The One Thing You Can Do Today to Get More VC Interviews Tomorrow

Breaking into Venture Capital is notoriously difficult.

In fact, by some estimates, you have approximately the same chances of landing a job in VC as you do of becoming a major league baseball player. Yes, I know…

Now, most people who are successful at becoming a VC are either well-connected in the industry or have a significant amount of related work experience under their belts.

So, if you have neither of these things, how do you increase your odds?

Here’s the trick: prove you can do the work.

While this will be especially true for those just starting out, wherever you are in your career arc now, if your end goal is venture capital and you haven’t yet had much luck in capturing any firm’s attention, chances are you haven’t proven to them you really know what you’re doing when it comes to VC.

A way to change this is by learning how to write one of the most basic and essential things any VC analyst worth his salt could punch out in his sleep — the investment memo.

Will this guarantee you a job in VC? Hardly.

But by showing a firm you are willing and capable of doing a little extra work, you will immediately separate yourself from the multitude of other candidates vying for the same position.

My proof is in practice. Once I started sending VC’s the investment memos I had written up along with my applications, my response rate skyrocketed and I began to be invited to interview at different firms.

And while I’m still on the outside looking in, I’ve been able to forge meaningful connections in the industry and have set myself up infinitely better for success than I would have, had I remained just a name in a pile.

So, how do you write an investment memo?

A simple Google search will provide you with a litany of varying information on the topic. Truthfully however, writing a memo can be broken down into seven simple sections.

Though rudimentary compared to the real thing, following this framework will be enough to catch the eye of most VC firms out there.

Part 1 — The Introduction

This section should be simple, no more than 4 short paragraphs long. In each of these paragraphs you’ll want to answer a basic question.

· What is the firm?

· What do they do?

· Who was the firm founded by?

· What is the goal of the firm?

The first two questions are easy enough to answer and most of the information — such as when the firm was founded, where it is located, what kind of funding it has received — can be found on websites such as Crunchbase or AngelList.

The second two questions will require a bit more digging on your part but you should be able to come up with a good amount of general info surrounding the firm’s founders and what they want to achieve. This info can be taken off of social media, LinkedIn, the firm’s website itself, or any articles that may have been written about the company.

Part 2 — Competition

Again, this section should only be a few paragraphs long.

All you need to do here is outline the most prominent risks involved with starting a firm in the industry. Ask yourself questions such as how many firms already exist in this space? What are the sizes of these firms? Are costs to enter this industry very high? Is the industry popular, or has it yet to prove it can become influential?

Once you have answers to these questions, break them down into manageable categories and move onto the next section.

Part 3 — Key Risks

This will be the longest section of your memo.

Here, what you will do is break down each category of competition you outlined in the previous section.

For instance, if your firm is an eCommerce startup, one of your categories will have certainly been something such as “Established Firms.” So what you should do is talk about Amazon and Ebay — two major players in the industry.

Assume your reader knows nothing about them. How much do they earn per year? What is their traffic? And most importantly, how will your firm differentiate itself to the point where it could realistically capture market share away from these two giants?

You’ll need to answer questions like this for all your categories. It is important to be thorough here. Show the VC you’re able to think outside the box and make even loose connections between your firm and what could prevent it from becoming successful.

Think of it like this: if you were tasked by a VC to determine whether or not it is worth investing millions of the firm’s money into a relatively unknown and unproven startup, wouldn’t you work hard to discover even the slightest flaw that could ruin the whole investment?

The right answer is that yes, you would. And VC firms will view this kind of comprehensive approach as valuable.

Part 4 — Leadership

Back to the short paragraphs.

This section should really just expand on information you’ve already included about the founders in the introduction. Try to dig up as much as you can about those in charge either via their LinkedIn profiles, blogs, etc., and put it all down in an organized way.

You can also add a little about the company itself. How many employees does it have — and does anything in the founder’s past lead you to believe he/she can manage that amount of people effectively?

Part 5 — Revenue Model

This should be a medium-length section, but it is very important you get it right.

The only question you need to answer here is “how will the startup earn money.” There are many ways to answer this question, and it will vary from firm to firm and industry to industry.

Graphs, tables, and equations are your friends here. If you can numerically describe how a firm will return the VC’s investment, this will go a long way towards showing that you can think in terms of profit/loss.

Your equation could be as simple as this this:

(365 * Number of unique sales/day) — Cost = Profit

Using this equation, dive into some scenarios. How many sales does the firm expect to make? What are the averages in the industry? What are the potential costs that could cut into those profits?

Make a table or a graph to show a few of these hypothetical figures and describe your reasoning behind these numbers.

To cap everything off, maybe include a section about potential alternative revenue streams that you think the firm could tap into. And then you’re done.

Part 6 — Exit

Again, shorter section, but equally important.

Before making an investment, VC firms will want to know how other VC’s who invested in similar companies made out. Find this information and put it down. What was the initial investment? What is the company worth now? How much time was it between the initial investment and the exit?

Again, websites such as CrunchBase, VentureBeat, CB Insights and many others can provide you with more than enough info to adequately complete this section.

Note however, that sometimes this information is unavailable simply because there haven’t been any exits so far. This will be especially true in emerging industries. In this scenario, the best thing to do would be to rely again on profits.

What are similar startups in the industry making? Are they profitable at all? What are their valuations?

The goal here is to include anything that will give the VC a better picture of what they could expect if all goes well and they’re able to exit the company successfully.

Part 7 — Recommendation

This will be your conclusion.

Much like any research-based project, before writing this section it would be prudent to take a step back and re-read your memo. What are the key points you can re-state here? What are the most important takeaways?

The purpose of this section is to take the body of information you have compiled and make an honest recommendation as to whether you think the company is worth the VC’s time and money. Simply answer the question: do you feel investing in this company is a good or bad idea, and why?

If the answer to that question is yes, it is sometimes also worth adding a little bit about how you think the VC should proceed after they invest. Should they push advertising with the company? Should they improve the platform or product itself?

Providing a few extra ideas like this will give the VC a chance to see you can also be effective and creative when it comes to doing the other thing that VC’s need to be good at — making sure their investments don’t fail.

So that’s it!

It seems like a good amount of work, and it is.

But truly, if you spend the few hours it should take you to write even just one of these documents, you will forever have a tool that will make you a more attractive, competitive candidate when applying to any entry-level VC position in the future.

And in an ultra-competitive industry, having something which can set you apart like this will be invaluable.

• To see all the above in action, here’s an example of an investment memo I recently wrote up on a fintech startup based out of NYC
• Like this post or think I left something out? Feel free to comment or ask questions — I always appreciate feedback
• Interested in Venture Capital? Connect with me on LinkedIn