Hello you,
I know you are reading this with a mix of optimism and excitement as you gear up to start your preparation to land an opportunity in the world of investing. There was a time when I was in your shoes, but did not have the benefit of a single comprehensive resource that could help me understand and prepare for same. Having spent some time in this part of the world, I realized that while technology helps to make our world a better place, sharing of knowledge can help do it more equitably. Thus, this is an attempt to help you benefit from some of my experiences in your journey of breaking into venture investing.
As summer approaches on the calendar every year, it heats up the competition to land a job in some of the most coveted Private Equity and Venture Capital firms. With top candidates like yourself eyeing a limited number of open positions in the investing world, my phone often buzzes with calls from friends and peers seeking clarity on what the VC life entails. To help you navigate through some of the most common questions, I will attempt to answer the following — choosing between VC vs. PE, life as a VC analyst and tips to break into VC. Let me also caution you by saying that the answers below are not representative of any particular firm’s role for analysts, and represent my personal opinion only.
How do you choose between VC and PE?
Venture investing is essentially the same as investing in private equities but for early stage businesses. The biggest question for me while choosing between two was if I wanted to help build companies that were formed 30 years ago, or do I help companies that will be built in the next 30 years? The prospect of being a part of the latter’s growth journey excited me more, and so gave me the first level of clarity. In addition to evaluating my own skill-sets for either roles, I asked myself some of the following questions
Do I prefer spending my time amongst people and ideas vs. spending hours on financial models?
What stage of evaluating businesses do I prefer? Do I like placing trust in founders early in their journey of building world renowned companies or do I evaluate them at a time when I can trust the numbers to tell the story?
How early in my life do I want to be able to build social capital that helps me create serendipity?
If I were to start a business at some point in life, which job is more likely to prepare me for it?
How does the life of a VC analyst /associate look like?
The life of analysts and associates in VC firms differs depending on the stage of investments that the firm makes. While the nature of work essentially would remain the same, the proportion of time devoted towards different aspects of the job would differ. There are 4–5 different things that an analyst would do
Sourcing investment opportunities: Early stage VC analysts spend most of their time in sourcing companies and evaluating founders. This means they meet a LOT of companies every month and evaluate them to find opportunities that are worth pursuing for the firm.
Building relationships: Getting access to investment opportunities and building knowledge on the sector is largely dependent on the ability to make friends in the ecosystem. This helps get access to investment opportunities before everyone else, and also helps analysts understand different sectors better through conversations with people who have spent 10,000 hours in the space.
Preparing investment thesis: A part of the job involves developing investment thesis for different sectors. This is largely driven by defining the market opportunity, the existing landscape, and the possible white spaces where the firm can look to invest in and why.
Supporting portfolio companies: A part of the analyst’s role is also to help portfolio companies solve problems, figure paths to growth, and hire talent. On behalf of the firm, you are a friend and a sounding board to the founders.
What are the good and the bad parts about this job?
The good part about a role as a VC analyst is multifold.
Strong social capital: The opportunity to meet and work with very, very smart and talented people in the ecosystem who are either investors in companies that have become household names, or are the founders themselves.
Breadth vs. depth: As a VC investor you have a good lay of the land. It helps you understand and learn about different sectors a lot better, allowing you to figure out where do you want to spend the next 20–30 years of your professional life (of course you can continue in investing, but if you do wish to switch later your decision will be more informed)
Ownership and flexibility of work: The role comes with a very high degree of ownership and responsibility, the ability to pace your learning and growth, and increasing amounts of intellectual stimulation. You aren’t a paper pusher or a mindless executor in this part of the world, you are a thought leader.
Irrespective of the career you choose, one of the best post on self-improvement that you should read is this.
Source: India Quotient, Stellaris Venture Partners
The not so good parts are that it isn’t a role where you get to work in teams everyday. You are mostly by yourself, have to define your own daily goals and be extremely self-motivated to sustain for a long time. The rewards for your efforts are not immediate, and hence you need to be comfortable to put in an effort with no clear sight of outcomes in the short-term. Furthermore, contrary to popular belief, it is not a lifestyle job. While there is work-life harmony and the ability to plan your day, you should expect yourself to put in the hours when required, be constantly plugged in, and be curious to learn and grow. As they say “with great power comes great responsibility.”
Source: India Quotient, Stellaris Venture Partners
Why did I choose to switch from consulting to VC?
Let me say this upfront that my life in consulting was one of the best learning experiences of my professional journey, and the memories from my consulting days keep hitting me every now and then. The opportunity to work with some of the smartest and warm set of individuals in the country and some of the most reputed organisations in the world is a privilege one rarely receives. The skill-sets, opportunities and mentorship you would receive in consulting are equally valuable and adequate in helping you along your learning journey. However, the nature of the role in consulting (as a junior consultant) may limit you in the following ways (sometimes they are function of the projects you end up working in)
The degree of autonomy to execute your ideas — since the final decision making may rest with your clients
Inability to get a complete overview of businesses at a point in time — since you work only a part of the puzzle during your consulting projects
Limited risk-reward opportunities — limited upside or downside since you will always have cover from your supervisors and the results are measured at the team-level
After having spent time in a very structured work environment, I wanted to challenge myself with the following
Climbing the ladder of chaos — startups don’t have set templates on what will work and what won’t, and as an investor I wanted to be a part of the journey where you figure this out (no more defined slide templates anymore 😛)
Define a goal and figure out the resources to achieve it than the other way round — sometimes the world of consulting may limit what can do by the resources you have at your disposal vs. as early stage investors (and more so as entrepreneurs) you define your your goal (either for an investment decision or to help your portfolio companies) and then figure out the resources to achieve it
While the above is limited to comparing consulting roles as opposed to roles in VC, analysts in VC firms also come from a variety of other backgrounds — investment banking, growth/operating roles in startups, entrepreneur turned VCs etc.
How does one prepare for VC interviews?
Preparing for a role in VC is not a sprint, it’s a marathon i.e. it is a longer journey. It is also more than just the professional skill-sets you bring on the table i.e. there are some personalities and intrinsic traits which fit the bill better than others. You will hear from all your VC friends that a large part of the interviews is about testing you on whether you would be a good VC investor or not. There are multiple ways to cover the ground here, but first things first.
Interviews can be divided into two parts: 1) Testing your interest in startups 2) Evaluating your “fit” for the VC world
Testing your interest in startups
Tactically, there are a few things you should do to prepare for this (some resources shared at the end to help you further)
Point of view on sectors
Try to have a broad PoV on different sectors (e.g. FoodTech, EdTech, FinTech, etc.) and a more nuanced PoV on 1–2 of your favourite sectors. By this I mean understand the following
What are the white-gaps in the sector waiting to be solved for? (If I give you $10M to invest where would you invest and more importantly why?
Which business models work in the sector and why? (Draw analogies from why some models failed in the past and what are the successful models that have worked in other sectors)
What are the important levers in the business that will be most important to determine its success? (e.g. distribution is key for consumer brands, retention for social platforms, etc.)
Portfolio analysis
For the particular VC firm you are interviewing with, select some of your most liked and least liked companies from their portfolio. Especially, for the ones you least liked, be prepared to answer why, in your opinion, you wouldn’t have invested in that opportunity (think with a lens of the size of market, business model, unit economics, etc.)
Funding scenario
As a startup enthusiast, you should be on top of the funding news and hence you could be expected to answer questions on some of your favourite investments in the last year or so and why.
Tracking companies
Know of a few early stage companies that you are tracking or have heard of that interests you (when asked this question, refrain from using already popular names like Uber or Facebook).
The VC fit
A big part of the interview is to test your fit for being a venture investor. This means that there are certain personality types that fit well in the industry. Although, there is no one size fits all here, but there are a few common underlying traits that are very clearly visible in most people who work in VC. They are very curious individuals and almost obsessive readers, are social (derive energy from people), self-motivated, hustlers, and can think on their feet. These are few of the many characteristics that different firms evaluate candidates for and might differ from one firm to another. Some of the ways in which these are tested is asking for past experiences where you may have demonstrated your hunger to learn and try new things, business case studies, brain-teasers and asking for your opinion on a certain topics.
Although some of the traits are, perhaps, more intrinsic and cannot be prepared overnight, you can definitely build a very strong habit of reading. You will surprise yourself by how reading can truly increase your hunger to know more, broaden your perspective, and make you stand out in the crowd. Hence, if you are a few years (or maybe months) away from evaluating a role in venture investing, this is your time to start early.
Source: India Quotient, Stellaris Venture Partners
As I conclude this here, my only piece of advice would be to not wait for opportunities to knock at your door, but figure out a way to create them for yourself. Become a thought leader in your individual capacity, share good content on social media and engage with top VCs and entrepreneurs (do not spam them) and eventually you will open up opportunities for yourself. Also, my personal philosophy says that breaking into investing is not a guarantee of success — the objective should always be on having multiple paths to achieve similar goals and skillsets. If you are willing to put in smart effort, you will create serendipity for yourself. However, the single most important question that should guide your decisions is at the end of it all — How Will You Measure Your Life?
Resources to help you prepare for a role in venture investing (and more importantly to help inculcate a habit of reading)
Types of venture investors — here
What helps one source better deals — here
Resources to be plugged into the startup ecosystem (must subscribe to and read daily) — Inc42, The-Ken, The Morning Context, Entrackr, Yourstory, podcasts, VC blogs, twitter feed of VC partners and startup founders
Track new companies and recent investments on Tracxn, Angel List, Trak.in, Y-Combinator, Google keyword searches
Reports and other resources — here
Be active on Twitter and LinkedIn (build your network, follow the right people — it is the best way to access top content and opinion pieces by veterans)
Books: Zero to One, Outliers, Shoe Dog, Superforecasting, Originals
1:1 experience share and personalized guidance — here