Why venture capital should be your next career move
As I wrap up my final month as an investment associate at Reinventure, I’ve enjoyed reflecting on all the cool things I’ve learnt over the last 18 months. However, it’s surprising to me how few of my university peers have considered joining the venture capital (VC) world given the accelerated learning and opportunities you have access to in less than 2 years as a junior. In fact, as we are now in the processes of hiring an investment analyst to join the team, it’s remarkable how much interest we have received from candidates from the US and UK, where roles in VC are highly competitive, yet it still seems to be a relatively unknown (or not well understood) sector in Australia. Admittedly, the VC space Australia is still young but growing very quickly — VC fundraising has almost quadrupled from FY13 to FY16 with AU$568m raised in FY16. While it is still quite a way off from our friends in the US, UK, or China, it’s an exciting time to be building a sustainable local VC ecosystem.
Thus, I write this blog post for you — my friends working in management consulting, investment banking, private equity, technology and startups — to give you 6 reasons why you should seriously consider working in venture capital:
1. Understanding the fundamentals for building successful businesses
Ever since I was a kid, I have been coming up with business ideas and always liked the idea of running my own venture someday. So after I graduated university, I joined a management consulting (MC) firm because I wanted to get a cross-industry view of how different businesses operate. MC gave me a good foundation on how to analyse businesses, build financial models, prepare presentations and think strategically, however the nature of MC means you end up working for big behemoth corporates that have been operating for decades. You don’t get insight into how businesses are formed, build processes and grow.
Working in venture capital, you get to speak to founders/CEOs daily and witness how startups are born from ideation to raising capital to becoming profitable (on that note, you also get to see why startups fail). When deciding whether or not to invest in a company, you go deep into understanding the mechanics of the business. Our due diligence includes analysing the business model, founders, traction (revenue, customers, growth), competitors, product stickiness, valuation, and interviewing customers and suppliers. By performing this analysis, you come to understand the benchmarks and heuristics of successful businesses. What should their growth look like? How many customers should they have to be ideal for VC funding? How do you create a network effect? While there is no exact formula, you know what to look for and avoid to ensure you go into every personal and professional venture with eyes wide open.
2. Building a professional network of inspirational founders
As a venture capitalist, you are always surrounded by the best and brightest startup founders who have put their comfy corporate salaries on the line in order to improve the world around them. As an aspiring founder, what better way to understand the skillsets, drive, and motivations of being a founder than to be at the centre of the ecosystem- investing in startups. We meet with founders every day, and also have around 30 inspirational founders in our current portfolio that we get to see at strategy sessions, board meetings and afternoon drinks. At Reinventure, we physically sit within Stone & Chalk — a dedicated Fintech coworking space — now located within the Sydney Startup Hub alongside Tank Stream Labs and Fishburners, so there is no shortage of inspirational founder and stories.
3. Sharing your thoughts and experiences on professional platforms
I didn’t know this when I first joined, but there are lots of people and companies out there that are really interested in a venture capitalist’s perspective on tech, startups, entrepreneurship, innovation, diversity and a whole range of other topics. Consequently, I have been pleasantly surprised by how many opportunities I have had to present my views and represent Reinventure’s perspective at conferences, meetups and panels, despite being a relatively junior member of the team. Prior to working at Reinventure, I had never been invited to talk publicly as an authority on any topic, NOT because I didn’t have the ability but because there were no available opportunities (particularly as a junior). But as a VC investment associate, I have been asked to speak on topics like: “How to raise seed money”, “How corporates can innovate with startups”, “What do VCs look for in investments”, “Should startups be thinking global”, amongst many others. Public speaking was not a skill I had practiced properly since high school nor did I think I would get a chance to practice it again until much later in my career, so it has been exciting to build that confidence again.
Bonus for the ladies:
As I mentioned earlier, venture capital in Australia is still has a relatively small headcount, and unfortunately it is also an industry that lacks gender diversity, so there are few women in the industry (but on that note, Reinventure has 50/50 gender balance across the company). Because of this, and because of the gender discrimination that has been exposed in the industry (particularly in the US), I have found a more deliberate effort to provide women with a platform and opportunity to shine a light on their skills, talent and perspectives. It is with this platform that I hope we can encourage and normalise more women in the venture capital industry.
4. Building a professional network of other VCs
Venture capital in Australia is still a small and tight-knit community, with most VCs co-investing in the same ventures. While there is some aspect of VCs competing against each other to invest in the best deals, there is far more utility, as an industry, in collaborating to achieve the best outcome for the entire startup ecosystem. As juniors in the VC community, we often work together when co-investing by sharing our due diligence findings or sitting together on board meetings. We also refer deals to one another when there is a good company that might not fit within our specific investment mandate. Thus, whilst our individual VC firms are small (usually between 5–10ppl), we still have a community of peers we can work with and can talk to. We organize events and drinks across the country and our VC Juniors Christmas party has become the hot ticket end-of-year event.
5. Developing skills as a futurist
One of the most exciting and important parts of being a venture capitalist is the ability to see trends and consumer behaviours evolve before they become mainstream. This is important because we don’t want to invest in ideas/businesses that are incremental improvements to what already exists today; while these types of businesses might be successful, they are not going to achieve the outsized returns required by VCs. Rather, we want to invest in game-changing ideas that have the ability to return >10x our initial investment. This requires us to look around the corner for not necessarily what is popular today but what will be popular in 3–5 years.
Working at Reinventure, I have been lucky enough to learn from the brightest minds in FinTech, data and disruption. Learning to decipher between a tech fad, sustaining innovation and disruptive innovation has informed so much of how I look at investments, both professionally and also personally. When I buy shares in listed companies, I ask myself, is this a business or industry that is at risk of being disrupted? Is the business overvalued/undervalued based on performance? Is the business using technology at its core or as an enabler? Even learning about blockchain and its applications early on has informed my small (but growing) crypto portfolio (although at this stage it’s feeling more and more like a gamble). In VC, you are literally paid to learn about the latest trends and technology which certainly helps you develop and define your own personal investment philosophies.
6. Accessing the best startup job opportunities
If the time comes when you decide to move on from venture capital, you can use your experience evaluating businesses to choose a high promise/successful startup to jump on board with. The benefit of working in VC is that you will have already performed some level of due diligence on the promising startups in your industry of focus, and have a behind the scenes view of companies that have all the makings of a unicorn.
It is with this knowledge that I have decided to join the BRICKX team this February. BRICKX joined the Reinventure portfolio family last year, and having worked closely with the CEO during our due diligence and looking ‘under the hood’ of the business, I knew it was somewhere I wanted to work. I will be able to bring my experience in VC to any future BRICKX capital raisings and work with the BRICKX team to leverage the most value from investors.
But while that is my preferred path, joining a startup is by no means the only career pathway following an entry into the VC world, with many of my peers either progressing within their companies to take on more responsibility, going on to manage a seed-stage fund or launching their own venture. Personally, I’m glad that I won’t be going too far and will be watching Reinventure and its portfolio of companies kicking more goals in 2018.
