug bit at age 14 when I started my first business. That business, and the two that followed, were what got me through university and taught me many valuable lessons.
With my fascination for startups well and truly stoked, I asked myself, “how do I learn more?”

At the time, becoming a CA and working in audit was the solution. What other job in the world could I do that would allow me an insider view of what makes or breaks a business? So, off I went…

Fast forward 12 years, 3 continents, and an inside view of hundreds of different companies and here I am: an experienced finance professional whose hunger for business and startups has never dissipated.

Drawing from the words of Ross from Friends (another mentor of mine), it’s time to PIVOT! Can a boring accountant build on a solid finance background, quell the stigma, and disrupt an industry that loves the look of itself?

Back to Bootstraps

It’s an odd feeling, starting from scratch in a field I know little about, using insight from a field in which I know plenty. It has a way of instilling a sense of humility.

But I’m going to push past that and offer up some wildly uneducated perspectives anyway. These insights are merely a gut feeling at this point. I hope to reflect on this post in 6–12 months and see that I’ve been proven horribly, horribly wrong.

Here are three macro-level thoughts that I intend on exploring further using real data and real insight from those who know more.

1. Scrappy, not Disorganized?

I get the sense that venture capital rewards hype, not data. Presented with amicable founders, investors seem to turn a blind eye to inefficiency and disorganization. When did “scrappy” become a euphemism?

Yes, success can be obtained by investing in the right people, but I can’t help but feel that VCs aren’t even scratching the surface of proper data-driven insights.
Why do I say this? Well, if data was the real source of opportunity, would we not see more investment in Africa? According to Dealroom, VC investment from 2015 to 2021 in Africa was only €3.8bn (a measly €3 per capita). Contrast this with the whopping €743bn invested in the USA and Canada despite only having a quarter of the population.

2. “Does Africa Even Have Internet?”

Ego, stigma, and naivety are barriers to real progress.

My next thought is that VCs who do have and use data, ignore it in favor of common misconceptions of the world, coupled with a little bit of ego.

It astounds me how many people subscribe to Trump’s “shithole” views of the African continent in this day and age. This is just one glaring example of naivety and ignorance preventing VCs from earning a boatload of money. I refuse to believe there aren’t a staggering number of other examples.

I strongly believe Asia and Africa will be building blocks of many of the world’s next breakthroughs. Are VCs capable of putting ego and bias aside to find and execute on opportunities that are slightly left of center?

Or will VC prove itself incapable of investing in people that aren’t sporting matching Allbirds?

3. No revenue? No problem!

Some Googling suggests that ~65% of VC investments generate no return or worse. This surprises me because I get the distinct feeling that VCs are still increasingly ready to support eye-watering valuations for startups (or even established scale-ups) that aren’t yet monetized.

The auditor in me is now questioning the risk management practices within the VC industry. As with any developing industry, it feels as though risk management isn’t a fully fleshed-out concept yet. Although, things probably don’t feel quite as risky when you’re playing with someone else’s money.

I’m left wondering about the accountability of VCs for fund performance seeing as the fund structure typically exposes the VC’s general partners to very minimal risk. With Venture Capital being a newish industry and funds traditionally having a 10-year life span, I can’t help but think that there will be a day of reckoning for VCs as startup sensationalism is weighed up against observable returns.

Where does the buck stop?

Writing this article has somehow left me more fascinated than I was before; it’s the first time I’ve put pen to paper on the topic, and writing has a way of creating clarity from the chaos in my mind.

I’m secretly hoping that the post strikes a nerve and I get hordes of angry venture capitalists in the comments telling me I’ve never been more wrong. It’ll certainly accelerate my learning.

Assuming all Medium readers are simply nice people, however, I’m planning a deeper dive into the above - and other - perspectives over the coming weeks and months as I learn more about the ins and outs of venture capital.

If you have any great resources or learnings from your first foray into the land of unicorns, I’d love it if you’d share them for my (and others’) benefit!

Right. Pivot!