The Business of Venture Capital. Mahendra Ramsinghani
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Square defined web presence as “anything accessible via a URL. It could be a blog, a social networking profile, a portfolio, a company, a social bookmarking archive… . It is whatever you think best represents who you are online.”9
At the entry-level position, differentiators can be few and competition fierce. A web presence can be a head start in building your path into a venture career. Building a network of mentors can also allow for rapid growth. “A good mentor in this business can be a huge asset,” advises Brant Moxley, who manages a placement firm, working with some of the leading investors. “But realize that in a classic venture firm, the senior partners do not have all the time to mentor juniors. A junior is like a remora feeding on the leftovers of the shark meal — you have to make sure you are in the right feeding ground,” he adds with a chuckle.10
INTERNSHIPS AND CAMPUS RECRUITMENT
Investment banking trumps VC when it comes to campus recruitment. Taufiq Rahim, a Daily Princetonian columnist, wrote of what he called the “hunting season” on campus of the elite. “They're here. I can see them. I can smell them. They're in my inbox. They're in my mailbox. They're on my voicemail. They're outside my door. They're on campus, and they smell blood… . They're the investment banks, the consulting firms — McKinsey, Goldman Sachs, Bain and Company, Merrill Lynch”11 But venture firms rarely conduct campus recruitment drives — the pace of hiring and volume of open positions is low, and when a MBA graduate has significant student debt to worry about, they are rarely picky.
Interviewing for Your VC Position
Preparation:
Investments: Research the venture firm's profile. Understand the sector and stage of investments, assets under management, and its latest fund size.
Look up the key portfolio companies, and map their progress. Have these companies signed up strategic partnerships? Have they raised follow-on rounds of capital?
Performance: Research any major exits.
Philosophy and culture: Read the founders’ and senior partners’ blogs. Understand their mind-set and philosophies well.
Reference checks: Call founders, co-investors, ex-employees . . . get to the bottom of how the firm treats people.
Examples of questions you can ask the venture firm:
1 What is the fund's investment strategy?Of course, you have done your homework, checked out the websites and online data sources. You know the firm's history and the background of the founders.Research one or two specific investments, and assess the competitive universe of similar investments made by other venture firms. Dive into the investment rationale and find out why this opportunity was chosen over others.Ask how the fund's investment strategy has evolved over time. What challenges has the fund faced, if any, in sourcing opportunities? In raising capital?Find out the life cycle of the current fund. All venture funds have a three- to five-year investment period from the time the fund is raised. Thus, depending on the timing of your entry, you could be involved in making investments, managing the portfolio, or preparing for the next fund raise.
2 What is a typical day at the firm? To whom would I report, and what self-development opportunities exist for an entry-level person?Look for opportunities where you will participate in all facets of the business.
3 Is this a collaborative environment or a field of cowboys who thrive going solo? How do the team members collaborate with each other, especially when the portfolio companies are in trouble? When has the firm let go of any staff, and why?Look for troubling situations. How were these handled by the internal team? Be prepared to get smooth-talked and do not believe everything you hear. You will rarely hear honest statements like “We screwed up on that investment” or the GP “is a Machiavellian despot, who screams his head off and throws things around, muttering obscenities.” Talk to the industry peers and CEOs of portfolio companies to get a true sense of the culture of the firm.Can you see yourself having fun with this team? A beer on Friday night?
4 How will my performance be measured? Will we have clear milestones established? Will I be able to measure my own progress? Beware of any firm that does not offer clarity in performance metrics, as ambiguity can be used to hurt you.
5 At what point will I be eligible to be on a partner track? In some firms, candidates are elevated to partner status after successful exits, while in other firms, it's a function of time.
Rajeev Batra, partner at the Mayfield Fund, says, “When I was finishing up my MBA at Harvard, I was approached by a few venture firms. I did not even realize I was being interviewed till we met for the third time.” Rajeev had a few entrepreneurial gigs, and a PhD in electrical engineering demonstrated his domain knowledge. “In my business school essay, I had written that eventually, I wanted to be a venture capitalist when I grow up,” he says.12
Mind Your Language … and Your Handwriting
When Forbes profiled Arthur Rock, a young investment manager in Boston, Dick Kramlich read the article with great interest. Arthur was hiring. “Well, I'm gonna find a younger partner …” Dick sat down and wrote him a longhand letter. “I never had ever done anything like this before” he would recall. “The following Monday I got a telephone call. “Mr. Rock's on the line.”
Arthur hired Dick shortly thereafter. “I found out there were over a thousand responses to the article. And that Arthur had a handwriting expert that analyzed my letter. Isn't that funny? So that's how I got in the venture business.” Later, Dick Kramlich went to found New Enterprise Associates (NEA), a multibillion-dollar global venture fund.
Terry McGuire, a venture capitalist of 25 years and Emeritus Chairman of National Venture Capital Association, spent a year in Ireland soon after college, where he learned to speak Gaelic. Coincidentally, at his first job interview, the interviewer spoke fluent Gaelic. He muttered, “An bfhuil se fluic, amach?” which is Gaelic for “Is it wet outside?” Terry promptly responded in Gaelic. The two hit it off, and Terry landed the job.13 But was it just a stroke of luck? It certainly helped that Terry was the president of the Harvard Business School Venture Capital Club. “It's a combination of training, the network, and opportunity that presented itself,” says Terry. Terry went on to start Polaris Ventures after a seven-year stint at this Chicago-based venture firm.
Candidates often underestimate the power of internship opportunities. Many practitioners would be open to a thoughtful email or a call along the lines of “Hi, I am graduating next year and wanted to explore a summer internship. I have studied your investment thesis and have identified a few opportunities that may be of interest. Let me know if I can come by and discuss these.” That kind of an opening gambit is bound to get a response.
Often, those at a junior level may wonder if entrepreneurs will engage with them. The debate is rife with opinions of a thousand bloggers: entrepreneurs should only talk to those professionals who can make decisions. While various blogs emphasize the important attributes of the investor's stature, experience, decision-making abilities, or getting the deal done, to get to the decision makers, the starting point is often a junior person. Pat Grady, partner at Sequoia Capital for over 12 years says, “When I joined Sequoia back in 2004, I was the youngest in the firm but my title was partner. For Sequoia, this was never about a ‘sourcing’ gimmick, making sure that founders ‘talk only to partners’ hence this title. It was a genuine intention to align everyone