Over the past 1.5 years, I’ve gotten a lot of requests from people looking to break into venture capital. In all of these 30 minute coffee chats or phone calls, I find myself giving the same recommendations and tips over and over again.
To scale my time this year, I’m going to jot down the top three pieces of advice I give to those looking to land their first job in the venture capital industry.
1. Brace yourself for the fact that you will be operating differently.
When you “operate” in venture, you are moving at a very different pace.
Note that you aren’t going to stop operating or building – at it’s core, a venture firm is still a company that needs to continually be building, iterating, and adapting to survive and win.
The key difference is that venture firms raise their capital from limited partners and thus aren’t exposed to the market forces in the same way that a startup is.
If a startup cannot build a product or service that satisfies a need in the market, no one will pay them, and they will run out of cash and die. In a startup, there is a real sense of urgency to move each and every single day.
VCs make money from management fees (usually 1-3% of the total funds raised that is allocated towards a firm’s operating expenses i.e. salaries) and carry (usually 20-30% of profits made from successful investment payouts). Since the cash flow from both of these sources has been budgeted into each fund, VCs naturally don’t have the same sense of urgency.
Obviously, a VC can’t hang out for years doing nothing with their LP capital and collecting management fees or else there would be consequences, including serious reputational risk and the inability to raise another fund.
Additionally, the VCs who rest on their laurels, don’t think of themselves as a startup, and expect the best teams to come to them for an investment, will slowly die out.
However, for all reasons listed above, VCs can afford to be patient and wait to make the right investments.
Bringing this back to the initial point, VCs operate in relative silos for most of the working week. You’re often spending most of your time in 1-on-1 meetings & calls with founders getting to know them and their businesses.
One or two times a week, you may have partner meetings where you collectively get together and discuss the most promising companies that you want to dig further into.
For time-sensitive investments, the team will rally together to do dilligence and “win” an investment. Post-investment, the full team will do everything in their power to support the company but usually there is one point of contact for the company who may or may not join the board.
The reason I bring up this point first is that I want people to know that this job is very different than a traditional operating role.
You won’t be surrounded by a team every day and there won’t be any war rooms where you gather to prepare for product launches.
The feedback loop is very long and you often won’t know how you are doing until years later when your companies are performing very well or very badly / cease to exist.
2. Stop networking with VCs. Get to know founders and provide value to them in any way you can.
This is the BIGGEST mistake I see people making when they are trying to find a job in venture.
It’s natural to think that you should spend all of your time meeting with every single VC in hopes that one of them will magically think about you when a position opens up in their firm.
Just like with any other job in any other industry, people want to know that you can do the job effectively.
Specific to venture, you need to be able to prove that you are well connected and have a network of founders who will come to you when they are looking to raise money.
More importantly, VCs want to know if the founders in your network respect you for the value you bring to the table to the degree that they would let you invest in their company.
When I first interviewed for my last venture firm, FundersClub, the investment team there did a reference check with a founder in my network who I had previously done some work for (on nights and weekends). Because I had worked hard for this founder, he spoke very highly of me which helped to build a positive first impression with the team.
If you are speaking with VCs, it should be because you are already meeting with founders, doing the diligence, and are sending promising founders to these VCs.
If you send a founder to a VC who ends up doing an investment in that founder, I guarantee you will be top of the list when that VC is looking to hire.
If you don’t think you’ve built up this network or rapport with founders, see my next point below.
3. Build a unique and proprietary source of deal flow.
Regardless of what position you are in a venture firm, from Associate to Partner, you will always be sourcing. Sourcing never stops, so accept that now.
When you are recruiting for a venture firm, the firm has to believe that you are going to bring:
- Unique perspective that will help with developing investment theses & investment decisions
- Value-add capabilities i.e. significant operating or founding experience that builds credibility with founders and supports founders in the company-building process
- Unique deal flow to bring in founders and companies that the investment team doesn’t already see
Given that experienced founders and operators don’t really need to recruit for venture firms (they usually get courted by VCs), I’m going to assume that the audience reading this post has less to offer on the table for points #1 and #2 and will need to rely more heavily on #3.
Figure out what networks you have access to that the firm’s current investment team isn’t able to tap into (either out of lack of effort or affinity) and get to intimately know those networks. These could be anything from college campuses, founder support networks, online communities, to a blockchain meetup that you organize.
As a small example, I never built the Product Manager HQ community with the intent of finding founders but it naturally became a great source to tap into when I went through venture recruiting.
During the interview process at my last firm, one of my tasks after my first round interview was to find two seed-stage companies that I’d be interested in investing in personally and get in touch with their founders. I was given two weeks to complete the task.
I went home, pinged my PM community, and asked if anyone worked at a seed stage startup.
Since I had founded, provided value, and built trust with this community for a long time, the PMs trusted me enough to tell me more about their companies, what they were building, and even offered to make introductions to their CEO / co-founders for me.
It took me about an hour to finish the task and send back a detailed e-mail with two startups that I selected along with my investment rationale and proof that I could get in touch with their CEOs at anytime.
The investment team scheduled a follow-up interview round with me that same day.
If you don’t believe any of your current networks to be that unique or proprietary, then put in the work and create one. If you aren’t already acting like you are a VC who is constantly thinking about building unique networks, then you won’t succeed on the job anyways.