The chances of someone landing a job at a venture capital firm is extremely low. 1The conventional approach was to attend a tier 1 university, get a summer job at a growth fund, land a job at an investment bank before starting your own fund. But recently there has been a buzz around building your network of founders first and cold emailing these “deals” to your favoured VC firm. This will definitely work because you are putting yourself out there and naturally through the process, you build your apprehension on analysing businesses and most importantly, the founder behind the startups.
The guide I will provide today builds on that narrative. They are numbered steps on what action you should take and why they matter so you know how they add value.
The probability of landing a job at a VC is probably lower than a pre seed deck’s chances of having a realistic TAM slide.
Write your own investment thesis. 2 This thesis will serve as a north star when you star hunting for deals. You will have a direction to work with. For instance, if you are interested in working at a fintech-only VC fund, you will only spend your time searching for founders building within fintech.
Next, you have to learn how to write an investment memo. 3 This is a very important document because it provides an exhaustive evaluation of the company which gets sent to partners prior to a cheque to founders. The memo contains the executive summary, the competitive analysis, management teams, valuation and deal structure and many more. 4
Understand the metrics - both VC and startup metrics. The metrics will be useful when you speak with founders.
“What is your customer acquisition cost and how is it impacting your bottom line?”
The above explained the VC and startup knowledge that you should seek while the following will provide you with the practical guidelines.
Do a bit of digging on startups fundraising on crowdfunding sites like Republic, Crowdcube or Wefunder. At times, on Wefunder, some startups would have an investment memo attached in their fundraising campaign. Read them to improve your memo writing skills.
Find a startup that fits your thesis.
If the campaign is yet to open, sign up for the campaign.
Once the campaign opens or if it’s already live, you should have access to the decks, founder updates and the data rooms that the company publicly shares.
Collate all of this information as you will need them to analyse if you would invest in this startup.
Build a framework that you will repeatedly use to evaluate startups. They should contain basic information on the company, the business overview, financials, team, industry and market trends, etc. Having a framework allows you to have more information which eventually helps in reducing risks.
Set up a call with the founder. Reach out to them on LinkedIn or through the contact provided in the campaign. Talking with the founder will teach you how to evaluate a person because they are the ones building the startups.
Ask yourself the following:
“How will this person reach when things go south?”
“Why do they think they are capable of building in this space?”
Now, you should have most of the information to form an informed opinion on the startup. Based on the framework and your thesis, ask yourself if you’d be investing in them.
When you see potential in the startup and would like to invest, write the memo.
Multiply this effort. Repeat the process for other startups that fit your thesis.
Share your work with the VCs that you’d like to work with. Do not go into the details and share the information but the actions you took so they know you are a proactive person.
This is a unique way of familiarising yourself with the job before you even land a job at a VC. You can always apply the guide above when you network with founder - of course, there won’t be much information shared by them but at least you can ask the essential early stage questions - the team, the business model, industry or market trends, etc.
That’s it. I hope you enjoyed reading this piece. Let me know if you know of other unique ways to get a job at a VC.
1 The entire US venture capital industry employs only about 10,000 to 12,000 investment professionals at any one time, and just 800 to 1,200 new analyst or associate seats open each year against tens of thousands of hopefuls.
2 Carta’s guide on crafting a fund investment thesis, the formal document that sets out a firm’s stage, sector, geography and edge so limited partners know exactly what they are buying into.
3 Carta’s short guide to the investment memo, the internal write-up VCs produce before putting money into a company, covering everything from market size and team to risks, valuation and exit path.
4 Go check it out yourself. Carta.