Jan 09

Sports Metaphors and Venture Investing

I originally wrote this for my Field Study in Private Equity class, but I wanted to archive it here as well:

I recently heard that the difference between a sport and a game is that
you can intentionally lose in a sport. Try to intentionally lose at
craps, you can make the odds bad, but you can't ensure a loss. Now some
sports have more skill (signal) than luck (noise), for instance I can
never get lucky and beat Usian Bolt, but I just might get lucky and upset the world champion of Poker. So poker has a lot more noise in it than does running.

what does this have to do with venture you're asking. Simple, while
venture investing may not be a game (you could intentionally lose), it
is a very noisy sport. There are a whole lot of factors outside your
control that contribute to you wins or losses. Add to that the effect
that winners get earlier looks at better deals, and can get access to
deals based on their reputation that others might not, and it really
becomes tough to distinguish luck from skill.

Anyway, with the
signal to noise ratio so low it will be hard to tell who really has
talent vs. those that got lucky, at least if one is only looking at
returns. If you want to be a runner then you'll probably want to find a
different line of work; maybe this explains the large vc poker league in the valley.

Jan 09

VC Internship Interviews

So this blog is not going to be a how-to on VC internships, but I've gotten a few questions after my last post on the interview process. I figure if one person is asking, then others must be wondering.

The VC interview process is not structured like many other B School interviews; you won't have to do public math, nor do you normally have to pitch a company (Though having a few ideas of startup companies you like can't hurt.) Instead you'll generally have to walk the person through your resume, and then tell them why you'll be good at VC, and how you can add value. Some guys will come right out and ask tough questions like "Why would an entrepreneur listen to you?" while others will be far more subtle. Either way, you've got to sell them on a couple things:

  • You know the business well enough that you won't waste their time.
  • You can add value. (Either you know a sector they like, or you have operating skills their companies can use.)
  • You're really excited about venture.

The last one seems obvious, but given how short the summer is and how little structure their is inside most firms, you're going to have to be self motivated. If it is just a job to you then (unlike banking) they won't get any good work from you. Remember, most VC's view internships as a waste , you really need to show that you aren't going to use up their most valuable resource: time.

So be ready to tell your story, show some passion, and go out there and get a job. 🙂

Jan 09

Finding a VC Internship

The Career Development Office sent a number of students who are interested in finding an internship in VC to speak with me. I think I've gotten my spiel down pretty well by now, so I thought I'd put it up here. 

  • Figure out your story. Just like the process for getting into B-School you need to have a story arc that logically ends with you getting the position you want, in this case a job in VC. In my case the story revolves around the three startups I worked at, my changing interest from technology to business and markets, and from being an individual contributor to more of a mentor. Obviously your resume should be written to reflect your story.
  • Be an expert. If you're not already an expert in an area that receives venture investment find one that you can become an expert in. Recently many students have looked into clean tech and the energy fields, but there are plenty of technologies
  • Make a list of alumni. You're going to want to make a list of firms that are the size and style that interests you, then cross reference that with alumni lists. When I first started I only looked at Tuck alumni, but over time I've found that alumni from my college as well as general Dartmouth alumni have been very receptive as well. Start with the more junior people, early on you'll be asking basic questions and it's best to get those answered by people who won't mind helping to educate you. Also, don't start with your top firm, you'll get better at the phone calls as you go, so save the best for last.
  • Learn the land mines. Early on you'll discover common questions about your background and why you think you should be a VC. Start to determine which answers resonate with people, and how to cut off avenues that are not flattering to you. For instance, most early stage VC's want to see that you have some operating experience. If you started a successful startup then this is easy, but if not you'll want to tell them earlier (before they ask) about some relevant operating experience and how you believe it has given you the necessary skills. Getting out in front of tough questions can keep you from having to go on the defensive about some aspect of your skill set.
  • Cast a wide net. I ended up meeting the firm I worked for over the summer because I mentioned to a family friend what I was looking to do. She replied that "Oh, I know a person that works in venture, would you like to speak with him." That turned out to be the connection that finally did it. So tell everyone in your network what you're looking to do, you never know when it will pay off.
  • Do free work. Show how you can add value by doing some due diligence for free. Obviously you should  offer to do work in the area in which you are an expert.
  • Be prepared to wait. Everyone will tell you that VC's wait until the end of the process to make decisions. It is a simple selection filter for a VC firm, if you're not willing to wait then you're not dedicated enough; it is also a way of not having to say no. My advice, stay focused and don't apply to jobs that would force you to make an early decision (such as consulting) since they'll just add stress when you have to turn them down. It is smart to have a Plan B, just make sure that you've exhausted your options before you have to pull the trigger.  
  • Stay up on VC news. PE Hub has a great mailing list that will give you a quick view of the news of the day. VentureBeat and TechCrunch are also excellent for staying abreast of what is going on in the world of Venture.  

Those are the things that worked for me, I hope they work for others.