Quarter Life Crisis

“The demand for VC jobs is way in excess of the supply and probably always will be.”

That just about sums it up. It’s understandable why VC jobs are so highly coveted. I’ve had a flavor of VC and I must say it is pretty exciting. You learn about different industries on a daily basis, work with all sorts of experienced and brilliant people and get a lot of exposure in the community. However, getting a job as an associate at a VC firm is tough. Probably one of the toughest jobs to get. Every year, thousands of MBAs, burnt out I-bankers, and management consultants at the end of their 2 year rotations are looking to move into VC. These people are the creme of the resume crop so competition is intense.

This chart shows that job posts for VC’s are dropping substantially making supply demand gap even bigger.

Here is a quote coming from a top VC from a top international VC firm.

“Unfortunately my 2 cents sound cold and harsh. But over last 3 years china has changed a lot. There are too many qualified/promising mainland chinese students from top US mba shcools accepting local (or near local) packages to get into vc, pe, banking, consulting.

Its much tougher than getting into business school. “

Takeaways:

If you want to do VC in China, you’ve gotta be in tune to the Chinese business environment.   A top MBA in the US won’t get that for you.  There are thousands of hungry/ambitious local Chinese MBA graduates that are just as sharp.  On top of that, they speak the native language and live the culture.  Oh, and btw they are also willing to work for about 1/5 of a typical US associate.

Lots of excitement around these dollars and startups. Makes some sense that alternative investments such as VC would have more dollars to invest since the traditional ones we are used to, equities and real estate, are mighty scary in the short term. We’ll see if this was a good investment for LP’s in 4-5 years.

Just had a phone call for an associate position with a VC in SD.  Like it usually is, I had to go through a referral to get this phone call.  Anyways, we spoke for about 30 minutes. I told them about myself, my interests, my goals, and what relevant VC experiences I have. Then I spent the next 15 minutes asking questions.  Until now, I’ve usually had a pretty hard time thinking of questions to ask (for my other interviews) but this time it was surprisingly easy to think of insightful questions.  I guess thats what happens when you interview for a position you’re actually interested in.  Anyways, we’ll see how it goes.

If you want to talk to the talk (walking the walk is a whole ‘nother issue. =D) for an interview. Learn to speak the lingo.  Here’s a VC vocabulary list for you.

1. How big is your fund?
   There is no point trying to raise $1 million from a $1 billion fund.
2. How much is left in the fund after commitments and reserves for follow-ons are accounted for?
   Is there enough “dry powder” in the fund to support your company’s needs over time?
3. When do you intend to go out fundraising?
   In other words, are you going to disappear for six to 12 months immediately after making an investment in my company and joining my board of directors?
4. When you fundraise and tell the story of your three most successful investments, how will you describe how value was created for LPs?
   The answer to this question will give you some insight regarding how you might be expected to create value.  For example, if the firm’s biggest success came as a result of increasing valuation multiples through the consolidation of a fragmented industry, your company’s strategy of creating value through innovation and organic growth might not be a great fit.
5. Who is on your firm’s investment committee?
   Depending on the firm, your primary contact may not be among the small group of founding partners who may be making key investment decisions.
6. What was your firm’s advertised IRR when you raised your last fund?
   If the firm raised its most recent fund based on an advertised trackrecord of, say, a 60% internal rate of return, you might want to question whether your plan’s forecast of, for instance, a 30% IRR is really going to maintain your investor’s interest over time.
7. May I get a copy of the “book” you sent around when you raised this fund?
   What promises did the general partners make to their limited partners when they raised their last fund?  How might those promises impact the fund’s relationship with your company?
8. What do you think the exit will be on this investment?  Do you think it will be a financial buyer or a strategic buyer?
   You are going to be asked this question.  It’s only appropriate that you find out up front what the expectations of your investors are regarding this critical issue.
9. As you think about how to shape the company so that it is optimally positioned for that exit, what three things do you think need to be done in my company?
   The general partners are measured against their ability to deliver value to their investors.  By what metrics will you be judged?
10. What was your firm’s biggest disaster as an investor?  How did the investment go sideways?
    There is a difference between a bad result and a bad investment.  Does the investor know the difference?  How did they behave?

Source: http://sapventures.typepad.com/main/2005/01/10_questions_to.html

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when to raise VC
seth posted this on December 17, 2007

A bunch of folks often ask about the fund raising process that meebo went through. I talked about it a long while ago in a series of three blog posts here, here and here. I thought it might be worthwhile to revisit one particular topic that I get asked about pretty frequently these days: when to raise venture capital.

The idea of starting a company’s pretty exciting. You have a vision, you begin to talk to people about it and form a solid team of folks to execute on the idea, and you begin work on the actual product. Of course, without money in the bank funding people’s salaries, an office, a copier and fax machine, etc, it seems pretty tough to actually get going. The result’s that more often than not, people wonder how to attract the attention of VCs when they’re just starting to build their product. My simple answer:

Don’t.

Folks are fond of saying that VCs have so much money they need to invest that they’re just giving money away. This really isn’t what’s going on. It’s true that VCs have pretty sizable amounts of cash to invest in promising startups, but the result is that they’re very careful with their time. They want to believe that your company is really exciting, can become a big business, and that it’s therefore something they’d like to spend their time on.

There are lots of ways they think about this. One part is of course the idea itself, but another big part is the team behind the project. Has the team worked on other startups in the past? Do the team members seem likeable? Do friends of friends know them and vouch for them? Have they worked in related fields in the past, and been successful in those positions?

Another piece of the puzzle that can help a whole lot is validation of the product in the market. In other words, has the team released a product that users are adopting in sizable chunks? If the answer’s yes, then the VC has two major points of potential risk taken away: 1) the team is capable of developing and delivering a product to market and, 2) users are interested in the product!

The benefits to you, the entrepreneur, of waiting until your product is launched and gaining traffic are also pretty significant. Instead of spending a lot of time trying to convince VCs that users really want your idea, you can just show the VCs your traffic numbers. You’ll have more natural interest from VCs in your product, and as such you’ll find meetings get scheduled more quickly and the whole fund raising process will be shortened by months! You’ll also likely end up with a higher valuation and better terms on the deal to boot. You’ll also avoid some pitfalls of raising VC money too early. What if you raised money into an idea, launched the product, and discovered users didn’t actually want it? Not only do you have to convince your team that it’s time to move on to a different idea, but now you have investors whom you have to convince too. Yikes!

Net: it’s basically all upside to wait until after you’ve released your product and see user adoption before seeking your first round of venture funding.

Seth

From: MEEBO 

Paul told me that VC is something that most people fall into later on in their careers after doing a lot of this and that. Most of them don’t plan on it. Case and point: Al Gore is now a VC.

That is one interesting path into a career in VC to say the least…

Here’s a follow up on the Gore as a VC news.

High tech, low tech, or no tech. It doesn’t really matter these days to US VCs.  All that matters is the bottom line…. Thats why big shots like Kleiner and Sequoia are going no tech in China. While it’s getting harder and harder to find blockbuster tech deals in the US, theres plenty of non tech deals elsewhere in the world with blockbuster potential and, in some cases, lower risk.   This is what VCs based in China/Taiwan have been looking at for awhile.  When I was at Vincera, we invested in a bread machine making company.  Yes, not your average deal, but with solid management, a competitive advantage and a huge market, you don’t need to be groundbreaking to get your 5-10x in 5-7 years.  All I’m worried about is that the presence of these big shots in Asia will drive up valuations and make it more difficult for regionally focused VCs to get these types of deals.