What I learned in my first 3 months in venture capital.

I spent the past three months in institutional venture capital.  As a former founder who bootstrapped to an exit, I always wanted to see what it was like on this side of the table.  Who makes the ultimate decision at partner meetings?  How do firms strategize for follow on?  What does it really mean to be thesis driven? 

I have been fortunate to have a seat at the table at Bloomberg Beta as a fellow, focused on investing in early stage companies improving the future of work with a focus on machine learning.  Beta is a founder-first firm where each member of the team has an equal seat at the table.  It’s a very wonderful place. As a fellow at Beta, I spoke to many founders, brought in deals, did tons of diligence, supported our portfolio founders and worked on our thesis development.  

What I have found interesting about venture capital is while it takes at least five years to figure out if you are any good at it, you can actually learn a whole lot in even just one week.  Why?  The feedback loop for each of your day to day activities is quite quick.  As an investor, you are taking up to ten calls a day with founders, you are having dozens of calls with your portfolio companies and, in the middle, you are doing due diligence on potential opportunities.  With the speed that deals come and go these days, as an investor, you are learning and iterating on your technique and strategy with every call you take and every deal you consider.  This could be as many as forty deals/calls per week.  That forty opportunities for improvement and iteration!

With all this said, having been on both sides of the table (as a founder and investor) I feel like I now have a particular perspective to share for founders, investors and for people considering a path in venture.

For people considering a path in venture:

1. Find your people.  Every firm is so unbelievably different.  And I’m not just talking about how they are structured in terms of size of fund, size of investment, etc.  I’m talking about in their framework for evaluating investment opportunities, in their partner dynamics, in how they view portfolio support, in how they structure their day to day.  Do they write investment memos?  Some do, some don’t. Who do they consider their core sourcing networks?  Some focus on institutional education, some focus on accelerators. What do they prioritize in evaluation?  Some are heavy product, some are heavy distribution. All of these variable components make up the culture of a fund and, as a result, paint a picture of what your day to day as a member of the team will be like.  There is no right or wrong answer in regards to how you run a fund.  They are all just different.  It is just really important that you find your people.  The ones that have the same thesis as you.  Are they spending their weekends researching new industries that excite them?  How do they pass on companies?  Are they quick to take an intro call or are they very scarce with calls and do a lot of evaluation before meeting?  Whatever the answers may be, would you do the same thing in their shoes?  You want to, if not, share the same sentiments as to how you conduct business, at least respect their frameworks. When you see it, you will know it.

2. Consider the path in front of you.  Getting a job in venture is incredibly hard.  Probably as hard as getting into Stanford.  And these days, you can go to Stanford and still not crack into venture!  So, let’s assume you are in a fortunate position where you have the opportunity to be judicious about which role in venture you take.  If so, it is really important to consider what the next five years will look like.  The totem pole in a venture firm is really, really short.  It’s basically going to be you (assumed associate or analyst) and the partner you work closely with.  Sure, maybe there are some titles in between like Principal or VP.  Let’s say you work hard and get yourself on a partner track.  Congrats!  So as your title is bumped up over time, you starting to get carry bit by bit...But, what does that mean at the end of the road as “partner”. As a partner at an already established fund, it may not mean you get the carry you are thinking you will.  You are getting carry in the fund and not necessarily the GP.  I will let that sink in. This might leave you back at square one where you have worked your way up the totem pole at your firm, but at the end of it the value of staying on as a partner is not worth the return.  You will then end up needing to leave to found your own firm to be compensated in a way that feels fair.  Did you past experience prepare you to raise your own fund from LP’s?  Hope so! Ensure the firm you decide to go with will prepare you for long term success. 

3. Sit in on a partner meeting.  One of the best ways to get insight on if these are your people and if this is a good path for you long term is to sit in on a partner meeting.  It’s a tall ask, but asking for it will be appreciated as it will not only show that you are thoughtful about your career but also really invested in finding out if its a fit for both of you.  In a partner meeting, you will get to understand how partners think about certain investment areas, how they share the diligence process, how they collaborate on investment theses and how they debate potential investment opportunities.  At some firms, everyone must sign off on an investment before a check is written, at others it can be a one hand raised type of thing. So much of venture is based on internal beliefs and morals so it’s incredibly important to feel like yours are shared with your teammates.

4. Get mentors.  This is so unbelievably hard.  There really isn’t a playbook as to how you acquire mentors that will be a good fit in guiding you along your career.  I remember at age 23 or 24 wishing so badly that I had mentors.  I thought about asking people I admired randomly but I never got the courage.  And then it just happened. When I turned around a few months ago I realized I had seven or eight people who were consulting me through the career transition process all whom I admire in the utmost and would trust with my life. The thing about mentorship is that it just happens.  You realize someone is your mentor naturally over time.  They don’t come in a certain size or shape. They don’t have to be in your industry or have had the exact same path that you are seeking. They are simply people who’s opinions you respect greatly and that have your best interest at heart. Once you find them, hold on to them dearly and utilize them through every single step of the way.

Moving on.

As a first time founder pitching to VC’s, I had absolutely no idea what I was doing.  I didn’t know what they were looking for, what their process was like and when I heard “no” I had absolutely no idea what I was doing wrong. 

For founders looking to raise venture capital:

The founder that is struggling to get connected to investors is going to need different advice than the founder that has many term sheets on their plate.  So with all this said, I will keep my advice general.

1. It’s not that investors are more busy than you (we certainly are not) there is just a lot more noise over here.  We are inundated with communication all day every day and sometimes prioritizing what is what gets a bit messy. What does that mean for you?  Honestly, do not be afraid to blow us up.  In fact, the more communication the better.  We want to know every time you uncover something really interesting about your customer base.  We want to know every product iteration you make and how it has improved your stickiness.  We want to know if you have a new angel who has signed a term sheet with a skill set that is going to get you to point B.  Truly don’t hesitate to blow us up.  And do not take it personal if it takes us a bit to get back to you.  Be direct.  If you need an answer by x date, tell us.  We aren’t ignoring you, we just are never, ever at inbox zero.

2. Don’t insult the associates.  A common things I heard founders share with one another is varying flavors of “I really don’t want to waste my time speaking with people that aren’t partners”.  Somehow or another this rumor got around that associates don’t have pull in firm decisions.  This is not true.  The dynamic inside funds is quite the opposite. More often than not, partners have been at firms for a long time and, as a result, don’t have the fire in their bellies to really fight for deals.  Partners really only feel the fire once there are multiple players hanging around the hoop and they have to get competitive.  Meanwhile, associates have all the fire in the world, all the time.  They success hinges upon their ability to push through good deals.  They have a name to make for themselves!  If they are to strike gold, it’s a big deal for them! Find an associate that believes in your company or idea and they will fight until the death for you.  

3. Don’t take no personally.  Facts.  If you get a pass from an investor, it is not because what you are doing is not a good idea.  Could be quite the opposite.  Oftentimes investors pass because they either 1) can’t wrap their head around the idea because it is too high level for them or 2) they don’t have enough time on their hands to do the appropriate due the diligence to understand it. If you really believe this is the right investor for you, then fight for it. If not, move on and do not get dejected. It’s not you, it’s them. 

4. Ask tough questions.  This is a two way street.  While the investor is trying to assess whether what you are building fits their viewpoint on where the world is headed, you should be figuring out if this person really has the potential to add value to your life.  Do they have customer connections that are going to help you get to $1M ARR?  How involved were they really with that one portfolio company you really admire?  What if it were actually possible for you to find an investor that could help you find early traction, find the right talent, find your series A investors, basically actually act as an extension of your team in all key areas.  Isn’t it worth interviewing your potential investors and finding that firm?

I have been lucky enough to be surrounded by not only really smart investors that have been investing in early stage venture for a long time but also have incredibly strong moral compasses.  They extremely thoughtful about every single one of their actions.  The following are some things they do that I chose to mimic.

For early stage investors:

1. Follow up.  It goes so unbelievably far to follow up in a timely manner.  It sounds so simple, but, having been there, I know how hard it is.  Do whatever you can to be diligent about this.  Maybe it’s having templated emails.  Maybe it’s blocked hours of time for responses.  Be incredibly organized so that no ball is left hanging in the air.  Lack of or delay in follow up is unfair to the founder.

2. Add value.  A rule of thumb to follow is to add value in every call you take.  For every action you take, have a follow up.  Even if you pass on a deal while on the call, follow up.  The greatest joy in life is helping others.  Whether you are going to be lifelong partners in building together or not you can still help that person their journey.  Ask yourself what your strengths are as an investor and what the founder’s greatest needs are.  How can you help?  Maybe they are too early for you, but how can you connect them with a customer that could help them in their beta.  Maybe they aren’t ready for institutional investment, do you have an angel that would be a good brainstorm partner for them?  Yes, this is time intensive to implement in your day to day routine.  It might feel strenuous to start.  But the long term ROI is there.  Not only are you going to feel better about how you are helping others but you are going to be building your network and personal brand as someone who helps others with no strings attached.  People do not forget this. You are your own personal rolodex. Your social capital has value.

3. Be transparent + clear.  Often as investor, if you are going to pass on a company, it’s not just for one reason.  Its 80% because of this (say product) but then 15% of that (distribution) and oh yeah also 5% this random reason (co-founder dynamic).  How are you going to say that to a founder in a way that doesn’t crush them and is actionable?  Be honest and direct with the founder about how you are thinking about the opportunity, what holes are still left open in your diligence process and what would help you understand the opportunity to the best of your ability.  At the end of the day the fundraising process is really just knowledge transfer.  And founders cannot educate you on their space if you are not being clear and succinct with what holes you have in your education process. 

4. Build your brand thoughtfully.  Building a brand is not just done through Twitter.  I am not saying to use it or not to use it.  I enjoy Twitter and do find it intellectual stimulating from time to time.  But my point here is it is just one vehicle for brand building.  Your brand is how you are perceived in society and what the public’s perception of you is.  The start up ecosystem is small and venture is even smaller.  Your persona is not just what you tweet, but also how you conduct yourself in conversations.  People talk with one another.  They are going to talk about what you did in the fundraising process and how you made someone feel.  The best investors I have come into contact with have a very specific personal brand that overlays how they speak with founders, how they conduct these relationship and, what they share via communication channels i.e. blogs.  The common thread I have found is that these investors are philosophers and ideators. They don’t try to check boxes on founder calls (Tell me about your TAM? Now tell me about your acquisition to date?). They actually are brainstorm partners. They spend more time sharing what they are thinking about in the respective industry and understanding what the founder is thinking about than getting granular or product or strategy. This creates high level conversation that helps each party understand whether they are seeing eye to eye on the future and even opens doors to new ideas in the space. These investors also tend to be big writers that communicate their ideas through long form. I have also found long form writing to be helpful in connecting me to people that are thinking about similar problems.

The last thing I will say that is not advice by any means but something just to keep in mind as you evaluate opportunities as an investor.

Being a good fundraiser is not synonymous with being a good founder.  It is easy to fall into a trap of taking call after call and being critical of founders for how they pitch, how they go through the fundraise process, etc.  Be kind with them.  Keep in mind the divide between building and fundraising.  They are very different skillsets. How a founder raises their round only tells you how they raise money.  It doesn’t tell you anything about how they hire, how they build, how they strategize, how they run.  It is a bubble of an experience.  If you are good at fundraising, it means just that.

This is not all encompassing.  Just some quick thoughts.  With that said, if you do have any questions or are interested in “picking my brain” on this subject at all, do not hesitate to reach out.  I’m an open book.  My email is elisedecamp@gmail.com.  I am a little slow to respond right now amidst this career transition.  Yes, I write this as the bookend of one career chapter and start of one anew.  My next role will be investing in tech in a different capacity.  You will have to stick around to hear more :)  

Thanks again for tuning in!