It has been fun blogging away on random topics related to Venture Capital for the past few months. I will continue this process after the winter break. Meanwhile, I am away from school leading an leadership expedition to Antarctica. If I come back on Jan 5, then I shall continue this blog. If I do not, I must have found a nice VC position out there in Penguinland. Please request Wharton to waive my student loans.
Happy New Year. And have a good one.
- Punit
Monday, December 25, 2006
Sunday, December 17, 2006
Aptitude Tests do not define us, Mr. Kawasaki
Recently, I chanced upon the much talked about VCAT test by one of the most esteemed Venture Capitalists out there.
I cogitated on this blog posting for quite a while. (By the way, my score asked me to email 2000 VCs and pray, something that I already do). I have exchanged emails earlier with Guy, being one of the thousands of Biffs, Sebastians, Brooks, and Tiffanys who want to be kingmakers, and he was generous in his advice and prompt in his response. I felt that the blog posting accurately reflected his opinion but I was taken aback by the significant generalizations inherent in the post.
I re-read a few of my earlier blogs, where I detail the reasons for my wanting to be in Venture Capital. At some level, this particular ambition invokes an emotional undercurrent in me. That probably is because to look for a VC position is to be in such an underdog position, especially in Business School. Young people do not naturally gravitate towards VC positions, Mr. Kawasaki. One has to sit out of dedicated interview periods, knock on hundreds of doors, and email many successful people like you to get a break. It is not a comfortable place to be in, and most people do not take it to it naturally, cocktail parties non-withstanding. But that begs the question. Why Venture Capital?
We do not work towards a Venture Capital job because we see cocktail parties, 0.5M dollar salaries and huge carries. On the contrary, most of us know that it is hard work, reasonable salaries and years before any particular break of any particular significance or visibility comes our way. So, then again, why Venture Capital?
Because most of us believe in our ability to help other companies move forward. Because most of us are young enough to have the energy, and have a finger on the pulse of what's going on and what's coming next. And because most of us want to be a part of the system that has built some of the most amazing technological innovations in recent times.
Many of us have worked for quite a few years in large, mid-size and small startups. We have worked on products, indeed built them, marketed them, and then supplemented that skill-set with advanced degrees in technology and business. We might not be as experienced as some senior partners out there, but we compensate for that with our energy and youth. I will argue that Venture Capital is not something to be done at the end of one's career. It is a great experience to have, to get one of the most well-rounded business experiences out there. It looks like a closed club from outside, but most of my friends who work in it vouch for satisfaction they get from their experiences.
I look at Venture Capital as a state of constant entrepreneurship...that builds other startups. You have to be driven, motivated and bright to succeed. Having not done a startup does not merit contempt when one is helping entrepreneurs. Nor are former entrepreneurs the best advisors to other entrepreneurs. Sure, there is something to be said for having gone through the experience many times over in one's lifetime before getting to be a VC. However, there is no reason someone with the right education, experience and attitude cannot help build successful companies. Most of us do not think that being a VC will involve making mere spreadsheets and giving random consultisque advice. Most of us look at it as an opportunity to work with the best and brightest, as a part of multiple teams, in multiple ways, and making a difference.
I think it is a significant underestimation of our capabilities to think that we are naive enough not to know what is in store for us in the Venture Capital industry. I may not get the right opportunity in this industry and might get the right opportunity in an appropriate startup. Or vice-versa. Neither is a backup for me. Ultimately, it is important to find satisfaction in whatever one does. I am interested in entrepreneurship, people and technology. And Venture Capital is one route to that.
I beg to differ Mr. Kawasaki. It is impossible to condense the capabilities of a person into an aptitude test. No aptitude test ever defined a person.
I cogitated on this blog posting for quite a while. (By the way, my score asked me to email 2000 VCs and pray, something that I already do). I have exchanged emails earlier with Guy, being one of the thousands of Biffs, Sebastians, Brooks, and Tiffanys who want to be kingmakers, and he was generous in his advice and prompt in his response. I felt that the blog posting accurately reflected his opinion but I was taken aback by the significant generalizations inherent in the post.
I re-read a few of my earlier blogs, where I detail the reasons for my wanting to be in Venture Capital. At some level, this particular ambition invokes an emotional undercurrent in me. That probably is because to look for a VC position is to be in such an underdog position, especially in Business School. Young people do not naturally gravitate towards VC positions, Mr. Kawasaki. One has to sit out of dedicated interview periods, knock on hundreds of doors, and email many successful people like you to get a break. It is not a comfortable place to be in, and most people do not take it to it naturally, cocktail parties non-withstanding. But that begs the question. Why Venture Capital?
We do not work towards a Venture Capital job because we see cocktail parties, 0.5M dollar salaries and huge carries. On the contrary, most of us know that it is hard work, reasonable salaries and years before any particular break of any particular significance or visibility comes our way. So, then again, why Venture Capital?
Because most of us believe in our ability to help other companies move forward. Because most of us are young enough to have the energy, and have a finger on the pulse of what's going on and what's coming next. And because most of us want to be a part of the system that has built some of the most amazing technological innovations in recent times.
Many of us have worked for quite a few years in large, mid-size and small startups. We have worked on products, indeed built them, marketed them, and then supplemented that skill-set with advanced degrees in technology and business. We might not be as experienced as some senior partners out there, but we compensate for that with our energy and youth. I will argue that Venture Capital is not something to be done at the end of one's career. It is a great experience to have, to get one of the most well-rounded business experiences out there. It looks like a closed club from outside, but most of my friends who work in it vouch for satisfaction they get from their experiences.
I look at Venture Capital as a state of constant entrepreneurship...that builds other startups. You have to be driven, motivated and bright to succeed. Having not done a startup does not merit contempt when one is helping entrepreneurs. Nor are former entrepreneurs the best advisors to other entrepreneurs. Sure, there is something to be said for having gone through the experience many times over in one's lifetime before getting to be a VC. However, there is no reason someone with the right education, experience and attitude cannot help build successful companies. Most of us do not think that being a VC will involve making mere spreadsheets and giving random consultisque advice. Most of us look at it as an opportunity to work with the best and brightest, as a part of multiple teams, in multiple ways, and making a difference.
I think it is a significant underestimation of our capabilities to think that we are naive enough not to know what is in store for us in the Venture Capital industry. I may not get the right opportunity in this industry and might get the right opportunity in an appropriate startup. Or vice-versa. Neither is a backup for me. Ultimately, it is important to find satisfaction in whatever one does. I am interested in entrepreneurship, people and technology. And Venture Capital is one route to that.
I beg to differ Mr. Kawasaki. It is impossible to condense the capabilities of a person into an aptitude test. No aptitude test ever defined a person.
Friday, December 15, 2006
India
I do not think I need to start this post by talking about the opportunity in India. That is a given. From both buyer and supplier point of view, India has become a force to reckon with in the last decade or so. In recent times, more than 40+ VC firms have established base in India. In fact, currently most VC firms of any consequence have an India strategy. But will they prosper?
What is the nature of the opportunity in India?
First of all, there is far too much money in India by all accounts. An excerpt from an India-focused report by EValueServe sums it up concisely.
Over 44 US-based VC firms are now seeking to invest heavily in start-ups and early-stage companies in India. These firms have raised, or are in the process of raising, an average of US $100 million each. Indeed, if these 40-plus firms are successful in raising money, they would garner approximately $4.4 billion to be invested during the next 4 to 5 years. Taking Indian Purchasing Power Parity (PPP) into consideration, this would be equivalent to $22 billion worth of investment in the US. Since about $1.75 billion (or approximately 40% of $4.4 billion) has been already raised, even if only $2.2 billion is raised by December 2006, Evalueserve cautions that there will be a glut of VC money for early- stage investments in India. This will be especially true if the VCs continue to invest only in currently favourite sectors such as IT, BPO, software and hardware products, telecom, and consumer Internet. Given that a typical start-up in India would require $9 million during the first three years (i.e., $3 million per year) and even assuming that the start-up survives for three years, investing $2.2 billion during 2007-2010 would imply investing in 150 to 180 start-ups every year during this period, which simply does not seem practical if the VCs continue to focus only on their current favourite sectors.
What does this imply?
Firstly that there is indeed more capital than there are deals, and secondly, to invest effectively, VCs will have to move beyond their favorite sectors. No wonder, there is a trend among VCs in India to invest in pickle factories, electrical fittings and other later-stage, more private equity type of deals.
So?
So this means that early stage VCs moving into India will either invest in later, more growth stage deals than they used to or will under-invest. However, there is a third scenario that is possible. There is one school of thought that believes that large VC players are moving into India with the sense that they may get hit in the short term. Their motivation is not to make loads of money in the short term as much as to create a beachhead of sorts. The next few years will be hazy but if they can ride the storm, they would have enough network, crediblity and deal-flow that the deals of 2009 Vintage will more than compensate for any less-than-stellar returns from deals of today's vintage. And while that happens, VCs will move into more later-stage deals.
If this is indeed true, then it will tie in all the four major phenomena occuring in the Indian Venture Capital landscape:
1. Influx of VCs into the Indian market
2. Too much Capital
2. Very few good deals
3. Later stage Investing by early stage players
Finally, the biggest need in India right now is not Venture Capitalists but effective operators. There is a big dearth of good managers in India and this presents an interesting opportunity for people like us. On another note, VCs have a big role to play in this market. This is especially true for those who do invest money but more than that, offer their experience, ideas and manpower to their portfolio companies. Very exciting times out there! So, if you are an entreprenuer looking for capital or good people, mail in!
What is the nature of the opportunity in India?
First of all, there is far too much money in India by all accounts. An excerpt from an India-focused report by EValueServe sums it up concisely.
Over 44 US-based VC firms are now seeking to invest heavily in start-ups and early-stage companies in India. These firms have raised, or are in the process of raising, an average of US $100 million each. Indeed, if these 40-plus firms are successful in raising money, they would garner approximately $4.4 billion to be invested during the next 4 to 5 years. Taking Indian Purchasing Power Parity (PPP) into consideration, this would be equivalent to $22 billion worth of investment in the US. Since about $1.75 billion (or approximately 40% of $4.4 billion) has been already raised, even if only $2.2 billion is raised by December 2006, Evalueserve cautions that there will be a glut of VC money for early- stage investments in India. This will be especially true if the VCs continue to invest only in currently favourite sectors such as IT, BPO, software and hardware products, telecom, and consumer Internet. Given that a typical start-up in India would require $9 million during the first three years (i.e., $3 million per year) and even assuming that the start-up survives for three years, investing $2.2 billion during 2007-2010 would imply investing in 150 to 180 start-ups every year during this period, which simply does not seem practical if the VCs continue to focus only on their current favourite sectors.
What does this imply?
Firstly that there is indeed more capital than there are deals, and secondly, to invest effectively, VCs will have to move beyond their favorite sectors. No wonder, there is a trend among VCs in India to invest in pickle factories, electrical fittings and other later-stage, more private equity type of deals.
So?
So this means that early stage VCs moving into India will either invest in later, more growth stage deals than they used to or will under-invest. However, there is a third scenario that is possible. There is one school of thought that believes that large VC players are moving into India with the sense that they may get hit in the short term. Their motivation is not to make loads of money in the short term as much as to create a beachhead of sorts. The next few years will be hazy but if they can ride the storm, they would have enough network, crediblity and deal-flow that the deals of 2009 Vintage will more than compensate for any less-than-stellar returns from deals of today's vintage. And while that happens, VCs will move into more later-stage deals.
If this is indeed true, then it will tie in all the four major phenomena occuring in the Indian Venture Capital landscape:
1. Influx of VCs into the Indian market
2. Too much Capital
2. Very few good deals
3. Later stage Investing by early stage players
Finally, the biggest need in India right now is not Venture Capitalists but effective operators. There is a big dearth of good managers in India and this presents an interesting opportunity for people like us. On another note, VCs have a big role to play in this market. This is especially true for those who do invest money but more than that, offer their experience, ideas and manpower to their portfolio companies. Very exciting times out there! So, if you are an entreprenuer looking for capital or good people, mail in!
Tuesday, December 05, 2006
Another Buzzword flogged to death: Web 2.0
Having gone through a few VC interviews, I have learnt that Venture Capitalists tend to cut through the jargon and look beneath the hood where it comes to things like "Web 2.0". And I have been asked quite a bit about my opinion on this latest buzzword sweeping the tech industry.
So I thought I would put together a simple primer for the uninitiated about what really is this Web 2.0 and what it means in terms of investment opportunities. Most of us know these concepts in bits and pieces. I am just trying to put them together in a short tutorial. And this tutorial is by no means exhaustive.
Identity
First of all, 2.0 is simply the software way of saying, updated. Web 2.0 is defined as the next version of internet infrastructure and applications. It was first coined by O'Reilly Media and John Battelle as a set of principles:
Value System
1. The web is a platform for the new wave of applications
2. Data will be the driving force for this wave
3. Social Participation will leverage this data to create immense network effects
4. Distributed development (read open source) of applications (widgets) will hold sway
5. Business models will be based on services rather than products
6. Applications will always stay in "beta" mode (no version system)
7. The long tail will create immense revenue opportunities
Key Technologies that prop it up
1. AJAX - a web-development technique that makes the page more responsive by not reloading completely everytime a user-interaction occurs. For ex: Geojoey.
2. Mashups - A technology that interfaces two different site functionalities into one service. For ex: "http://www.housingmaps.com/">Housing Maps.
3. RSS/Atom - Used in combination with feedreaders to check for updates on RSS-enabled websites (Content feeds). This allows the users to find out if their content sources have been updated. You can add my blog to your feedreader by bookmarking this.
4. Blog - This is not as much a technology as continually updated diary. The ease with which this could be created and used led to an explosion of content on the Internet. There are many variants of it (vlog (video logs), mlog (mobile logs) etc).
5. Folksonomy - The technique of categorizing content by making the users "tag" the content with "tags" (keywords). The social nature of this technique leads to a very efficient information retrieval system. Most Web 2.0 sites work on this principle. For ex: You can search on YouTube by clicking on the tag related to your interests.
The Newsmakers
I will categorize the companies in this realm in terms of various functional buckets. However, this is going to be a 30K feet view of the web 2.0 world. In fact, some of these can be placed in multiple categories.
1. Ecommerce (goods, services or classifieds) - eBay, craigslist, Judy's Book, Zillow
2. Content - Wikipedia, Flickr, Geojoey, YouTube, Last.fm
4. Retrieval Infrastructure - del.icio.us, Digg
5. Advertising - Adsense
6.Communications - Skype
7. Applications - Google Docs, Netvibes
8. Collaboration - Socialtext, Basecamp
9. Blogs - Technorati, Bloglines, Jotspot
10. Social Networking - LinkedIn, facebook, MySpace
All in all, Web 2.0 means different things to different people. The impact of this new wave of technology is being seen all over the Internet, and this probably brings us closer to the original vision of the Web being a completely democratic, open, and free network. We shall see where this ends up.
And then a little bit of whining
On another note, I can safely say my recruiting season has finally started. And it has been weird to say the least. I am getting calls from VC firms, they talk to me, nothing (that I know off) goes wrong, things look good, there is the usual, "We will bring you into for another discussion sometime soon", and then poof!
What exactly does sometime soon mean? I am not sure but from what I have heard, it could be weeks, months or tomorrow. The result? I sit around not sure whether I am doing well or not. If this is not wallowing in ambiguity, I am not sure what is.
Oh well...We shall persevere. This is SO much fun!
So I thought I would put together a simple primer for the uninitiated about what really is this Web 2.0 and what it means in terms of investment opportunities. Most of us know these concepts in bits and pieces. I am just trying to put them together in a short tutorial. And this tutorial is by no means exhaustive.
Identity
First of all, 2.0 is simply the software way of saying, updated. Web 2.0 is defined as the next version of internet infrastructure and applications. It was first coined by O'Reilly Media and John Battelle as a set of principles:
Value System
1. The web is a platform for the new wave of applications
2. Data will be the driving force for this wave
3. Social Participation will leverage this data to create immense network effects
4. Distributed development (read open source) of applications (widgets) will hold sway
5. Business models will be based on services rather than products
6. Applications will always stay in "beta" mode (no version system)
7. The long tail will create immense revenue opportunities
Key Technologies that prop it up
1. AJAX - a web-development technique that makes the page more responsive by not reloading completely everytime a user-interaction occurs. For ex: Geojoey.
2. Mashups - A technology that interfaces two different site functionalities into one service. For ex: "http://www.housingmaps.com/">Housing Maps.
3. RSS/Atom - Used in combination with feedreaders to check for updates on RSS-enabled websites (Content feeds). This allows the users to find out if their content sources have been updated. You can add my blog to your feedreader by bookmarking this.
4. Blog - This is not as much a technology as continually updated diary. The ease with which this could be created and used led to an explosion of content on the Internet. There are many variants of it (vlog (video logs), mlog (mobile logs) etc).
5. Folksonomy - The technique of categorizing content by making the users "tag" the content with "tags" (keywords). The social nature of this technique leads to a very efficient information retrieval system. Most Web 2.0 sites work on this principle. For ex: You can search on YouTube by clicking on the tag related to your interests.
The Newsmakers
I will categorize the companies in this realm in terms of various functional buckets. However, this is going to be a 30K feet view of the web 2.0 world. In fact, some of these can be placed in multiple categories.
1. Ecommerce (goods, services or classifieds) - eBay, craigslist, Judy's Book, Zillow
2. Content - Wikipedia, Flickr, Geojoey, YouTube, Last.fm
4. Retrieval Infrastructure - del.icio.us, Digg
5. Advertising - Adsense
6.Communications - Skype
7. Applications - Google Docs, Netvibes
8. Collaboration - Socialtext, Basecamp
9. Blogs - Technorati, Bloglines, Jotspot
10. Social Networking - LinkedIn, facebook, MySpace
All in all, Web 2.0 means different things to different people. The impact of this new wave of technology is being seen all over the Internet, and this probably brings us closer to the original vision of the Web being a completely democratic, open, and free network. We shall see where this ends up.
And then a little bit of whining
On another note, I can safely say my recruiting season has finally started. And it has been weird to say the least. I am getting calls from VC firms, they talk to me, nothing (that I know off) goes wrong, things look good, there is the usual, "We will bring you into for another discussion sometime soon", and then poof!
What exactly does sometime soon mean? I am not sure but from what I have heard, it could be weeks, months or tomorrow. The result? I sit around not sure whether I am doing well or not. If this is not wallowing in ambiguity, I am not sure what is.
Oh well...We shall persevere. This is SO much fun!
Sunday, November 26, 2006
Deciding to do a Deep-Dive
How does a Venture Capitalist decide that they need to spend more time on a business plan and do comprehensive due-diligence on it? What factors are important and what is the thought process behind sending back an idea, and spending time on an idea?
Through my experiences at Intel Capital and University Venture Fund (Wharton Chapter), and discussions with mentors in the industry, I have seen a common theme come up. This thought process is important especially for post-MBAs because that is what you will spend a lot of your time doing: Sifting through business plans to find that elusive investment gem.
So here I put together a simple (and frankly very common) framework to take a look at a business idea. The framework has five aspects to it:
1. Team
- Who is on the team and what kind of background do they have? Are they credible and more importantly, are they hungry?
- How is the team relevant to the business plan that has been put together? Why are they on the team in the first place?
2. Problem
- What problem is the startup trying to solve?
- Is there a market for the solution? Is the Total Addressable Market (TAM) above a particular size (usually ~$300M or more)
3. Solution
- How is the problem being solved? What are the details of the solution?
- What is the competitive landscape of the sector?
- What other kinds of solutions are out there and what is the point of differentiation for the startup?
- Does the solution create some other potential problems?
- How do they plan to reach their customers? Is there a distribution strategy and if so, is it viable?
- Is the solution defensible and has IP protection?
4. Economics
- What are the margins on the product? Are they sustainable across the channels?
- What kind of capital do they intend to raise? Where will it be used?
- What are the financials of the company 2-3 years down the lane? What about 5 years later?
5. Exit
- What are the potential avenues for an exit?
- What kind of exit do we forsee, and what kind of return do we see on this investment (Ballpark figure)?
This exercise may not take more than a few hours at most, and less than an hour at least, but it should quickly provide the potential investor with a sense of whether they want to devote more time on this idea or not.
At the end of the day, an idea does not make a company, people do. Hence, beyond these questions it is probably more important to pick up that phone and call a friend to ask about the team behind the company. And then proceed from there.
My 2 cents on how to quickly surf through an idea. You do it differently? Shoot me an email or leave me a comment.
Through my experiences at Intel Capital and University Venture Fund (Wharton Chapter), and discussions with mentors in the industry, I have seen a common theme come up. This thought process is important especially for post-MBAs because that is what you will spend a lot of your time doing: Sifting through business plans to find that elusive investment gem.
So here I put together a simple (and frankly very common) framework to take a look at a business idea. The framework has five aspects to it:
1. Team
- Who is on the team and what kind of background do they have? Are they credible and more importantly, are they hungry?
- How is the team relevant to the business plan that has been put together? Why are they on the team in the first place?
2. Problem
- What problem is the startup trying to solve?
- Is there a market for the solution? Is the Total Addressable Market (TAM) above a particular size (usually ~$300M or more)
3. Solution
- How is the problem being solved? What are the details of the solution?
- What is the competitive landscape of the sector?
- What other kinds of solutions are out there and what is the point of differentiation for the startup?
- Does the solution create some other potential problems?
- How do they plan to reach their customers? Is there a distribution strategy and if so, is it viable?
- Is the solution defensible and has IP protection?
4. Economics
- What are the margins on the product? Are they sustainable across the channels?
- What kind of capital do they intend to raise? Where will it be used?
- What are the financials of the company 2-3 years down the lane? What about 5 years later?
5. Exit
- What are the potential avenues for an exit?
- What kind of exit do we forsee, and what kind of return do we see on this investment (Ballpark figure)?
This exercise may not take more than a few hours at most, and less than an hour at least, but it should quickly provide the potential investor with a sense of whether they want to devote more time on this idea or not.
At the end of the day, an idea does not make a company, people do. Hence, beyond these questions it is probably more important to pick up that phone and call a friend to ask about the team behind the company. And then proceed from there.
My 2 cents on how to quickly surf through an idea. You do it differently? Shoot me an email or leave me a comment.
Monday, November 20, 2006
NexGen Partner Profile Series: Alexander Harrison (Sequoia Capital)
Continuing the series where I profile young Next generation partners who I admire for their accomplishment and personality.
Alexander Harrison (Sequoia Capital)
Alexander is incredibly affable and probably one of the most accessible Venture Capitalist one will meet. This is especially commendable for someone who has accomplished so much so quickly. I remember reaching out to him during my internship at Intel Capital, and not only did he promptly reply, he also stayed engaged till we could figure out a mutually convenient time to meet up. And after that, he has been helping me and supporting my ambitions more than anyone who met someone just once would do.
Education - BA from Darthmouth College
Previous Venture Capital Job - Summit Partners
Last Job before Venture Capital - Goldman Sachs (covering communication semiconductor firms)
Positioning - Financial Services, Healthcare Technology and Services
Out of the blue deed - As a child, Alexander was a stage and TV actor
Personal Mantra - "Its not show-fun, it's show business", "All you have is your credibility"
Investing Philosophy - Alexandar works in sectors where you typically find:
1. Savvy entrepreneurs
2. Business models with strong early operating leverage
3. Ability to scale a company without heavy vc investment early on
The Drift - If you are truly ambitious and passionate, Alexander will go out of his way to help you.
Alexander Harrison (Sequoia Capital)
Alexander is incredibly affable and probably one of the most accessible Venture Capitalist one will meet. This is especially commendable for someone who has accomplished so much so quickly. I remember reaching out to him during my internship at Intel Capital, and not only did he promptly reply, he also stayed engaged till we could figure out a mutually convenient time to meet up. And after that, he has been helping me and supporting my ambitions more than anyone who met someone just once would do.
Education - BA from Darthmouth College
Previous Venture Capital Job - Summit Partners
Last Job before Venture Capital - Goldman Sachs (covering communication semiconductor firms)
Positioning - Financial Services, Healthcare Technology and Services
Out of the blue deed - As a child, Alexander was a stage and TV actor
Personal Mantra - "Its not show-fun, it's show business", "All you have is your credibility"
Investing Philosophy - Alexandar works in sectors where you typically find:
1. Savvy entrepreneurs
2. Business models with strong early operating leverage
3. Ability to scale a company without heavy vc investment early on
The Drift - If you are truly ambitious and passionate, Alexander will go out of his way to help you.
Tuesday, November 14, 2006
Corporate Venture Capital: Are they really VCs?
So I did my internship at Intel Capital, which is probably the world's largest and most influential corporate Venture Capital shop. I have been working for the last year and a half at University Venture Fund, which is probably the largest student-run Venture Capital shop. Does this mean the time cometh for me to work at the world's largest traditional Venture Capital firm? I do not know but I do know that I have an opinion on the differences between these different models of capital deployment.
So today let me give you my two cents on Corporate VCs. In the past, questions have been raised on whether Corporate VC investments actually increase firm value. I contend that you can love them or hate them, you can't ignore them. After all, in the second quarter of 2006, Corporate VCs participated in ~20% of all VC deals.
Corporate Venture Capital
Corporate Venture Capital arms of large technology firms (or any firm for that matter) probably started from the corporate development divisions of these companies. They owe their genesis to the tendency of large technology firms to shore up their growth through inorganic means (M&A). At some point, many of these made the transistion from acquiring startups to investing in startups (to acquire them), to investing in startups for their strategic benefits. In that sense, Intel Capital is probably more traditional than most because it tends to invest for IRR reasons as much as strategic ones.
Some of the prominent Corporate Investors are:
1. Intel Capital
2. Cisco
3. Siemens Venture Capital
4. Comcast Interactive Group
5. Motorola Ventures
Specifically Corporate Venture Funds have multiple objectives when they invest:
1. Create a potential window for scanning the market for novel technologies
2. Create an ecosytem for their core products
3. Invest in inorganic growth by building up startups for future acquisitions
4. Pre-empt competition by investing in strategic technology
5. Create returns for their parents through traditional investing strategies
Depending on the firm one is looking at, there is a different order of priority between the four objectives. Intel Capital for example is very much focused on 1, 2, 3 and 4, but is largely driven by 5. Hence, it ensures that it remain a top quartile fund inspite of its strategic objectives.
Key Observations
1. It is these, sometimes conflicting aims, that makes the job of a Corporate VC incredibly difficult. And exciting. But the glass is half empty or full depending on how one looks at it. The same job can be exciting or frustrating depending on one's investment ideology. Corporate VCs juggle these often contrarion aims on a daily basis.
2. On the boards of their portfolio companies, they remain representatives of their parent firms and are sometimes silent observers (due to liability issues).
3. Corporate VCs often work way harder than their traditional counterparts. Their investments (especially in firms like Intel Capital) span across the globe and can be incredibly difficult to navigate through. There are whole host of regulatory, multi-national, macro-economic, and political issues that creep into an investment decision. This makes their work quite complicated.
4. Yet, many Corporate VCs do not get carry. They have immensely important jobs and sit on boards. But corporations (so as to not misalign incentives) shy away from putting together a carry compensation structure. This lack of power-compensation structures has always been an issue in Corporate VC.
5. There are inherent information asymmetries associated with dealing with large Corporate funds and their parent companies. This can create some apprehension among potential startups and other co-investors.
All these issues create a unique Venture Capital model that has significantly altered the investment landscape and been responsible for some very large investments in recent times (Intel Capital's $600M investment in Clearwire).
Finally, this is by no means an exhaustive list or an expostulation of the pros and cons of Corporate Venture Capital. It is more of a 10000 feet view of this model of VC. After all, I owe a lot of what I learnt to people like Ron, Rohini and others from Intel Capital who mentored me during my internship there. And hence, probably owe my budding career to Intel Capital.
So today let me give you my two cents on Corporate VCs. In the past, questions have been raised on whether Corporate VC investments actually increase firm value. I contend that you can love them or hate them, you can't ignore them. After all, in the second quarter of 2006, Corporate VCs participated in ~20% of all VC deals.
Corporate Venture Capital
Corporate Venture Capital arms of large technology firms (or any firm for that matter) probably started from the corporate development divisions of these companies. They owe their genesis to the tendency of large technology firms to shore up their growth through inorganic means (M&A). At some point, many of these made the transistion from acquiring startups to investing in startups (to acquire them), to investing in startups for their strategic benefits. In that sense, Intel Capital is probably more traditional than most because it tends to invest for IRR reasons as much as strategic ones.
Some of the prominent Corporate Investors are:
1. Intel Capital
2. Cisco
3. Siemens Venture Capital
4. Comcast Interactive Group
5. Motorola Ventures
Specifically Corporate Venture Funds have multiple objectives when they invest:
1. Create a potential window for scanning the market for novel technologies
2. Create an ecosytem for their core products
3. Invest in inorganic growth by building up startups for future acquisitions
4. Pre-empt competition by investing in strategic technology
5. Create returns for their parents through traditional investing strategies
Depending on the firm one is looking at, there is a different order of priority between the four objectives. Intel Capital for example is very much focused on 1, 2, 3 and 4, but is largely driven by 5. Hence, it ensures that it remain a top quartile fund inspite of its strategic objectives.
Key Observations
1. It is these, sometimes conflicting aims, that makes the job of a Corporate VC incredibly difficult. And exciting. But the glass is half empty or full depending on how one looks at it. The same job can be exciting or frustrating depending on one's investment ideology. Corporate VCs juggle these often contrarion aims on a daily basis.
2. On the boards of their portfolio companies, they remain representatives of their parent firms and are sometimes silent observers (due to liability issues).
3. Corporate VCs often work way harder than their traditional counterparts. Their investments (especially in firms like Intel Capital) span across the globe and can be incredibly difficult to navigate through. There are whole host of regulatory, multi-national, macro-economic, and political issues that creep into an investment decision. This makes their work quite complicated.
4. Yet, many Corporate VCs do not get carry. They have immensely important jobs and sit on boards. But corporations (so as to not misalign incentives) shy away from putting together a carry compensation structure. This lack of power-compensation structures has always been an issue in Corporate VC.
5. There are inherent information asymmetries associated with dealing with large Corporate funds and their parent companies. This can create some apprehension among potential startups and other co-investors.
All these issues create a unique Venture Capital model that has significantly altered the investment landscape and been responsible for some very large investments in recent times (Intel Capital's $600M investment in Clearwire).
Finally, this is by no means an exhaustive list or an expostulation of the pros and cons of Corporate Venture Capital. It is more of a 10000 feet view of this model of VC. After all, I owe a lot of what I learnt to people like Ron, Rohini and others from Intel Capital who mentored me during my internship there. And hence, probably owe my budding career to Intel Capital.
Tuesday, November 07, 2006
Why do I want to be a Venture Capitalist? (My Kauffman Fellowship Essay)
I wrote this piece for my Kauffman Fellowship Essay. A bunch of you pinged me to send them a copy after I had applied. I am reprinting it here so as to show one perspective of the motivations behind wanting to get into Venture Capital. Again, its just my opinion and thoughts. Feel free to give me feedback. One is always learning and this is just an experiment in PDA (Public display of Ambitions!)
Why do I want to pursue a career in Venture Capital? This question is even more important today as I skip the recruiting period at school and work on my Kauffman Fellowship application. Success for me is the ability to discern what the core of my motivations is, and then incorporating that into my career. I am at a point in my life where I do not need a job but am looking for the job. That search culminates at Venture Capital, a profession at the crossroads of technology, people and entrepreneurship.
My tryst with technology started in High school where I studied Electrical Devices as a vocational subject and continued on through bachelors into Graduate School where I developed a new semiconductor layout technology called VOILA – VLSI Overall Integrated Layout Application. It progressed at Wharton where I won the Venture Capital Investment Competition (VCIC), the Wharton Technology Case Competition, and resulted in a blog called “FutureVC” at http://futurevc.blogspot.com/.
I started my professional career at Avanticorp as a software engineer, using my expertise to integrate Electronic Design Automation (EDA) software tools across different functional areas. Five years, four promotions and two job changes later, I was the youngest Member Consulting Staff (MCS) at Cadence, considered the largest and most technically advanced company in EDA. But before that I spent some time trying to build a startup as a senior engineer in Softface using EDA algorithms to create next generation taxonomical software. Working in entrepreneurial settings like these taught me how to handle group dynamics, impending deadlines and complex technical issues with equal adroitness.
At Wharton, I am an associate and Outreach manager for University Venture Fund (UVF), an $18M early-stage technology fund. As an outreach manager, I am responsible for creating partnerships with VC shops around the east coast and enhancing UVF’s deal flow. As an Associate, I am responsible for conducting due-diligence and making investment decisions on deals ranging from home security to network storage. However, the watershed of my budding Venture Capital experience has been my internship at Intel Capital (ICAP). As an Investment Manager Intern, I developed a financial valuation tool for ICAP’s broadband investments, helped source, negotiate and value a $8M emerging market broadband wireless deal, and proposed a new mobile services investment strategy. Most of all, I learnt from mentors like Ron Reich, saw the Venture Capital mindset at close quarters, and learnt to work with entrepreneurs. It was here that I started my transition from an engineer-MBA to a Venture Capitalist.
I came to Wharton to initiate that transition. In my Wharton application essay, I wrote – the "perfect business degree" provides the right blend of theoretical knowledge, practical implications of that knowledge along with a quality network of individuals from which to draw expertise, advise and confidence as I pursue my goals. But school, like life is what you make of it. At Wharton, I chair the Wharton Technology Conference and am leading a group of 25 Wharton Students on an expedition to climb Mt. Cotopaxi – the world’s tallest active volcano at 19,347 feet. I think these activities are very important because they help me explore my leadership style and my ability to facilitate, and create significant experiences. Replace “experiences” with “startups”, and this is not too different from the job profile of a Venture Capitalist. On the professional side, I complement these experiences by working on the side with entrepreneurs in Silicon Valley to implement business development projects for their startups (Suggestica).
In the long term, I plan to use my skills in finance, entrepreneurial management and technology to plug into the revolution sweeping across the globe. This revolution is breaking down the traditional market economy and creating a new way of doing business, one that combines the powerful market forces of capitalism with the egalitarianism of technology. I aspire to be a change agent, a future thought leader, who can combine vision, enthusiasm and experience to create a new generation of technology ventures. I know my chances of success would be greatly enhanced by the education and preparation provided by the Kauffman Fellowship program.
I am applying for admission into the Kauffman Fellowship program with the intention of being able to leverage my work experience and technical background so as to carve a niche for myself in the Venture Capital industry. With my background in Semiconductor, Wireless, Mobile Services and India, I have strong insights into the direction in which Venture Capital Industry is moving. A few years of experience in frontline and mid-level Venture Capital positions will create a solid foundation for me to hone and implement my own personal investing philosophy.
And this investing philosophy extends to the way I plan my career too. Whether it is life or a potential startup, every new investment in time and resources should be scrutinized with greater acuity than earlier. After three degrees and eight years of higher education, any further investment should be experiential, efficient and critical. The Kauffman fellowship fulfills all three criteria.
I believe I am going through an exciting phase in my life where my ideas are being honed by experience, and synergized by knowledge. Now I stand poised at the next step towards attainment of my goals – A Kauffman Fellowship. I understand the semiconductor space, have done an enterprise software startup, and did a deep-dive into broadband wireless investments. I have a growing network of entrepreneurs and Venture Capitalists in Silicon Valley and India. But I also understand that domain expertise, operating experience and network alone doesn’t make a good Venture Capitalist.
This summer, I was sitting across the table from Curtis Feeny from Voyager Capital. We were talking about his experiences in Venture Capital. During our conversation, Curtis leaned forward and said something that I will remember throughout my career. “Good Venture Capitalists are good human beings first.” People count, ideas count, the rest follows. If selected, I will bring my knowledge, drive and people-skills to the next class of Kauffman fellows. But more importantly, I will bring respect for entrepreneurship, humility that will fuel my thirst to excel and incredible energy to the program. I am very confident that my experience as a Kauffman fellow will pave the way to realizing my ambitions and look forward to the opportunities it will provide me in the years to come.
Why do I want to pursue a career in Venture Capital? This question is even more important today as I skip the recruiting period at school and work on my Kauffman Fellowship application. Success for me is the ability to discern what the core of my motivations is, and then incorporating that into my career. I am at a point in my life where I do not need a job but am looking for the job. That search culminates at Venture Capital, a profession at the crossroads of technology, people and entrepreneurship.
My tryst with technology started in High school where I studied Electrical Devices as a vocational subject and continued on through bachelors into Graduate School where I developed a new semiconductor layout technology called VOILA – VLSI Overall Integrated Layout Application. It progressed at Wharton where I won the Venture Capital Investment Competition (VCIC), the Wharton Technology Case Competition, and resulted in a blog called “FutureVC” at http://futurevc.blogspot.com/.
I started my professional career at Avanticorp as a software engineer, using my expertise to integrate Electronic Design Automation (EDA) software tools across different functional areas. Five years, four promotions and two job changes later, I was the youngest Member Consulting Staff (MCS) at Cadence, considered the largest and most technically advanced company in EDA. But before that I spent some time trying to build a startup as a senior engineer in Softface using EDA algorithms to create next generation taxonomical software. Working in entrepreneurial settings like these taught me how to handle group dynamics, impending deadlines and complex technical issues with equal adroitness.
At Wharton, I am an associate and Outreach manager for University Venture Fund (UVF), an $18M early-stage technology fund. As an outreach manager, I am responsible for creating partnerships with VC shops around the east coast and enhancing UVF’s deal flow. As an Associate, I am responsible for conducting due-diligence and making investment decisions on deals ranging from home security to network storage. However, the watershed of my budding Venture Capital experience has been my internship at Intel Capital (ICAP). As an Investment Manager Intern, I developed a financial valuation tool for ICAP’s broadband investments, helped source, negotiate and value a $8M emerging market broadband wireless deal, and proposed a new mobile services investment strategy. Most of all, I learnt from mentors like Ron Reich, saw the Venture Capital mindset at close quarters, and learnt to work with entrepreneurs. It was here that I started my transition from an engineer-MBA to a Venture Capitalist.
I came to Wharton to initiate that transition. In my Wharton application essay, I wrote – the "perfect business degree" provides the right blend of theoretical knowledge, practical implications of that knowledge along with a quality network of individuals from which to draw expertise, advise and confidence as I pursue my goals. But school, like life is what you make of it. At Wharton, I chair the Wharton Technology Conference and am leading a group of 25 Wharton Students on an expedition to climb Mt. Cotopaxi – the world’s tallest active volcano at 19,347 feet. I think these activities are very important because they help me explore my leadership style and my ability to facilitate, and create significant experiences. Replace “experiences” with “startups”, and this is not too different from the job profile of a Venture Capitalist. On the professional side, I complement these experiences by working on the side with entrepreneurs in Silicon Valley to implement business development projects for their startups (Suggestica).
In the long term, I plan to use my skills in finance, entrepreneurial management and technology to plug into the revolution sweeping across the globe. This revolution is breaking down the traditional market economy and creating a new way of doing business, one that combines the powerful market forces of capitalism with the egalitarianism of technology. I aspire to be a change agent, a future thought leader, who can combine vision, enthusiasm and experience to create a new generation of technology ventures. I know my chances of success would be greatly enhanced by the education and preparation provided by the Kauffman Fellowship program.
I am applying for admission into the Kauffman Fellowship program with the intention of being able to leverage my work experience and technical background so as to carve a niche for myself in the Venture Capital industry. With my background in Semiconductor, Wireless, Mobile Services and India, I have strong insights into the direction in which Venture Capital Industry is moving. A few years of experience in frontline and mid-level Venture Capital positions will create a solid foundation for me to hone and implement my own personal investing philosophy.
And this investing philosophy extends to the way I plan my career too. Whether it is life or a potential startup, every new investment in time and resources should be scrutinized with greater acuity than earlier. After three degrees and eight years of higher education, any further investment should be experiential, efficient and critical. The Kauffman fellowship fulfills all three criteria.
I believe I am going through an exciting phase in my life where my ideas are being honed by experience, and synergized by knowledge. Now I stand poised at the next step towards attainment of my goals – A Kauffman Fellowship. I understand the semiconductor space, have done an enterprise software startup, and did a deep-dive into broadband wireless investments. I have a growing network of entrepreneurs and Venture Capitalists in Silicon Valley and India. But I also understand that domain expertise, operating experience and network alone doesn’t make a good Venture Capitalist.
This summer, I was sitting across the table from Curtis Feeny from Voyager Capital. We were talking about his experiences in Venture Capital. During our conversation, Curtis leaned forward and said something that I will remember throughout my career. “Good Venture Capitalists are good human beings first.” People count, ideas count, the rest follows. If selected, I will bring my knowledge, drive and people-skills to the next class of Kauffman fellows. But more importantly, I will bring respect for entrepreneurship, humility that will fuel my thirst to excel and incredible energy to the program. I am very confident that my experience as a Kauffman fellow will pave the way to realizing my ambitions and look forward to the opportunities it will provide me in the years to come.
Monday, November 06, 2006
Oh Man, Kauffman
Susan Wu from Charles River Ventures pointed out that I need to talk about the Kauffman Fellowship if I wanted to really mention all avenues to make it in Venture Capital.
Kauffman Fellowship is a program setup to select, train and place the next generation of venture capitalists. Kauffman Fellows are students of the Center for Venture Education, and can be either temporary or permanent full-time associates of the Venture Firm during the time of the Fellowship. As associates, their salary, benefits and expenses are the responsibility of and determined by the firm.
There are two ways to become a Kauffman Fellow:
1. Regular Matching - for people who apply to the program on an individual level (usually MBA students). They are usually no connected to any Venture Capital shop.
2. Affiliate Matching - for people who are affiliated with a VC shop. These are usually folks in non-partner positions with less than three years of current Venture Capital experience. Usually the VC firm sponsors their tuition for this program
Both Regular matching and Affiliate matching has very similar application process. The only difference is that in Affiliate matching you are required to get a recommendation from a firm mentor.
Both of these processes require:
1. A completed online application
2. Painfully procured copies of your transcripts from every school you have attended
3. Three recommendations
4. $250 application fees
All in all, from what I have heard ( since I am not a Kauffman fellow (yet), I can only base my observations on hearsay), it is pretty selective process. Last year's statistics involved something like 500 applications resulting in 40 finalists and maybe only 5 really "matched" people.
The caveat there is that many of the other finalists found jobs in the ensuing months.
The Process:
1. Apply - The first step is to actually apply to the program and get your information through before the deadline (Nov 1 this year)
2. Semi-Finals - If you are one of the lucky 80-100 or so you are selected, then you will go through an interview process with a specially selected panel of VCs. Your performance here will determine whether you go to the next round or not
3. Finals - If you are a finalist, congrats. You have made it to the final round. In this round, you are "matched" with partnering VC firms. Being matched with these firms is pretty much like the usual interview process. If you are matched and have gone through the finals, then you are a Kauffman fellow.
What does this finally boil down to?
A Kauffman fellow gets to work as an associate/principal in a leading VC firm (which he/she is matched to). That person has a firm mentor in the matched VC shop who is responsible for training the fellow. The fellow draws a salary just like any full-time employee but also has to go through the educational component of the fellowship by traveling to various locations for classes at regular intervals.
And Finally
In the end, it is a great way to get in. To maximize your chances, I would advice building up your credentials from the time you step into B-school (or even earlier). The fellowship is competitive but is definitely a relatively fool-proof way of making a dent into this seemingly impregnable industry. I have applied and frankly, I cannot judge my chances.
For better or worse, one thing that I got from it was that, I spent a lot of time thinking about the reasons that I wanted to join this industry. This was important as I wrote my Statement of Purpose. It helped me coagulate a lot of my motivations and allowed me to focus on the real reasons for my ambitions.
All in all, a very useful exercise. In the next post, I will do the unthinkable. I will actually post my Kauffman fellowship Statement of Purpose on this blog. If nothing else, it should give you one perspective on why one is motivated to be in this industry.
Kauffman Fellowship is a program setup to select, train and place the next generation of venture capitalists. Kauffman Fellows are students of the Center for Venture Education, and can be either temporary or permanent full-time associates of the Venture Firm during the time of the Fellowship. As associates, their salary, benefits and expenses are the responsibility of and determined by the firm.
There are two ways to become a Kauffman Fellow:
1. Regular Matching - for people who apply to the program on an individual level (usually MBA students). They are usually no connected to any Venture Capital shop.
2. Affiliate Matching - for people who are affiliated with a VC shop. These are usually folks in non-partner positions with less than three years of current Venture Capital experience. Usually the VC firm sponsors their tuition for this program
Both Regular matching and Affiliate matching has very similar application process. The only difference is that in Affiliate matching you are required to get a recommendation from a firm mentor.
Both of these processes require:
1. A completed online application
2. Painfully procured copies of your transcripts from every school you have attended
3. Three recommendations
4. $250 application fees
All in all, from what I have heard ( since I am not a Kauffman fellow (yet), I can only base my observations on hearsay), it is pretty selective process. Last year's statistics involved something like 500 applications resulting in 40 finalists and maybe only 5 really "matched" people.
The caveat there is that many of the other finalists found jobs in the ensuing months.
The Process:
1. Apply - The first step is to actually apply to the program and get your information through before the deadline (Nov 1 this year)
2. Semi-Finals - If you are one of the lucky 80-100 or so you are selected, then you will go through an interview process with a specially selected panel of VCs. Your performance here will determine whether you go to the next round or not
3. Finals - If you are a finalist, congrats. You have made it to the final round. In this round, you are "matched" with partnering VC firms. Being matched with these firms is pretty much like the usual interview process. If you are matched and have gone through the finals, then you are a Kauffman fellow.
What does this finally boil down to?
A Kauffman fellow gets to work as an associate/principal in a leading VC firm (which he/she is matched to). That person has a firm mentor in the matched VC shop who is responsible for training the fellow. The fellow draws a salary just like any full-time employee but also has to go through the educational component of the fellowship by traveling to various locations for classes at regular intervals.
And Finally
In the end, it is a great way to get in. To maximize your chances, I would advice building up your credentials from the time you step into B-school (or even earlier). The fellowship is competitive but is definitely a relatively fool-proof way of making a dent into this seemingly impregnable industry. I have applied and frankly, I cannot judge my chances.
For better or worse, one thing that I got from it was that, I spent a lot of time thinking about the reasons that I wanted to join this industry. This was important as I wrote my Statement of Purpose. It helped me coagulate a lot of my motivations and allowed me to focus on the real reasons for my ambitions.
All in all, a very useful exercise. In the next post, I will do the unthinkable. I will actually post my Kauffman fellowship Statement of Purpose on this blog. If nothing else, it should give you one perspective on why one is motivated to be in this industry.
Wednesday, November 01, 2006
NexGen Partner Profile Series: Mamoon Hamid (USVP)
So today I am going to start a new series on this blog. It will deal with the stories and profiles of people like us, but maybe a little ahead in game. These are MBA students who have graduated recently, and have gone out and carved a name for themselves in the VC world. I think their stories will give us a lot more perspective on what to do in the near term (and what kind of people succeed in this industry) than if I profiled senior partners and legends. The legends will have their own valuable insights but these are people who are young enough to be like us, and have achieved things that are inspiring and encouraging.
So to kick this segment off, I will start by profiling a friend.
Mamoon Hamid (USVP)
Mamoon is probably one of the humblest and most modest guys I have met. We met during my random search for someone to talk to in the Venture Capital world. He not only returned my cold call but also was exceptionally kind to me, and connected me to his mentor in another VC firm. If you want to stay optimistic while doing this crazy search, he is the guy to meet.
Education - Mamoon has a Bachelors in EE and a Masters in Management Science from Stanford. He also has an MBA from HBS
Venture Capital Jobs - Voyager Capital, USVP
Last Job before Venture Capital - Xilinx (Senior Marketing Manager)
Years of Experience - 7
Positioning - Semiconductor, Consumer Internet, Mobile Technology
Out of the blue deed - Started a Pakistani-Indian restaurant in San Francisco. I have had dinner there and it is good
Personal Mantra - Do what you like, do it right and you'll do fine in life
Investing Philosophy -
1. Go in early, support the best people - people who've got the je ne sais quoi and domain expertise. Ideally, these are people you know and trust.
2. Always address a market of consequence ($500m+SAM)
3. Avoid investments that require change in human behavior - whether that’s an engineer, network administrator or plain old consumer. People rarely change (just like in real life) and if they do, it’s over a time period that extends beyond the VC investment time horizon
4. Deal terms (aside from valuation) protect the downside – so if you’re getting bogged down by specific terms, ask yourself whether you should really be making the investment.
The Drift - If someone says, you got to be aggressive to succeed in Venture Capital. Ask him to contact Mamoon.
So to kick this segment off, I will start by profiling a friend.
Mamoon Hamid (USVP)
Mamoon is probably one of the humblest and most modest guys I have met. We met during my random search for someone to talk to in the Venture Capital world. He not only returned my cold call but also was exceptionally kind to me, and connected me to his mentor in another VC firm. If you want to stay optimistic while doing this crazy search, he is the guy to meet.
Education - Mamoon has a Bachelors in EE and a Masters in Management Science from Stanford. He also has an MBA from HBS
Venture Capital Jobs - Voyager Capital, USVP
Last Job before Venture Capital - Xilinx (Senior Marketing Manager)
Years of Experience - 7
Positioning - Semiconductor, Consumer Internet, Mobile Technology
Out of the blue deed - Started a Pakistani-Indian restaurant in San Francisco. I have had dinner there and it is good
Personal Mantra - Do what you like, do it right and you'll do fine in life
Investing Philosophy -
1. Go in early, support the best people - people who've got the je ne sais quoi and domain expertise. Ideally, these are people you know and trust.
2. Always address a market of consequence ($500m+SAM)
3. Avoid investments that require change in human behavior - whether that’s an engineer, network administrator or plain old consumer. People rarely change (just like in real life) and if they do, it’s over a time period that extends beyond the VC investment time horizon
4. Deal terms (aside from valuation) protect the downside – so if you’re getting bogged down by specific terms, ask yourself whether you should really be making the investment.
The Drift - If someone says, you got to be aggressive to succeed in Venture Capital. Ask him to contact Mamoon.
Saturday, October 28, 2006
What about getting that Startup experience?
One key asset to have to position oneself for Venture Capital is to have startup experience. Learning how to survive and operate in entrepreneurial settings makes for a much more credible VC. To this point, Ashish Chordia (my friend and a second year Wharton student) has written an interesting article on his search for a startup internship for the summer.
Much like me, Ashish spent the last few months before summer looking for that perfect summer internship in a startup. While nothing in life is perfect, he did manage to maximize his time doing something that he really loved and learnt a lot from.
His article should be a great read. Check it out.
Get It Started: How to snag a summer internship with a start-up
And that is NOT Ashish in the picture in that article.
Also, he will be a guest writer on this blog so look out for his experiences in Startup Land! He has an interesting blog going on his time at Wharton at: http://lifeatwharton.blogspot.com/
Much like me, Ashish spent the last few months before summer looking for that perfect summer internship in a startup. While nothing in life is perfect, he did manage to maximize his time doing something that he really loved and learnt a lot from.
His article should be a great read. Check it out.
Get It Started: How to snag a summer internship with a start-up
And that is NOT Ashish in the picture in that article.
Also, he will be a guest writer on this blog so look out for his experiences in Startup Land! He has an interesting blog going on his time at Wharton at: http://lifeatwharton.blogspot.com/
Wednesday, October 25, 2006
Learning VC the Hard Way - VCIC Part I
I have a very close friend called Ashish Chordia, who left Wharton midway to join Wharton-west, and be near Silicon Valley. We both attacked a few competitions last year and won them, one of them being the Venture Capital Investment Competition at Wharton.
Now Ashish has significant entrepreneurial instincts and is destined to be one for better or worse. I really wanted to give VCIC my best shot given my interest in Venture Capital and roped Ashish in. This brings me to the rule no.1 of building teams, always work with people you like to work with. Complementary skills are important but still secondary. In fact, Ashish and me have very similar skills and mindsets. So at this point, I set about thinking about how to build up this team. We added Siddharth Sudhir to the team. Sid is a financial wiz who churns out models by the minute and practically runs a hedge fund out east. Then we got Preet Gona, who is a biotech guy with some Venture Capital experience. And finally, we rounded it off by adding Christine Chan, who has experience as a M&A analyst for Lazard.
So all in all, we were five first years with no pretensions of being able to survive this competition.
Ashish - General Tech (Software)
Christine - M&A
Preet- Biotech
Punit - General Tech (Hardware)
Sid - Hedge fund
All in all, a good solid Venture Capital firm:)
Now, the VCIC at Wharton is structured as a 24 hour contest. And this is how it all panned out:
Friday 5pm - Pick up Business Plans
Sid went and picked up the five business plans. Funnily, for a 24 hour contest, I was not really showing much urgency. I remember having gone to a dinner with an alumni and then ambling back toward's Sid home around 10pm in the night, only to see all the rest four sitting around in various corners reading various business plans. And so it started...
Friday midnight - Analyze the Business Plans
We made a decision pretty quickly to eliminate 3 business plans and pick 2 to concentrate on. In VCIC, one is given a particular fund profile with a particular level of fund divestment along with a time frame. This means that our investment decisions have to be colored with the kind of urgency we have in terms of where we are in the lifecycle of the fund, and how much money we have to still invest.
All of us picked up one business plan based on our core competencies and decided to be the champion for those deals. First, we had to convince ourselves that we liked the plan, and if we did, then we have to convince the team. This worked well because we were hard to please, opiniated MBA students. 2 out of the 5 plans were eliminated pretty quickly by the respective "champions". This approach worked well for us in this part of the competition. However, it proved to be disastrous in the next stage when our decision to invest had to be dependent on not just viability but also the audience. Something I will explain in detail in the next post.
Saturday 3 to 5am - Build basic building blocks for the next day
Once we had eliminated the 3 out of 5 business plans, we divided up into teams. A team of two was responsible for building the basic model to be used to value the companies. The rest started analyzing all the business plans and creating a list of questions to ask the entrepreneurs. Soon, we have a list of about 30 questions or so for each business plan irrespective of whether our guts told us we should invest or not.
In parallel, we built up the model based on our top investment choice and set up the cap tables, ensured that the model was in synch with the pro-forma that we have created based on the financials that the entrepreneur had given us. In addition, we set up sensitivity analyses, created best-case, fair-way and worst case scenarios. All in all, set up stuff so as to minimize our work the next day.
Now armed with the questions and models, we crashed with the alarm set to wake us up in 2-3 hours.
Saturday 8am - Entrepreneurs Presentations
This part of the contest was relatively laidback. We had to sit for about 2 hours listening to all the five entrepreneurs pitch their business plan to us. For most part, this served as sanity check for us. We confirmed and questioned our assumptions on the plan. We also had the champion of each business plan listen very carefully to their corresponding pitch while the rest made notes and cross-checked the diligence questions that we had created the last nite. This session was immensely important because it gave us a sense of how well we had understood the business from the plan that the entrepreneur had given us.
Saturday 10am - Diligence Sessions
This was intense. We have 15 min sessions with each entrepreneur. We had tons of questions to go through and in each session, we had a real Venture Capitalist judge sitting in, taking notes on how well we were performing. This part was incredibly stressful because we had far too many questions, the entrepreneur wanted time to properly explain his/her plan but we just had to get through our questions. Here we stretched the limits of politeness and tried to be as brisk as possible. We hit upon a plan to tackle this. The Champion would start the questioning, then each team member would chime in with their questions, one person in the team (usually the champion of the previous diligence session) was the time keeper and would ensure we stayed on track.
With this plan, off we went. We started and quickly realized that we were incredibly aggressive and bordering on rude. We didnt mean to be this way, but we had so much diligence questions to take care off.
On the positive side, we came off as incredibly prepared and organized. On the negative side, we came off as very rude, aggressive professionals who bordered on being snobbish. This would be a major part of our feedback at the end of the session.
Saturday noon - Lunch and Investment thesis work
From noon - 3pm, we had three hours to come up with a valuation for the deals we wanted to invest in, a investment thesis, a term sheet and a power point presentation. We had to submit this to the judges at 3pm and then present as a team to the venture capitalist judges as if they were the investment committee.
This part of the afternoon was incredibly smooth. We broke off into teams. One team worked on the valuation and one team worked on the presentation. Here is where our composition of the team helped a lot. It was obvious very quickly to all of us, that we all were very good in terms of working together. A few of us were very good at creating effective presentations and analyzing the arguments for and against a business. Two of us were very good with numbers and so the engineer and hedge fund guy were building the term sheet and valuation model. One of us (yours truly) was good at nothing, so he spent time coordinating between everyone else. I would sit with the presentation team and ensure that we were in synch with what the valuation team was thinking. Then I would spend some time with the valuation guys trying to ensure our term sheet made sense. So being the jack of all trades helped. I actually worked in this role in the later stages too and our respective competencies really made for a great team.
Saturday 3pm - Presentations
Every team had to make a 15 min presentation and then a 10 min Q&A session. The presentation went very smoothly because we did not worry too much about the form as much as the content. Our presentation was simple but effective, and we used colors to signify many of the factors that we judged plans against. All in all, our presentation was probably what clinched things. All of us spoke, in tandem and in a way that it was very professional and effective.
The Q&A session bordered on chaos and panic. We were mere first years with not that much knowledge. The judges were seasoned VCs and we were asked some very difficult questions. Somehow, we ended up answering many. There was one hilarious confusion between C-corp and S-Corp to which one of us retorted, "Yes, our lawyer will figure it out. We do not think that mistake is a big deal!" I do not know how we survived that one. But overall we were fine.
Saturday 5pm - We Won
In general, by this time we were incredibly exhausted having barely slept for 24 hours and having gone through one of the most intense experiences at Wharton. Little did we know that once we won, a more intense experience awaited us. We sincerely believed we learnt a lot and that was prize enough.
Ashish and me had won the Wharton tech competition a couple of days ago, and we both believed that our luck had run its course. In fact, when they announced the 3rd prize, I was thinking, "Man, we didn't even come third. This is the pits!". Finally, when they announced the winners (and it was us), you should have seen our faces. We did not know what hit us.
This was probably the first time as a team we believed that we could do this. We had no clue that we were even reasonably good let alone imagine winning. But now, we felt we should give this us best shot. This changed the dynamic of the team dramatically (for the better) and we started preparing earnestly for the regionals. But that is a story for the next post.
Why did I write down this story?
Because I think there are important lessons to be learnt here.
1. It is very important to build a team of people who like each other
2. A good VC team is a team of complementary skills
3. Do not ever disrespect the entrepreneur (We did a bit when we rushed them and we learnt our lesson the hard way)
4. Plan, plan and plan in advance. Our team was effective because we were so good at breaking tasks and working in parallel
5. It does not hurt to take the lead and give away leadership of various chunks of the work to various team members.
We had one person who would quickly break off things and hand it over to various sub-teams. It worked because everyone was so focused on doing well, no one cared if someone became the de-facto team lead.
Its important to learn to lead with respect and care. That probably answers a very rudimentary question in team dynamics.
Q: How does one lead a team of peers in complex situations?
A: Very Carefully
Finally, we were an awesome team. And we became great friends. Those days are remembered fondly everytime we see each other. Everyone had competencies beyond what their resume indicated- Ashish had pure guts, Christine for her amazing organizational ability, Sid for his financial warren-buffetesque brain, Preet for pure confidence in answering any question thrown at him (even if we had no clue what the answer could be!) and me, me for being amazing at nothing yet reasonably good at everything. Wait for the next stage. I will probably write about it after a few other posts.
Now Ashish has significant entrepreneurial instincts and is destined to be one for better or worse. I really wanted to give VCIC my best shot given my interest in Venture Capital and roped Ashish in. This brings me to the rule no.1 of building teams, always work with people you like to work with. Complementary skills are important but still secondary. In fact, Ashish and me have very similar skills and mindsets. So at this point, I set about thinking about how to build up this team. We added Siddharth Sudhir to the team. Sid is a financial wiz who churns out models by the minute and practically runs a hedge fund out east. Then we got Preet Gona, who is a biotech guy with some Venture Capital experience. And finally, we rounded it off by adding Christine Chan, who has experience as a M&A analyst for Lazard.
So all in all, we were five first years with no pretensions of being able to survive this competition.
Ashish - General Tech (Software)
Christine - M&A
Preet- Biotech
Punit - General Tech (Hardware)
Sid - Hedge fund
All in all, a good solid Venture Capital firm:)
Now, the VCIC at Wharton is structured as a 24 hour contest. And this is how it all panned out:
Friday 5pm - Pick up Business Plans
Sid went and picked up the five business plans. Funnily, for a 24 hour contest, I was not really showing much urgency. I remember having gone to a dinner with an alumni and then ambling back toward's Sid home around 10pm in the night, only to see all the rest four sitting around in various corners reading various business plans. And so it started...
Friday midnight - Analyze the Business Plans
We made a decision pretty quickly to eliminate 3 business plans and pick 2 to concentrate on. In VCIC, one is given a particular fund profile with a particular level of fund divestment along with a time frame. This means that our investment decisions have to be colored with the kind of urgency we have in terms of where we are in the lifecycle of the fund, and how much money we have to still invest.
All of us picked up one business plan based on our core competencies and decided to be the champion for those deals. First, we had to convince ourselves that we liked the plan, and if we did, then we have to convince the team. This worked well because we were hard to please, opiniated MBA students. 2 out of the 5 plans were eliminated pretty quickly by the respective "champions". This approach worked well for us in this part of the competition. However, it proved to be disastrous in the next stage when our decision to invest had to be dependent on not just viability but also the audience. Something I will explain in detail in the next post.
Saturday 3 to 5am - Build basic building blocks for the next day
Once we had eliminated the 3 out of 5 business plans, we divided up into teams. A team of two was responsible for building the basic model to be used to value the companies. The rest started analyzing all the business plans and creating a list of questions to ask the entrepreneurs. Soon, we have a list of about 30 questions or so for each business plan irrespective of whether our guts told us we should invest or not.
In parallel, we built up the model based on our top investment choice and set up the cap tables, ensured that the model was in synch with the pro-forma that we have created based on the financials that the entrepreneur had given us. In addition, we set up sensitivity analyses, created best-case, fair-way and worst case scenarios. All in all, set up stuff so as to minimize our work the next day.
Now armed with the questions and models, we crashed with the alarm set to wake us up in 2-3 hours.
Saturday 8am - Entrepreneurs Presentations
This part of the contest was relatively laidback. We had to sit for about 2 hours listening to all the five entrepreneurs pitch their business plan to us. For most part, this served as sanity check for us. We confirmed and questioned our assumptions on the plan. We also had the champion of each business plan listen very carefully to their corresponding pitch while the rest made notes and cross-checked the diligence questions that we had created the last nite. This session was immensely important because it gave us a sense of how well we had understood the business from the plan that the entrepreneur had given us.
Saturday 10am - Diligence Sessions
This was intense. We have 15 min sessions with each entrepreneur. We had tons of questions to go through and in each session, we had a real Venture Capitalist judge sitting in, taking notes on how well we were performing. This part was incredibly stressful because we had far too many questions, the entrepreneur wanted time to properly explain his/her plan but we just had to get through our questions. Here we stretched the limits of politeness and tried to be as brisk as possible. We hit upon a plan to tackle this. The Champion would start the questioning, then each team member would chime in with their questions, one person in the team (usually the champion of the previous diligence session) was the time keeper and would ensure we stayed on track.
With this plan, off we went. We started and quickly realized that we were incredibly aggressive and bordering on rude. We didnt mean to be this way, but we had so much diligence questions to take care off.
On the positive side, we came off as incredibly prepared and organized. On the negative side, we came off as very rude, aggressive professionals who bordered on being snobbish. This would be a major part of our feedback at the end of the session.
Saturday noon - Lunch and Investment thesis work
From noon - 3pm, we had three hours to come up with a valuation for the deals we wanted to invest in, a investment thesis, a term sheet and a power point presentation. We had to submit this to the judges at 3pm and then present as a team to the venture capitalist judges as if they were the investment committee.
This part of the afternoon was incredibly smooth. We broke off into teams. One team worked on the valuation and one team worked on the presentation. Here is where our composition of the team helped a lot. It was obvious very quickly to all of us, that we all were very good in terms of working together. A few of us were very good at creating effective presentations and analyzing the arguments for and against a business. Two of us were very good with numbers and so the engineer and hedge fund guy were building the term sheet and valuation model. One of us (yours truly) was good at nothing, so he spent time coordinating between everyone else. I would sit with the presentation team and ensure that we were in synch with what the valuation team was thinking. Then I would spend some time with the valuation guys trying to ensure our term sheet made sense. So being the jack of all trades helped. I actually worked in this role in the later stages too and our respective competencies really made for a great team.
Saturday 3pm - Presentations
Every team had to make a 15 min presentation and then a 10 min Q&A session. The presentation went very smoothly because we did not worry too much about the form as much as the content. Our presentation was simple but effective, and we used colors to signify many of the factors that we judged plans against. All in all, our presentation was probably what clinched things. All of us spoke, in tandem and in a way that it was very professional and effective.
The Q&A session bordered on chaos and panic. We were mere first years with not that much knowledge. The judges were seasoned VCs and we were asked some very difficult questions. Somehow, we ended up answering many. There was one hilarious confusion between C-corp and S-Corp to which one of us retorted, "Yes, our lawyer will figure it out. We do not think that mistake is a big deal!" I do not know how we survived that one. But overall we were fine.
Saturday 5pm - We Won
In general, by this time we were incredibly exhausted having barely slept for 24 hours and having gone through one of the most intense experiences at Wharton. Little did we know that once we won, a more intense experience awaited us. We sincerely believed we learnt a lot and that was prize enough.
Ashish and me had won the Wharton tech competition a couple of days ago, and we both believed that our luck had run its course. In fact, when they announced the 3rd prize, I was thinking, "Man, we didn't even come third. This is the pits!". Finally, when they announced the winners (and it was us), you should have seen our faces. We did not know what hit us.
This was probably the first time as a team we believed that we could do this. We had no clue that we were even reasonably good let alone imagine winning. But now, we felt we should give this us best shot. This changed the dynamic of the team dramatically (for the better) and we started preparing earnestly for the regionals. But that is a story for the next post.
Why did I write down this story?
Because I think there are important lessons to be learnt here.
1. It is very important to build a team of people who like each other
2. A good VC team is a team of complementary skills
3. Do not ever disrespect the entrepreneur (We did a bit when we rushed them and we learnt our lesson the hard way)
4. Plan, plan and plan in advance. Our team was effective because we were so good at breaking tasks and working in parallel
5. It does not hurt to take the lead and give away leadership of various chunks of the work to various team members.
We had one person who would quickly break off things and hand it over to various sub-teams. It worked because everyone was so focused on doing well, no one cared if someone became the de-facto team lead.
Its important to learn to lead with respect and care. That probably answers a very rudimentary question in team dynamics.
Q: How does one lead a team of peers in complex situations?
A: Very Carefully
Finally, we were an awesome team. And we became great friends. Those days are remembered fondly everytime we see each other. Everyone had competencies beyond what their resume indicated- Ashish had pure guts, Christine for her amazing organizational ability, Sid for his financial warren-buffetesque brain, Preet for pure confidence in answering any question thrown at him (even if we had no clue what the answer could be!) and me, me for being amazing at nothing yet reasonably good at everything. Wait for the next stage. I will probably write about it after a few other posts.
Thursday, October 19, 2006
The search for the one
During my undergrad engineering days, I was in a batch of 60 students in Electronics Engineering. 54 of them were men and 6 were women. And my class has more women than most other engineering majors at school. Naturally, the supply-demand situation was skewed. It led to significantly low reservation prices for most men, and huge premiums on most women. All my life, I found myself in these situations. BSEE, MSEE, Silicon Valley companies, Wharton, the list goes on:)
So it is natural than I would want a job in Venture Capital. The supply-demand situation is as bad (well, not as bad as in engineering school but pretty bad) but my previous experiences have engendered the skill to survive in highly rationed markets. This continues to stand me in good stead. And will help when (if) I land up on Sand Hill Road because after all, where are the women Venture Capitalists?).
So beyond going to parties (networking), can we hit some online sites and look for VC jobs? What resources are out there to source those few and far between? I will try to list a few for mutual benefit. As usual, if I miss something, leave a comment, email your indignation or come talk to me.
Venture Capital Internship/Job Resources:
1. Doostang - All right, We in UVF passed over this deal an year ago because we were not sure the market needed another professional "Linkedin" clone. The long term viability of this site may be suspect but right now, it has some of the best venture capital jobs out there. Ask someone to invite you in and see for yourselves.
2. LinkedIn - Well, everyone knows what it does. There are some VC jobs posted here also. Though if someone posted out here and you just saw it, you probably already missed the boat. Still just generally from the professional network point of view, this is the best site out there.
3. Glocap - This is a PE/VC recruiting firm and it does a reasonably good job of ensuring its presence and profile in Bschool campuses. It has more PE (obviously) jobs than VC but that's the nature of the beast. They do have a nice job status tracking system. I tend to differentiate between later stage stuff and our typical, crazy early stage stuff by calling the former PE and latter VC. You can call it what you want, this is just nomenclature.
4. PERecruit - This is more EU focused. They come to campuses to interview folks and get a headsup on the applicant pool out there. Most jobs are Europe focused. They are rumored to starting a Mumbai office soon.
5. Pinnacle Group - It is another one of these executive recruiting sites. I like the fact that they are more proactive about creating personal relationships and actually exchange emails with prospectives before the jobs open up, so as to get to know them better. A good place to hit and establish a relationship with.
6. PEWire - PEWire has an annual internship lovefest. They will ask VC firms to send in job reqs for summer internship and then will post them out in a huge list on their newsletter. Keep an eye on this. Its easy to miss as it comes as a part of their daily newsletter, and it can have interesting opportunities.
7. Your Business school Venture Capital Club - Frankly, Wharton's VC club is barely there. We have a huge PE club which funnels the hordes into later stage shops but Venture Capital does not have much following (here or elsewhere). Too much risk appetite required. Having said that, things are improving by the year. Look up your VC club site. Most VCs will post through the management of that club.
8. Sharon Park Starbucks - The Sharon Park starbucks (right next to the safeway and behind Clearstone/Lightspeed and other VC firms) is the place to really sources those jobs. You basically sit there day in and out during your summer, and drink latte after latte. 50% of the guys in navy blue shirts and khakhis are VCs. Just lunge at them and grab their foot. Don't let them go till they offer you a gig at their office. Don't lunge at the ones wearing suits. Those are the entrepreneurs and bankers.
Ok, the last one is just me trying to be funny. Don't try it. But then, maybe you should. Who knows what may work.
It's late. Midterms are over. I am not recruiting courtesy my Venture Capital ambitions. A week of pure unadulterated VC networking:) Life is good. Good nite.
So it is natural than I would want a job in Venture Capital. The supply-demand situation is as bad (well, not as bad as in engineering school but pretty bad) but my previous experiences have engendered the skill to survive in highly rationed markets. This continues to stand me in good stead. And will help when (if) I land up on Sand Hill Road because after all, where are the women Venture Capitalists?).
So beyond going to parties (networking), can we hit some online sites and look for VC jobs? What resources are out there to source those few and far between? I will try to list a few for mutual benefit. As usual, if I miss something, leave a comment, email your indignation or come talk to me.
Venture Capital Internship/Job Resources:
1. Doostang - All right, We in UVF passed over this deal an year ago because we were not sure the market needed another professional "Linkedin" clone. The long term viability of this site may be suspect but right now, it has some of the best venture capital jobs out there. Ask someone to invite you in and see for yourselves.
2. LinkedIn - Well, everyone knows what it does. There are some VC jobs posted here also. Though if someone posted out here and you just saw it, you probably already missed the boat. Still just generally from the professional network point of view, this is the best site out there.
3. Glocap - This is a PE/VC recruiting firm and it does a reasonably good job of ensuring its presence and profile in Bschool campuses. It has more PE (obviously) jobs than VC but that's the nature of the beast. They do have a nice job status tracking system. I tend to differentiate between later stage stuff and our typical, crazy early stage stuff by calling the former PE and latter VC. You can call it what you want, this is just nomenclature.
4. PERecruit - This is more EU focused. They come to campuses to interview folks and get a headsup on the applicant pool out there. Most jobs are Europe focused. They are rumored to starting a Mumbai office soon.
5. Pinnacle Group - It is another one of these executive recruiting sites. I like the fact that they are more proactive about creating personal relationships and actually exchange emails with prospectives before the jobs open up, so as to get to know them better. A good place to hit and establish a relationship with.
6. PEWire - PEWire has an annual internship lovefest. They will ask VC firms to send in job reqs for summer internship and then will post them out in a huge list on their newsletter. Keep an eye on this. Its easy to miss as it comes as a part of their daily newsletter, and it can have interesting opportunities.
7. Your Business school Venture Capital Club - Frankly, Wharton's VC club is barely there. We have a huge PE club which funnels the hordes into later stage shops but Venture Capital does not have much following (here or elsewhere). Too much risk appetite required. Having said that, things are improving by the year. Look up your VC club site. Most VCs will post through the management of that club.
8. Sharon Park Starbucks - The Sharon Park starbucks (right next to the safeway and behind Clearstone/Lightspeed and other VC firms) is the place to really sources those jobs. You basically sit there day in and out during your summer, and drink latte after latte. 50% of the guys in navy blue shirts and khakhis are VCs. Just lunge at them and grab their foot. Don't let them go till they offer you a gig at their office. Don't lunge at the ones wearing suits. Those are the entrepreneurs and bankers.
Ok, the last one is just me trying to be funny. Don't try it. But then, maybe you should. Who knows what may work.
It's late. Midterms are over. I am not recruiting courtesy my Venture Capital ambitions. A week of pure unadulterated VC networking:) Life is good. Good nite.
Tuesday, October 10, 2006
What did I do (and am doing) to position myself?
So I remember mentioning somewhere that I will list out the things one could do at school to position themselves for a Venture Capital job. Let me list out what I did and we can go into some detail on each. This is in ascending order of importance (in my opinion).
1. Take a VC class - Yeah, you could do that. It may help some. But as I have said before, the amount of process stuff that one needs to learn to do well in Venture Capital can be learnt in a few hours. The rest is (as they say) is experience and intuition. This means you got to have experiential knowledge.
2. Do a Field Application Project - Do a study on an issue of importance to Venture Capitalists as a self-study in school. I did one of these last year with Professor Steve Sammut (on oddly enough, Pharma sector), and it was an awesome experience from the point of interacting with Safeguard Scientific and learning about the business.
3. Do a VC Trek with your fellow students - This is a good one. A first year mentioned this to me recently and I think this is incredibly useful. I would say try to organize a trek if you can, but the next best thing to do is to go on it. One gets to meet a lot of VCs in a very relaxed atmosphere, and it is an easy way to make a few contacts in the industry.
4. Compete in VCIC - The Venture Capital Investment Competition or VCIC as it is known, is the single best, intensive course in Venture Capital one could take. A team of five are given a bunch of business plans. They have three days to diligence, evaluate, grill entrepreneurs and come up with an investment thesis. We won this last year at Wharton and barely lost the 2nd spot in the regionals. All in all, a fantastic experience.
5. Work for a local VC firm - I am an associate for University Venture Fund, which is not really a local VC fund but has enough reach and deal flow to keep me busy and teach me the inner workings of a successful venture fund. Try to get into a local VC firm or your university's Venture fund (if there is one), and this could be the best thing you could do for yourselves beyond landing a summer internship in Venture Capital.
And in the end, spend the rest of the time looking for an internship, networking and reading tech blogs:)
Between all these things, you should have enough on your resume to take a serious stab at a career in Venture Capital. Beyond that, it's fate, timing, luck, whatever you may call it.
1. Take a VC class - Yeah, you could do that. It may help some. But as I have said before, the amount of process stuff that one needs to learn to do well in Venture Capital can be learnt in a few hours. The rest is (as they say) is experience and intuition. This means you got to have experiential knowledge.
2. Do a Field Application Project - Do a study on an issue of importance to Venture Capitalists as a self-study in school. I did one of these last year with Professor Steve Sammut (on oddly enough, Pharma sector), and it was an awesome experience from the point of interacting with Safeguard Scientific and learning about the business.
3. Do a VC Trek with your fellow students - This is a good one. A first year mentioned this to me recently and I think this is incredibly useful. I would say try to organize a trek if you can, but the next best thing to do is to go on it. One gets to meet a lot of VCs in a very relaxed atmosphere, and it is an easy way to make a few contacts in the industry.
4. Compete in VCIC - The Venture Capital Investment Competition or VCIC as it is known, is the single best, intensive course in Venture Capital one could take. A team of five are given a bunch of business plans. They have three days to diligence, evaluate, grill entrepreneurs and come up with an investment thesis. We won this last year at Wharton and barely lost the 2nd spot in the regionals. All in all, a fantastic experience.
5. Work for a local VC firm - I am an associate for University Venture Fund, which is not really a local VC fund but has enough reach and deal flow to keep me busy and teach me the inner workings of a successful venture fund. Try to get into a local VC firm or your university's Venture fund (if there is one), and this could be the best thing you could do for yourselves beyond landing a summer internship in Venture Capital.
And in the end, spend the rest of the time looking for an internship, networking and reading tech blogs:)
Between all these things, you should have enough on your resume to take a serious stab at a career in Venture Capital. Beyond that, it's fate, timing, luck, whatever you may call it.
Tuesday, September 26, 2006
What's thy disposition, O' VC God!: Current Trends in Venture Capital
Disclaimer: I am a student, this is my opinion. If you know better, teach me. Leave a comment or ping me directly.
Understand the industry dynamics to find the job
Like those mythical dragons of China, jobs in Venture Capital seem to be exist but then maybe not. You see people getting hired but you are not sure how because no one knew, no one heard, and yet people are hired. Dragons probably don't exist but Venture Capital jobs do. And they exist in the realm of hearsay. You have to hear about them, they are not posted. Someone speaks, someone listens and in that wondrous journey of words through the ether, jobs are snatched, people are hired and history is made.
Ok, so the first paragraph was a whim of mine. To blend my somewhat childish literary tendencies into a professional blog. Now back to normalcy. Venture Capital positions are available but far and few. The trick is for someone to remember you when an opportunity arises. As discussed earlier, Networking is the key. But it's also important to understand the nature of this industry and where it is going.
State of the Industry
Simply put, there is far too much money in the industry and not that many great deals. The result is Overhang ( a nice, simple explanation of the problem is here courtesy Paul Kedrosky)and loads of good money chasing a few good deals. Most of the returns in the industry are made by the top few firms while the others scamper around for the scraps. That said, there are good VCs everywhere. However, this industry can be a vicious cycle. Past history is the only indicator of future performance. Far too many legends sit around on their past laurels while very capable people struggle to make a name for themselves. You have to be in a great firm to get a hold of the best deals (so that you can make a name for yourselves). You have get a hold of the best deals and display great aptitude in working on them, to get a shot at the best firms. And so the grand vicious circle of Venture Capital is created.
So?
So since there is so much money floating around, there are a bunch of trends:
1. Move towards Emerging Markets - Countries like China and India are seeing a tremendous inflow of VC capital. A lot of firms are looking east to see if they can invest the money they have raised and make some profit. Whether they do so or not, is the topic of another posting. GigaOM has an excellent article on VC investing boom in India. Check it out.
2. Move towards Later Stage deals - Many VC firms are trying to invest in later stage, traditional Private Equity style deals. This, in the case of emerging markets, can be the low hanging fruit and might be a decent way of divesting larger bite sizes and getting the necessary returns. This means competing against hedge funds and PE shops, increased prices and lower returns.
3. Bigger is Better - There are few brand name funds being chased by a horde of LPs, and this is leading to huge amounts of capital in these select funds that are being raised. Small size funds are almost a misnomer. Look at this Quarter: Oak raised 2.56B fund, NEA raised 2.5B and Vantagepoint raised 0.9B (less than its target of 1B).
4. The incredible shrinking machine - Because of a combination of the factors above, the big will become bigger, the rich will become richer and the credible will become, well...more credible. A lot of small players will exit and the number of VC firms will decline dramatically (more so from the bottom).
Ok...so?
So, the jobs will be fewer, people will be more selective about hiring you and most importantly:
you should be more selective about which firm you want to work for!
I will talk a lot more about this and each of the above trends in the coming posts.
Understand the industry dynamics to find the job
Like those mythical dragons of China, jobs in Venture Capital seem to be exist but then maybe not. You see people getting hired but you are not sure how because no one knew, no one heard, and yet people are hired. Dragons probably don't exist but Venture Capital jobs do. And they exist in the realm of hearsay. You have to hear about them, they are not posted. Someone speaks, someone listens and in that wondrous journey of words through the ether, jobs are snatched, people are hired and history is made.
Ok, so the first paragraph was a whim of mine. To blend my somewhat childish literary tendencies into a professional blog. Now back to normalcy. Venture Capital positions are available but far and few. The trick is for someone to remember you when an opportunity arises. As discussed earlier, Networking is the key. But it's also important to understand the nature of this industry and where it is going.
State of the Industry
Simply put, there is far too much money in the industry and not that many great deals. The result is Overhang ( a nice, simple explanation of the problem is here courtesy Paul Kedrosky)and loads of good money chasing a few good deals. Most of the returns in the industry are made by the top few firms while the others scamper around for the scraps. That said, there are good VCs everywhere. However, this industry can be a vicious cycle. Past history is the only indicator of future performance. Far too many legends sit around on their past laurels while very capable people struggle to make a name for themselves. You have to be in a great firm to get a hold of the best deals (so that you can make a name for yourselves). You have get a hold of the best deals and display great aptitude in working on them, to get a shot at the best firms. And so the grand vicious circle of Venture Capital is created.
So?
So since there is so much money floating around, there are a bunch of trends:
1. Move towards Emerging Markets - Countries like China and India are seeing a tremendous inflow of VC capital. A lot of firms are looking east to see if they can invest the money they have raised and make some profit. Whether they do so or not, is the topic of another posting. GigaOM has an excellent article on VC investing boom in India. Check it out.
2. Move towards Later Stage deals - Many VC firms are trying to invest in later stage, traditional Private Equity style deals. This, in the case of emerging markets, can be the low hanging fruit and might be a decent way of divesting larger bite sizes and getting the necessary returns. This means competing against hedge funds and PE shops, increased prices and lower returns.
3. Bigger is Better - There are few brand name funds being chased by a horde of LPs, and this is leading to huge amounts of capital in these select funds that are being raised. Small size funds are almost a misnomer. Look at this Quarter: Oak raised 2.56B fund, NEA raised 2.5B and Vantagepoint raised 0.9B (less than its target of 1B).
4. The incredible shrinking machine - Because of a combination of the factors above, the big will become bigger, the rich will become richer and the credible will become, well...more credible. A lot of small players will exit and the number of VC firms will decline dramatically (more so from the bottom).
Ok...so?
So, the jobs will be fewer, people will be more selective about hiring you and most importantly:
you should be more selective about which firm you want to work for!
I will talk a lot more about this and each of the above trends in the coming posts.
Wednesday, September 20, 2006
Beyond Networking
Networking is essential to Venture Capital however it can only go so far. It cannot replace the skill set that is need to be a good Venture Capitalist. Now, I will caveat this by saying that I might not necessarily be a good one but I do know (through discussions with VCs of every stripe and shades) what could make an MBA student a good VC.
In my opinion, there are three kinds of skills required (in no particular order).
1. PROCEDURAL KNOWLEDGE
2. VENTURE EXPERTISE
3. EMOTIONAL MATURITY
PROCEDURAL KNOWLEDGE: All the skills that can be learned and form the basic transactional foundations of the day to day activities of a VC. You will do this and need to know this to be a VC. However, this alone does not make you a VC.
a. Venture Capital Theory - An introduction to Venture Capital model of financing and its methodology.
b. Basic Financial theory of Venture Capital - simple to learn, easy to implement. It involves knowledge of things like termsheets, valuation models and methologies, most of it can be learnt from a simple Corp Valuation or a Venture Capital class at school.
c. Legal Aspects of entrepreneurship - Knowledge of legal convenants/terms used in termsheets. Very useful in structuring deals and basic bread-butter stuff for most VCs.
VENTURE EXPERTISE: Builds on the procedural knowledge and is the part which distinguishes a good candidate from a bad one.
a. Technical Expertise - Having technical knowledge in one or more technology sectors is key whether it is semiconductor or biotech, security or wireless. This can be attained through general expertise in a sector or through BS/MS/PhD in it.
b. Domain Expertise - Following up the technical expertise with a genuine interest in the direction of the market is important. It is key to stay abreast of the general industry trends through a combination of blogs, articles and news-wires.
c. Operating Expertise - Having general operating experience in the industry is very useful since it proves that you have the ability to place yourselves in the entrepreneur's shoes and have been exposed to the usual situations that plague tech startups. After all, what advice would you give an entrepreneur if you don't know how it is to be in his/her place?
d. Entrepreneurial Expertise - Even better than just operational expertise. Having experience starting something or working in a startup is one of the best skillsets you can bring to a Venture Capital firm. After all, you know how it is.
EMOTIONAL MATURITY: Builds on knowledge and expertise. You can be the most knowledgeable expert in this world but it is useless if you don't know how to use your skills.
a. Ability to Connect - The nature of a VC job is such that you spend 90% of your time connecting with others. Be they partners, Entrepreneurs, customers, management teams, lawyers or bankers. It is important to be able to connect with a wide variety of people and work with them.
b. Communication Skills - It is important to articulate what your inner self says. You will be wearing many hats at the same time. Interim CEO, board observer, Venture Capitalist and what not. All of these require the knack of switching hats and communicating with a different audience.
c. Empathy - Remember the Entrepreneur? They are the gutsy one. They are taking the risk with her career/ambitions/time/resources to do this. Empathize with them. Its important to do all you can to help them succeed and most importantly, empathize with their situation. A good relationship with your entrepreneur will lead to many more interesting deals/ideas and coupled with expertise, will add credibility to your working style.
At the end of the day, as Curtis Feeny from Voyager Capital told me once, its more important to be a good human being than a great Venture Capitalist.
Did I miss something? Do comment if you think there is something else to add to this list. Next post will deal with what I did through the first year of my school to position myself!
PS: I am not a VC (yet) and neither do I have a VC job (yet). Most of my musings are based on what I learnt over the last year and through my VC friends.
PPS: Everything know or do or have done is because someone in this industry gave me a chance, talked to me or taught me. This should go a long way to prove that "nice VCs" is not a oxymoron:)
In my opinion, there are three kinds of skills required (in no particular order).
1. PROCEDURAL KNOWLEDGE
2. VENTURE EXPERTISE
3. EMOTIONAL MATURITY
PROCEDURAL KNOWLEDGE: All the skills that can be learned and form the basic transactional foundations of the day to day activities of a VC. You will do this and need to know this to be a VC. However, this alone does not make you a VC.
a. Venture Capital Theory - An introduction to Venture Capital model of financing and its methodology.
b. Basic Financial theory of Venture Capital - simple to learn, easy to implement. It involves knowledge of things like termsheets, valuation models and methologies, most of it can be learnt from a simple Corp Valuation or a Venture Capital class at school.
c. Legal Aspects of entrepreneurship - Knowledge of legal convenants/terms used in termsheets. Very useful in structuring deals and basic bread-butter stuff for most VCs.
VENTURE EXPERTISE: Builds on the procedural knowledge and is the part which distinguishes a good candidate from a bad one.
a. Technical Expertise - Having technical knowledge in one or more technology sectors is key whether it is semiconductor or biotech, security or wireless. This can be attained through general expertise in a sector or through BS/MS/PhD in it.
b. Domain Expertise - Following up the technical expertise with a genuine interest in the direction of the market is important. It is key to stay abreast of the general industry trends through a combination of blogs, articles and news-wires.
c. Operating Expertise - Having general operating experience in the industry is very useful since it proves that you have the ability to place yourselves in the entrepreneur's shoes and have been exposed to the usual situations that plague tech startups. After all, what advice would you give an entrepreneur if you don't know how it is to be in his/her place?
d. Entrepreneurial Expertise - Even better than just operational expertise. Having experience starting something or working in a startup is one of the best skillsets you can bring to a Venture Capital firm. After all, you know how it is.
EMOTIONAL MATURITY: Builds on knowledge and expertise. You can be the most knowledgeable expert in this world but it is useless if you don't know how to use your skills.
a. Ability to Connect - The nature of a VC job is such that you spend 90% of your time connecting with others. Be they partners, Entrepreneurs, customers, management teams, lawyers or bankers. It is important to be able to connect with a wide variety of people and work with them.
b. Communication Skills - It is important to articulate what your inner self says. You will be wearing many hats at the same time. Interim CEO, board observer, Venture Capitalist and what not. All of these require the knack of switching hats and communicating with a different audience.
c. Empathy - Remember the Entrepreneur? They are the gutsy one. They are taking the risk with her career/ambitions/time/resources to do this. Empathize with them. Its important to do all you can to help them succeed and most importantly, empathize with their situation. A good relationship with your entrepreneur will lead to many more interesting deals/ideas and coupled with expertise, will add credibility to your working style.
At the end of the day, as Curtis Feeny from Voyager Capital told me once, its more important to be a good human being than a great Venture Capitalist.
Did I miss something? Do comment if you think there is something else to add to this list. Next post will deal with what I did through the first year of my school to position myself!
PS: I am not a VC (yet) and neither do I have a VC job (yet). Most of my musings are based on what I learnt over the last year and through my VC friends.
PPS: Everything know or do or have done is because someone in this industry gave me a chance, talked to me or taught me. This should go a long way to prove that "nice VCs" is not a oxymoron:)
Monday, September 04, 2006
How did I Network?
First of all, the art of good networking involves not considering it as a process but an experience. You have to enjoy meeting people, talking to them about their ambitions and of course, you goals. The aim should be to connect with the person you are talking to and make a friend. Everything else will follow. Meeting people with warmth, with openness to new ideas and people is the best form of networking.
If you find the process of networking cumbersome, then maybe Venture Capital is not for you. The industry is an art form more than a precise science, and it works primarily because it is a collection of tightly-knit, extremely bright people. Every deal that you source, diligence and close might involve phone calls to your friends in the VC firm across the road.
The process of finding a VC job is not too different. It's not about applying for positions in a VC firm, it's about knowing when they appear. When someone comes across an opportunity that might be a fit, that someone has to remember you.
So Networking is important and more important is Networking with genuine sense of openness and fun.
The way I went about the process is not too different from what most of the MBA students do when they look for an internship/full time position.
Step 1: Create a Pitch
Create an effective 1-2 minute pitch on your background, credentials and ambitions. Being very clear about what you want to focus on is important. Ultimately, the question is what do you bring to the table. And this has be answered in a clear and concise manner. I found strong, effective pitches were the best way to get the attention of the person across the table or phone. Also, the people who you are talking are usually pretty busy and are taking time out of the work to lend a helping hand. Speaking clearly and articulating your ambitions unambigiously helps save their time and also helps them help you in the most appropriate way. You also come off as an impressive, motivated individual and that can't hurt!
Step 2: Collate your sources
You have to first of all collect any initial contacts that you might have in VC world or related to Venture Capital.
For us MBA students, these are primarily from the following sources:
1. Friends who are in the VC industry
2. Friends who are entrepreneurs and who have interfaced with VCs at some point in the lifecycle of their startup
3. Your peers at school who might have had VC experience
4. Business school Alumni
Step 3: Get Started
From all this, create a list of initial contacts who you can talk to and start pinging them one by one. Before you speak to them, practise your pitch with a few peers!
The way I have done it till date is by sending them an initial short introductory email with a short bio and a request to meet/talk for a few mins. Obviously, using your contacts to "warm call" people is more effective than "cold calling" them. Having said that, when I started, I did not know that many folks in the VC world and I have been reasonably successful in talking to loads of VCs. The trick is to ensure that you have some valuable to say and you have the confidence that you deserve to be given a chance.
I can say that the people you will end up getting responses from are a self-selected group of VCs who are generally less-stressed, warm human beings (there are exceptions and I have been at the recieving end of those). Trust them, rely on them, talk to them and lay out your ambitions. At the end of each conversation, ask if they could do you a favor by introducing you to someone who was a relevant person to talk to. This is a long shot but you have nothing to lose and you can end up winning a "warm call/referral".
That is the way the network grows.
Finally, as you network will grow, you will learn how to pitch better, you will figure out the VC parlance and know what the trends in the industry are. In a very subtle way, you will become smarter and will understand what this industry is about.
And that is a good point to re-evaluate if you are indeed a good fit for Venture Capital. Thus, networking will help you not only in finding a job but in deciding if you actually do want the job.
Till now, I have been aggregrating my experience in VC recruiting but I am curious about what other's experiences have been? Anything different to say or an experience which does not match what I outlined in this blog? Do comment or ping me.
Next time, I will talk about what else can we do beyond networking to enhance our chances.
If you find the process of networking cumbersome, then maybe Venture Capital is not for you. The industry is an art form more than a precise science, and it works primarily because it is a collection of tightly-knit, extremely bright people. Every deal that you source, diligence and close might involve phone calls to your friends in the VC firm across the road.
The process of finding a VC job is not too different. It's not about applying for positions in a VC firm, it's about knowing when they appear. When someone comes across an opportunity that might be a fit, that someone has to remember you.
So Networking is important and more important is Networking with genuine sense of openness and fun.
The way I went about the process is not too different from what most of the MBA students do when they look for an internship/full time position.
Step 1: Create a Pitch
Create an effective 1-2 minute pitch on your background, credentials and ambitions. Being very clear about what you want to focus on is important. Ultimately, the question is what do you bring to the table. And this has be answered in a clear and concise manner. I found strong, effective pitches were the best way to get the attention of the person across the table or phone. Also, the people who you are talking are usually pretty busy and are taking time out of the work to lend a helping hand. Speaking clearly and articulating your ambitions unambigiously helps save their time and also helps them help you in the most appropriate way. You also come off as an impressive, motivated individual and that can't hurt!
Step 2: Collate your sources
You have to first of all collect any initial contacts that you might have in VC world or related to Venture Capital.
For us MBA students, these are primarily from the following sources:
1. Friends who are in the VC industry
2. Friends who are entrepreneurs and who have interfaced with VCs at some point in the lifecycle of their startup
3. Your peers at school who might have had VC experience
4. Business school Alumni
Step 3: Get Started
From all this, create a list of initial contacts who you can talk to and start pinging them one by one. Before you speak to them, practise your pitch with a few peers!
The way I have done it till date is by sending them an initial short introductory email with a short bio and a request to meet/talk for a few mins. Obviously, using your contacts to "warm call" people is more effective than "cold calling" them. Having said that, when I started, I did not know that many folks in the VC world and I have been reasonably successful in talking to loads of VCs. The trick is to ensure that you have some valuable to say and you have the confidence that you deserve to be given a chance.
I can say that the people you will end up getting responses from are a self-selected group of VCs who are generally less-stressed, warm human beings (there are exceptions and I have been at the recieving end of those). Trust them, rely on them, talk to them and lay out your ambitions. At the end of each conversation, ask if they could do you a favor by introducing you to someone who was a relevant person to talk to. This is a long shot but you have nothing to lose and you can end up winning a "warm call/referral".
That is the way the network grows.
Finally, as you network will grow, you will learn how to pitch better, you will figure out the VC parlance and know what the trends in the industry are. In a very subtle way, you will become smarter and will understand what this industry is about.
And that is a good point to re-evaluate if you are indeed a good fit for Venture Capital. Thus, networking will help you not only in finding a job but in deciding if you actually do want the job.
Till now, I have been aggregrating my experience in VC recruiting but I am curious about what other's experiences have been? Anything different to say or an experience which does not match what I outlined in this blog? Do comment or ping me.
Next time, I will talk about what else can we do beyond networking to enhance our chances.
The Process
"The Process". Sounds like a John Grisham novel right?
Anyways, so here is the process:
1. Be self-aware
Know what you bring to the table before you start talking to people.
2. Refine a pitch
When you starting talking to people, you should have a brief/impactful way of introducing yourselves.
3. Know what you want to know
Have an idea of why you are networking. Don't get on to the phone and ask for a job. Try to find out about field, genuinely and sincerely. Jobs come and go, knowledge has to be invited home.
4. Network
Talk to as many VCs as you can and get in front of them with your ambitions in tow.
5. Do a field study in a VC related topic
Try to do a field study in a VC related topic preferably with a VC firm and get a hold on the street lingo in VC land. ("Carry" is not a verb as much as a noun in a VC song and things like that).
6. Network
Refine your idea of what you bring to the table and what kind of VC job you want, and use that to talk to more VCs.
7. Subscribe to tech/VC blogs
Ensure that you are on top of the tech startup world/trends by subscribing to influential, interesting VC/tech blogs.
8. And network a bit more
Keep talking to as many people as you can. Essentially, when the right position comes by, someone should remember you. That is the only way one gets a job in VCland.
(Unless you are Ankur Luthra (Summit Partners) who got his pic in Wired magazine gazing at a wall full of business plans)
Anyways, so here is the process:
1. Be self-aware
Know what you bring to the table before you start talking to people.
2. Refine a pitch
When you starting talking to people, you should have a brief/impactful way of introducing yourselves.
3. Know what you want to know
Have an idea of why you are networking. Don't get on to the phone and ask for a job. Try to find out about field, genuinely and sincerely. Jobs come and go, knowledge has to be invited home.
4. Network
Talk to as many VCs as you can and get in front of them with your ambitions in tow.
5. Do a field study in a VC related topic
Try to do a field study in a VC related topic preferably with a VC firm and get a hold on the street lingo in VC land. ("Carry" is not a verb as much as a noun in a VC song and things like that).
6. Network
Refine your idea of what you bring to the table and what kind of VC job you want, and use that to talk to more VCs.
7. Subscribe to tech/VC blogs
Ensure that you are on top of the tech startup world/trends by subscribing to influential, interesting VC/tech blogs.
8. And network a bit more
Keep talking to as many people as you can. Essentially, when the right position comes by, someone should remember you. That is the only way one gets a job in VCland.
(Unless you are Ankur Luthra (Summit Partners) who got his pic in Wired magazine gazing at a wall full of business plans)
How to find out how to find a VC internship
No. My english isn't that bad. I just thought that it was a funny title for a blog entry.
A geek like me can find 10 girlfriends (at the same time) easier than find a VC internship. Not a great analogy and probably an exaggeration. That said, it is "hard" to find a VC internship.
But hard is relative. Its harder than finding a McKinsey gig or harder than finding your IB gig. But easier than starting a successful startup. The trick is to commit to finding a VC internship. If you are hellbent on finding one, you probably will. The way I structured my search was as follows:
Step 1. Talk to all 2nd years who did anything related to Venture Capital
This is the best resource that us Bschoolers have and we usually dont use it well enough. Find people who previously worked in VC or did something related to that in their summers and talk to them. They have gone through the phase you are going to go through and they know the drift.
Step 2. Find mentors/people who will bat for you (among your peers/2nd years)
I found Arif Janmohamed, Mukul Chawla and Sandeep Lodha. Arif now works at Cisco M&A, Mukul is at Warburg Pincus and Sandeep crossed the border to Bain. But all of these had VC related summers or had recruited at VC firms. I got to know them and they mentored me on everything from my resume to the process to the pitch. They gave me contacts and opportunities. And then coached me on how to make the best of those opportunities.
Find people like that and hang on to them. Its a small world, if you are good, you will cross paths with your peers. So don't be afraid to ask for favors. You will get an opportunity to return it. But most of all, don't waste people's time. If you are not commited or are just testing waters, be upfront about it.
It's kind of like life right? There are usually people who know more about things than you do. Your options are to bumble along and find the path yourselves, or to be open to learning the path from others. Some paths are to be forged individually and some are more apprenticeship-model based. VC is more latter than the former.
Anyways, at the end of these steps, I had a clue as to the process that awaits me.
A geek like me can find 10 girlfriends (at the same time) easier than find a VC internship. Not a great analogy and probably an exaggeration. That said, it is "hard" to find a VC internship.
But hard is relative. Its harder than finding a McKinsey gig or harder than finding your IB gig. But easier than starting a successful startup. The trick is to commit to finding a VC internship. If you are hellbent on finding one, you probably will. The way I structured my search was as follows:
Step 1. Talk to all 2nd years who did anything related to Venture Capital
This is the best resource that us Bschoolers have and we usually dont use it well enough. Find people who previously worked in VC or did something related to that in their summers and talk to them. They have gone through the phase you are going to go through and they know the drift.
Step 2. Find mentors/people who will bat for you (among your peers/2nd years)
I found Arif Janmohamed, Mukul Chawla and Sandeep Lodha. Arif now works at Cisco M&A, Mukul is at Warburg Pincus and Sandeep crossed the border to Bain. But all of these had VC related summers or had recruited at VC firms. I got to know them and they mentored me on everything from my resume to the process to the pitch. They gave me contacts and opportunities. And then coached me on how to make the best of those opportunities.
Find people like that and hang on to them. Its a small world, if you are good, you will cross paths with your peers. So don't be afraid to ask for favors. You will get an opportunity to return it. But most of all, don't waste people's time. If you are not commited or are just testing waters, be upfront about it.
It's kind of like life right? There are usually people who know more about things than you do. Your options are to bumble along and find the path yourselves, or to be open to learning the path from others. Some paths are to be forged individually and some are more apprenticeship-model based. VC is more latter than the former.
Anyways, at the end of these steps, I had a clue as to the process that awaits me.
Saturday, September 02, 2006
My first steps into Venture Capital
So I decided that I will try to figure out where I can make a career in this field. Everywhere I talked to, people tend to be discouraging and do not think, there is a way to get a position in VC directly out of Business school. Maybe there is a grain of truth. There is not much you can contribute to a VC firm if you are just out of school. However, most of us are NOT just out of school.
Most of us have a few years of operating experience and even multiple degrees before we get to Bschool. Having said that, there is a profile which is especially conducive to getting in.
(This does not mean people with different profiles can't get in, this is just more conducive)
1. Have an advanced engineering degree (BS, MS in EE/CS/other engineering disciplines)
2. Have startup experience either through starting something or by working on the groundfloor of one
3. Have operating experience of some significance
4. Be a hustler
I think the last point is probably the most important one. You need to hustle quite a bit. Get in front of incredibly busy people, charm your way to an audience and then make the most ouf it. This is NOT IB/consulting, there is no set path. You should be genuinely interested in meeting other entrepreneurs/VCs because you are interested in getting to know them. And you can't do that unless you are 100% passionate about this technology and startups.
Which brings us to the main criteria to get a VC job:
>>>> YOU HAVE TO REALLY WANT IT
VC jobs are not backups and you will not be very efffective recruiting for IB/Consulting/etc and try to get a VC job in the background. That said, startup jobs/tech operating jobs can be a consequence of looking for a VC job. You start talking to people to find a VC internship and suddenly, you get a great operating internship in a nice tech startup.
That happens more often than we would think.
So having spent enough time talking to 2nd years/VC friends, I decided I was going to go find myself a VC internship. And then process really took off.
Most of us have a few years of operating experience and even multiple degrees before we get to Bschool. Having said that, there is a profile which is especially conducive to getting in.
(This does not mean people with different profiles can't get in, this is just more conducive)
1. Have an advanced engineering degree (BS, MS in EE/CS/other engineering disciplines)
2. Have startup experience either through starting something or by working on the groundfloor of one
3. Have operating experience of some significance
4. Be a hustler
I think the last point is probably the most important one. You need to hustle quite a bit. Get in front of incredibly busy people, charm your way to an audience and then make the most ouf it. This is NOT IB/consulting, there is no set path. You should be genuinely interested in meeting other entrepreneurs/VCs because you are interested in getting to know them. And you can't do that unless you are 100% passionate about this technology and startups.
Which brings us to the main criteria to get a VC job:
>>>> YOU HAVE TO REALLY WANT IT
VC jobs are not backups and you will not be very efffective recruiting for IB/Consulting/etc and try to get a VC job in the background. That said, startup jobs/tech operating jobs can be a consequence of looking for a VC job. You start talking to people to find a VC internship and suddenly, you get a great operating internship in a nice tech startup.
That happens more often than we would think.
So having spent enough time talking to 2nd years/VC friends, I decided I was going to go find myself a VC internship. And then process really took off.
Why Venture Capital?
Why? Indeed I spent quite a bit of my time at school (at the expense of that amazing market strategy class) looking blankly at the professor and thinking about what I wanted to do with my life.
So many avenues were open to me and the economy seems to be doing well too. But what should I be focusing on? This is the question most people are faced with at regular intervals of their lives and I sincerely believe the ones who succeed are those who can answer it in a way that it aligns with their darkest, innermost urges.
What is your elixir?
What makes you happy?
What would be a satisfactory life if I fast-forwarded 40 years and you were in the autumn of your career/life?
Most people try to look at life as a ladder and look at the next few rungs at a time. I do not believe that is a unreasonable strategy. But I like to atleast take a stab at fashioning my life from the big picture down. What is the 30000ft view of what I want to do? And then lets zoom down to see, what the potential next few steps might be.
Unrealistic? I do not know. I am 29 and have worked enough and studied enough to atleast make an attempt to figure my ambitions out.
But I ramble. The question was: Why Venture Capital?
I have a bachelors and MS in Electronics and Telecommunications. I really love technology. No, not just in a geeky sort of way. But I genuinely believe in its power to change our lives. Tell me the last consultant/IB guy who changes the way we did things? But the guy who invented the VoIP protocol, and the guy who created/marketed Skype changed our life immutably. So, post-MBA whatever I do, it has to do with technology. Then these are the options I have:
1. IB with a tech focus
2. Consulting with a tech focus
3. Operating role in a large/midsize tech firm
4. Do a tech startup/ground floor of a early stage tech firm
5. Invest in tech (PE/VC)
Of all these options, 4 and 5 seem most interesting to me. I dont seem to be excited by 1 or 2. And have done enough of 3 in my prior life.
So, it boils down to either investing in technology or starting a company of my own. Both of which are viable, reasonable options and none of which is a backup to the other.
Somewhere in the first couple of months of my MBA, after hearing the experiences of tons of alumni/2nd years, I decided to pursue a career in Venture Capital and/or look for entrepreneurial oppportunities.
So many avenues were open to me and the economy seems to be doing well too. But what should I be focusing on? This is the question most people are faced with at regular intervals of their lives and I sincerely believe the ones who succeed are those who can answer it in a way that it aligns with their darkest, innermost urges.
What is your elixir?
What makes you happy?
What would be a satisfactory life if I fast-forwarded 40 years and you were in the autumn of your career/life?
Most people try to look at life as a ladder and look at the next few rungs at a time. I do not believe that is a unreasonable strategy. But I like to atleast take a stab at fashioning my life from the big picture down. What is the 30000ft view of what I want to do? And then lets zoom down to see, what the potential next few steps might be.
Unrealistic? I do not know. I am 29 and have worked enough and studied enough to atleast make an attempt to figure my ambitions out.
But I ramble. The question was: Why Venture Capital?
I have a bachelors and MS in Electronics and Telecommunications. I really love technology. No, not just in a geeky sort of way. But I genuinely believe in its power to change our lives. Tell me the last consultant/IB guy who changes the way we did things? But the guy who invented the VoIP protocol, and the guy who created/marketed Skype changed our life immutably. So, post-MBA whatever I do, it has to do with technology. Then these are the options I have:
1. IB with a tech focus
2. Consulting with a tech focus
3. Operating role in a large/midsize tech firm
4. Do a tech startup/ground floor of a early stage tech firm
5. Invest in tech (PE/VC)
Of all these options, 4 and 5 seem most interesting to me. I dont seem to be excited by 1 or 2. And have done enough of 3 in my prior life.
So, it boils down to either investing in technology or starting a company of my own. Both of which are viable, reasonable options and none of which is a backup to the other.
Somewhere in the first couple of months of my MBA, after hearing the experiences of tons of alumni/2nd years, I decided to pursue a career in Venture Capital and/or look for entrepreneurial oppportunities.
Why start this blog?
This blog started was inspired by a comment from Will Price, who is a principal at Hummer Winbald Venture Partners. Will was probably the last VC I met before I left Bay Area to get back to my 2nd year at Wharton.
I was doing my usual thing, making a contact, getting advice as to what more I should do to position myself for a VC job and out came this nugget of wisdom.
"Write a Blog"
"About what?", I said.
"Something that you are good at related to Venture Capital", came the response.
Now I have an extensive semiconductor background, have been in operating roles in large, small, mid-size firms and have domain experience in Wireless/Software among other things. But so do many others. Why should someone come to my blog to read about my take on things "unless" my take was seriously unique?
Then came a flash. Why not write about this process that I am going through? I have spent days/months/almost an year in this industry, meeting people, cold-calling, warm-calling, mailing, doing what I can to figure out if:
a. This industry is a fit for me
b. If I am a fit for this industry
I have spent countless hours meeting VCs and Entrepreneurs of all shades and stripes. There is something in my experience that would be useful to other aspiring VCs and other professionals who might want to get an insight into this as a career.
And more importantly, what I learnt from my countless encounters.
So thats that. Thanks Will for the idea. By the way, he has an excellent blog going. Check it out.
I was doing my usual thing, making a contact, getting advice as to what more I should do to position myself for a VC job and out came this nugget of wisdom.
"Write a Blog"
"About what?", I said.
"Something that you are good at related to Venture Capital", came the response.
Now I have an extensive semiconductor background, have been in operating roles in large, small, mid-size firms and have domain experience in Wireless/Software among other things. But so do many others. Why should someone come to my blog to read about my take on things "unless" my take was seriously unique?
Then came a flash. Why not write about this process that I am going through? I have spent days/months/almost an year in this industry, meeting people, cold-calling, warm-calling, mailing, doing what I can to figure out if:
a. This industry is a fit for me
b. If I am a fit for this industry
I have spent countless hours meeting VCs and Entrepreneurs of all shades and stripes. There is something in my experience that would be useful to other aspiring VCs and other professionals who might want to get an insight into this as a career.
And more importantly, what I learnt from my countless encounters.
So thats that. Thanks Will for the idea. By the way, he has an excellent blog going. Check it out.
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