Breaking into Venture Capital: Start with a Great Study Project
By Yujin Chung, Wharton MBA, 2010
I’ve been receiving several requests for calls/meetings by MBA students and alums on how to break into VC. Like anyone in venture capital will tell you, there is no single path or route. I would argue, however, that my described approach below is less random and somewhat productive. It's even been shared by others who entered the industry via MBA programs. These include Cali Tran of Northbridge Partners and Rama Sekhar of Norwest Partners. My own approach led to a spring time internship with Comcast’s seed stage fund (Genacast Ventures), a study project with Andreessen Horowitz, and final rounds with three top venture funds (resulting in two offers). This approach also assisted Simon Lu in obtaining an internship at Twitter.
The great thing about this approach is that regardless of outcome, you’ll learn something, meet a ton of people, and enrich your learning of a new market, which is great for your career whether you get into VC or not.
Some background
I seriously began my VC job search August of 2009, right after my investment banking internship at Morgan Stanley. While I had a terrific summer (I learned a ton about finance and Wall Street from one of the best firms in the world), I knew banking was not my long-term career choice. I did know I loved technology and entrepreneurship (I had worked part-time as a marketing intern for Mixer Labs Spring semester of 2009 - this company ended up becoming acquired by Twitter earlier this year), I had not made a conscious effort to truly learn about venture capital or entrepreneurship. Also, given my lack of experience at a startup or VC fund - in fact, I would argue my background which included stints at Bain, Warner Music (digital strategy/business development), and now banking labeled me as a primo douchebag - I would need to find a differentiator to really have any shot at finding a job in VC.
This is a key point, about differentiation. You have to realize that every year there are likely only 5-10 roles available during the course of the year (I believe I went through 6-7 interview processes before closing my last two offers). That limited number of roles isn’t important - it’s the fact that roughly 100-200 of the best MBA candidates are vying FOR EACH ROLE. It’s HUGELY competitive. It’s completely a buyer’s market. So unless you have a different angle, you’re just going to look like any other strategy consulting/investment banking/entrepreneur/VC associate candidate - completely cookie cutter. My background was even worse given the lack of the latter two. So I REALLY needed an edge to break into the industry.
Before I go any further, you have to make sure you want to do this, and that’s a decision every person makes for him/herself. For me, I lived and breathed technology since I was in high school. I read this great article about the Palmpilot in Fast Company my senior year in high school which changed my life and made me pursue an engineering degree. So I knew this is what I wanted to do. But it would not be without much time, effort, and sacrifice.
The differentiator: study project
The main mistake many MBA career offices tell candidates desiring a role in VC is that networking is important. I remember one of our advisors saying I should be on the phone two hours a day setting up coffees/lunches/meetings.
While I initially felt panicked and considered moving in this direction, stop and think about that approach. Sure, you could harass your network and email every Wharton alum in VC, but then ask yourself the next natural question: what the hell would you talk about? About how you want to get into VC? Tips/tricks? Now be empathetic - why the hell would any associate/partner at a top firm want to talk take up their valuable time to share such information? It’s a completely one-sided ask.
So the real question is not to take up someone’s time, but engage the other party in a way so that post meeting they feel they got something out of it. In fact, it should be one-sided the other way. Good relationships aren’t borne of asking, but giving.
My friend and mentor, Chris Farmer, who recently left Bessemer Ventures as a VP, gave me a great idea by example. He shared some initial research he had done on VC syndication to “forecast” future fund performance. Essentially, top firms invest together, and new firms which invest with top firms tend to become top firms in the future. More simply, the cool kids choose who will be cool next (see Chris’ quora answer here: http://www.quora.com/What-are-generally-considered-the-top-venture-capital-firms)
Along with the research being completely kickass, it was a great conversation starter, not only because the content was interesting, but because during the course of the meeting you could own the conversation. Instead of a passive interview where you would be attacked with questions left and right, you were bringing in a metaphorical grenade launcher to manage and control the discussion.
So that’s the theory. But what would you include in such a project? What content is interesting to VC’s? How could this help you get a job?
Do the job before the job
The study project should be an example of doing the job before getting the job. What does a good VC do? Valuation? Term sheet negotiation? Analysis?
This is where MBA classes get VC wrong. They focus so much on the analysis and terms - and I admit it is important to understand these components of the role - but these parts are so less priority.
A good VC is like a great Hollywood talent agent. Among the numerous duties a VC must have, the two most important are knowing the market and accessing the market. Doing the study project helps with the first duty. Sharing the knowledge helps with the second.
Knowing the market
This is understanding emerging trends, having some thoughts on market theses based on historical analysis, and identifying the top startups and entrepreneurs in those sectors. A mentor mine at Bessemer, Trevor Oelschig, described this state as “being in flow.” People send you tips. You’re respected as an expert. You can engage with a VC, entrepreneur, or corporate exec and sound credible because you know the space. Most importantly, you start getting quality dealflow.
Dealflow is easy to get - everyone and their mother is starting a company these days. Quality Dealflow is hard. Like the agent example, if you go to Hollywood everyone has a screenplay but the vast majority of those are awful because those writers can’t access top talent. Same goes in VC - most businessplans suffer not from the idea but because the entrepreneurs are not quality. And just like in Hollywood, we all know who the top entrepreneurs are, and we all fight to invest with them.
A study project can accelerate this learning process by doing a) a historical analysis of industry in transition and b) market mapping the current landscape of startups in that industry. And my first study project (http://www.slideshare.net/Enderdoon/media-study-project-final-ydc2) is exactly this. I analyzed the media industry (most of my structures coming from the book Curse of the Mogul by Jonathan Knee) and then analyzed how the mobile and social gaming industries were emerging based on that structure.
None of this was easy - for the former I studied Knee’s book along with other resources for weeks. For the latter I created a custom database of companies and categories from a social gaming conference website which listed all its attendees. There were weeks when I was up till 2am doing mind numbing research and creating slides (finally, my consulting/banking background came in handy!). But to be honest, I loved every minute of it - I was learning so much and expanding my knowledge of these sectors.
Some other comments on research
- Try to do something that involves a lot of data crunching/mundane work. This is where being in an MBA program is a strength, not a weakness, as you have the time to actually do analysis that people in the industry don’t have time to do (VC is very OCD - my days are generally segmented into 30min chunks so it’s nearly impossible to do a concentrated study)
- I’d argue doing the first project on your own, and doing others with one other person. Team above size of two get challenging to manage very quickly
- If you find yourself postponing to do the research or not being engaged, this is not the industry for you. Which is fine! Everyone has different passions and you’ve got to do what you love. But if you’re not self-motivated enough to do a damn study project, you will hate the real job.
- Again, this is not a trivial time commitment. I skipped a ton of social events/travel/even classes to get this done. Do I have any regrets? Sure. Would I have done this again if I had to redo my MBA? In a heartbeat.
Accessing the market
So I finished my initial draft of the research in mid November. Now what? Now it was time to market the hell out of it. This is the other part of VC students need to understand: this is a people business. You need to know a ton of people, you have to meet a ton of people, you have to impress a ton of people. Information in a vacuum might as well not exist. You need to get out there and share this awesome research.
I initially started with a few friendly VC’s/entrepreneurs for feedback, but then every Friday was in NYC or the west coast setting up meetings. If your research is good, it shouldn’t be hard to ask for referrals so you could expand your network - every meeting should lead to 1-2 more meetings if done correctly. After my first 5-6 meetings, all my other meetings (probably 50-60 before I was done) were by referral.
The other advice I would give here: meet with EVERYONE, not just VC’s. You obviously need to meet with VC’s for input/relationship purposes (and to get a sense of where jobs/openings emerge) but for dealflow purposes they’re not very helpful. In reality, make time with entrepreneurs - whether CEO’s or C-level execs, they tend to be more accessible than corporate execs. Other good people to reach are angel investors, lawyers, and even midmarket bankers like the guys at GCA Savvian.
Also, if you feel like you had a great meeting with one, offer to do free work. Often times entrepreneurs need help with market sizing, research, or other work where an MBA skillset can be helpful. Do the right thing and help them out - and never ask for a dime. These entrepreneurs are working 10x harder than you with 100x more stress so I feel it’s almost ethically wrong to ask for anything. Instead, you’ll more than earn any relevant fees in reputation equity. Also, entrepreneurs (I’m gushing now but bear with me) are just so great to work with - they love what they do, they’re energizing and optmistic, and 99% of the time, are just amazing people. Every meeting/call I had with Hot Potato and Challengepost was damn inspiring.
I’ll keep writing more but so far if you’re strongly thinking about VC, this is a good way to get started. And this approach was also helpful on the startup route - I actually managed final rounds/offers with a variety of startups based on this research.
The real hard part, actually finding a job and interviewing, unfortunately is completely outside your control. That’s just good luck/timing. You can improve your probability by doing a study project with a firm (this happened to work in my case but honestly speaking could have just as easily not succeeded) but really you can’t control that aspect.
But really, that’s life. A mentor of mine, now a retired CEO of a public tech company, once said that success was the intersection of preparation and opportunity. I can’t help you with the latter, but hopefully the comments above help with the former.
By Yujin Chung, Wharton MBA, 2010
I’ve been receiving several requests for calls/meetings by MBA students and alums on how to break into VC. Like anyone in venture capital will tell you, there is no single path or route. I would argue, however, that my described approach below is less random and somewhat productive. It's even been shared by others who entered the industry via MBA programs. These include Cali Tran of Northbridge Partners and Rama Sekhar of Norwest Partners. My own approach led to a spring time internship with Comcast’s seed stage fund (Genacast Ventures), a study project with Andreessen Horowitz, and final rounds with three top venture funds (resulting in two offers). This approach also assisted Simon Lu in obtaining an internship at Twitter.
The great thing about this approach is that regardless of outcome, you’ll learn something, meet a ton of people, and enrich your learning of a new market, which is great for your career whether you get into VC or not.
Some background
I seriously began my VC job search August of 2009, right after my investment banking internship at Morgan Stanley. While I had a terrific summer (I learned a ton about finance and Wall Street from one of the best firms in the world), I knew banking was not my long-term career choice. I did know I loved technology and entrepreneurship (I had worked part-time as a marketing intern for Mixer Labs Spring semester of 2009 - this company ended up becoming acquired by Twitter earlier this year), I had not made a conscious effort to truly learn about venture capital or entrepreneurship. Also, given my lack of experience at a startup or VC fund - in fact, I would argue my background which included stints at Bain, Warner Music (digital strategy/business development), and now banking labeled me as a primo douchebag - I would need to find a differentiator to really have any shot at finding a job in VC.
This is a key point, about differentiation. You have to realize that every year there are likely only 5-10 roles available during the course of the year (I believe I went through 6-7 interview processes before closing my last two offers). That limited number of roles isn’t important - it’s the fact that roughly 100-200 of the best MBA candidates are vying FOR EACH ROLE. It’s HUGELY competitive. It’s completely a buyer’s market. So unless you have a different angle, you’re just going to look like any other strategy consulting/investment banking/entrepreneur/VC associate candidate - completely cookie cutter. My background was even worse given the lack of the latter two. So I REALLY needed an edge to break into the industry.
Before I go any further, you have to make sure you want to do this, and that’s a decision every person makes for him/herself. For me, I lived and breathed technology since I was in high school. I read this great article about the Palmpilot in Fast Company my senior year in high school which changed my life and made me pursue an engineering degree. So I knew this is what I wanted to do. But it would not be without much time, effort, and sacrifice.
The differentiator: study project
The main mistake many MBA career offices tell candidates desiring a role in VC is that networking is important. I remember one of our advisors saying I should be on the phone two hours a day setting up coffees/lunches/meetings.
While I initially felt panicked and considered moving in this direction, stop and think about that approach. Sure, you could harass your network and email every Wharton alum in VC, but then ask yourself the next natural question: what the hell would you talk about? About how you want to get into VC? Tips/tricks? Now be empathetic - why the hell would any associate/partner at a top firm want to talk take up their valuable time to share such information? It’s a completely one-sided ask.
So the real question is not to take up someone’s time, but engage the other party in a way so that post meeting they feel they got something out of it. In fact, it should be one-sided the other way. Good relationships aren’t borne of asking, but giving.
My friend and mentor, Chris Farmer, who recently left Bessemer Ventures as a VP, gave me a great idea by example. He shared some initial research he had done on VC syndication to “forecast” future fund performance. Essentially, top firms invest together, and new firms which invest with top firms tend to become top firms in the future. More simply, the cool kids choose who will be cool next (see Chris’ quora answer here: http://www.quora.com/What-are-generally-considered-the-top-venture-capital-firms)
Along with the research being completely kickass, it was a great conversation starter, not only because the content was interesting, but because during the course of the meeting you could own the conversation. Instead of a passive interview where you would be attacked with questions left and right, you were bringing in a metaphorical grenade launcher to manage and control the discussion.
So that’s the theory. But what would you include in such a project? What content is interesting to VC’s? How could this help you get a job?
Do the job before the job
The study project should be an example of doing the job before getting the job. What does a good VC do? Valuation? Term sheet negotiation? Analysis?
This is where MBA classes get VC wrong. They focus so much on the analysis and terms - and I admit it is important to understand these components of the role - but these parts are so less priority.
A good VC is like a great Hollywood talent agent. Among the numerous duties a VC must have, the two most important are knowing the market and accessing the market. Doing the study project helps with the first duty. Sharing the knowledge helps with the second.
Knowing the market
This is understanding emerging trends, having some thoughts on market theses based on historical analysis, and identifying the top startups and entrepreneurs in those sectors. A mentor mine at Bessemer, Trevor Oelschig, described this state as “being in flow.” People send you tips. You’re respected as an expert. You can engage with a VC, entrepreneur, or corporate exec and sound credible because you know the space. Most importantly, you start getting quality dealflow.
Dealflow is easy to get - everyone and their mother is starting a company these days. Quality Dealflow is hard. Like the agent example, if you go to Hollywood everyone has a screenplay but the vast majority of those are awful because those writers can’t access top talent. Same goes in VC - most businessplans suffer not from the idea but because the entrepreneurs are not quality. And just like in Hollywood, we all know who the top entrepreneurs are, and we all fight to invest with them.
A study project can accelerate this learning process by doing a) a historical analysis of industry in transition and b) market mapping the current landscape of startups in that industry. And my first study project (http://www.slideshare.net/Enderdoon/media-study-project-final-ydc2) is exactly this. I analyzed the media industry (most of my structures coming from the book Curse of the Mogul by Jonathan Knee) and then analyzed how the mobile and social gaming industries were emerging based on that structure.
None of this was easy - for the former I studied Knee’s book along with other resources for weeks. For the latter I created a custom database of companies and categories from a social gaming conference website which listed all its attendees. There were weeks when I was up till 2am doing mind numbing research and creating slides (finally, my consulting/banking background came in handy!). But to be honest, I loved every minute of it - I was learning so much and expanding my knowledge of these sectors.
Some other comments on research
- Try to do something that involves a lot of data crunching/mundane work. This is where being in an MBA program is a strength, not a weakness, as you have the time to actually do analysis that people in the industry don’t have time to do (VC is very OCD - my days are generally segmented into 30min chunks so it’s nearly impossible to do a concentrated study)
- I’d argue doing the first project on your own, and doing others with one other person. Team above size of two get challenging to manage very quickly
- If you find yourself postponing to do the research or not being engaged, this is not the industry for you. Which is fine! Everyone has different passions and you’ve got to do what you love. But if you’re not self-motivated enough to do a damn study project, you will hate the real job.
- Again, this is not a trivial time commitment. I skipped a ton of social events/travel/even classes to get this done. Do I have any regrets? Sure. Would I have done this again if I had to redo my MBA? In a heartbeat.
Accessing the market
So I finished my initial draft of the research in mid November. Now what? Now it was time to market the hell out of it. This is the other part of VC students need to understand: this is a people business. You need to know a ton of people, you have to meet a ton of people, you have to impress a ton of people. Information in a vacuum might as well not exist. You need to get out there and share this awesome research.
I initially started with a few friendly VC’s/entrepreneurs for feedback, but then every Friday was in NYC or the west coast setting up meetings. If your research is good, it shouldn’t be hard to ask for referrals so you could expand your network - every meeting should lead to 1-2 more meetings if done correctly. After my first 5-6 meetings, all my other meetings (probably 50-60 before I was done) were by referral.
The other advice I would give here: meet with EVERYONE, not just VC’s. You obviously need to meet with VC’s for input/relationship purposes (and to get a sense of where jobs/openings emerge) but for dealflow purposes they’re not very helpful. In reality, make time with entrepreneurs - whether CEO’s or C-level execs, they tend to be more accessible than corporate execs. Other good people to reach are angel investors, lawyers, and even midmarket bankers like the guys at GCA Savvian.
Also, if you feel like you had a great meeting with one, offer to do free work. Often times entrepreneurs need help with market sizing, research, or other work where an MBA skillset can be helpful. Do the right thing and help them out - and never ask for a dime. These entrepreneurs are working 10x harder than you with 100x more stress so I feel it’s almost ethically wrong to ask for anything. Instead, you’ll more than earn any relevant fees in reputation equity. Also, entrepreneurs (I’m gushing now but bear with me) are just so great to work with - they love what they do, they’re energizing and optmistic, and 99% of the time, are just amazing people. Every meeting/call I had with Hot Potato and Challengepost was damn inspiring.
I’ll keep writing more but so far if you’re strongly thinking about VC, this is a good way to get started. And this approach was also helpful on the startup route - I actually managed final rounds/offers with a variety of startups based on this research.
The real hard part, actually finding a job and interviewing, unfortunately is completely outside your control. That’s just good luck/timing. You can improve your probability by doing a study project with a firm (this happened to work in my case but honestly speaking could have just as easily not succeeded) but really you can’t control that aspect.
But really, that’s life. A mentor of mine, now a retired CEO of a public tech company, once said that success was the intersection of preparation and opportunity. I can’t help you with the latter, but hopefully the comments above help with the former.
