The Business of Venture Capital. Mahendra Ramsinghani

Inn and trying to impress panels of interviewers with their technical and social skills, juniors applying for summer internships in finance and consulting can now reap the benefits of their work: elaborate “sell days” to convince them to accept the job… . They paid for two nights at a fancy hotel in New York… . They rented out a museum and had a cocktail party, and then rented out the VIP room in a nightclub in Soho… . They even send chocolates in the mail… . They showed recruits a whole lifestyle. When Goldman Sachs CEO gave a keynote speech to Wharton MBA students, the first point he made after stating Goldman Sachs's $23 billion in revenue in 2004 was the importance his firm places on “hiring and retaining the best people” in order to maintain a “culture of excellence.”¹

      Brant Moxley, managing director at Pinnacle Group International, an executive recruiting firm that focuses on private equity and venture capital career opportunities, says, “There are 10 times the number of applicants for every job opening in the venture capital arena. The demand is staggering. Strong operating experience and technical and financial skills, or experience in the investment banking business may also be a badge of honor at the entry level. What I find fascinating is while everyone wants to get in the business of venture capital, not many understand what it takes to stay in the business.”

Sarah Tavel, a partner at Benchmark, wrote, “People who tend to rise to the top during the selection process do so because of their passion, not just for venture capital but for the entire ecosystem.”²

      A pre-MBA position is, by design, established for two years. “Ninety percent of the time, these positions are not partner tracks. At best, an analyst would stay with the firm for three years, instead of the usual two,” declares Brant.

      A Typical Venture Capitalist's (VC's) Responsibilities

      A typical position description for investment professional would read as follows:

       Key tasks and responsibilities. Participate in and contribute to all aspects of the investment process with responsibility for all quantitative and qualitative analysis of portfolio companies.

       Sourcing and Analysis. Develop a sourcing strategy and identify key competitive elements in developing a sustained long term advantage. Evaluate potential opportunities, including sector research and trend analysis. Conduct due diligence, assist with deal execution and transaction management.

       Structuring and execution. Negotiate investment structure in close liaison with the legal team. Prepare and coordinate the execution of term sheets, investor rights and share purchase agreements, and other legal documentation.

       Portfolio management / Post-investment monitoring. Support the CEO, identify value-add levers and carry out portfolio company analysis on a quarterly basis. Stay up to date on performance variances, top challenges for each company. Prepare returns forecasts and updates for limited partners. Awareness of relevant legal aspects of corporate governance is essential.

       Marketing and fundraising. Marketing, positioning, and fundraising via strong relationships with GPs/investors/ consultants/advisers.

       Skills. Knowledge of relevant (health care, technology, fintech) sectors. Transactional experience and analytical abilities. Advanced financial, business modeling, and writing skills.

       Competencies. Results-driven, ambitious, and highly motivated. Strategic and commercial acumen. An entrepreneurial approach, initiative, and adaptability. Team player with a strong work ethic. Excellent networking skills.

One “associate”-level job position that got lit up on Twitter was symptomatic of an entitled overlord seeking a slave or even a grateful piss-boy, ideally on-call round the clock. Qualifications listed include “someone who grew up poor or very close to poverty” and has an MBA with experience at a top consulting firm. But after all that and the ginormous student-debt, you would start as an executive assistant. Don't lose hope, because someday…yes, someday you will be the CEO. Until then, be a slave. “You are someone who understands and accepts they are working for a boss… . You should be able to build order from chaos, be able to create structure for someone who has zero” structure, available 24/7, grew up poor (yes, this was listed as a qualification in the ad), and provide concierge like service. If all goes well, you could be the CEO, “make enough for generations to come.”³ Would you apply for such a finely crafted position?

And if you get in, the instability and the churn factor in this career path are high. C. Richard Kramlich of NEA, once remarked, “Below the surface there's a huge amount of turnover.”⁴ When Bill Gurley graduated, he wanted to be a venture capitalist. He went to New York for the first time in his life to beg for meetings with venture capitalists and was told, “Don't even think about it, kid. Go work for 20 years and then come back.” Gurley went on to become one of the biggest sell-side analysts on Wall Street, quickly narrowing his focus to “this thing called the internet, which no one knew anything about at the time.” Microsoft founder Bill Gates recommended Gurley for his first venture job with Hummer Winblad. Gurley jumped at the opportunity and said yes before even hearing the entire offer.⁵ Soon Benchmark would come knocking and recruit him away.

John Doerr of Kleiner Perkins Caufield & Byers (KPCB) once remarked, “I cold-called Silicon Valley’s venture groups, hoping to apprentice myself to one.”⁶ His cold-calling efforts did not get him a job at KPCB, but eventually, after five years at Intel, John would land at this firm. Brooks Byers, who had asked John to get some experience, famously invited John Doerr for a 5:30 a.m. jog to see how motivated he was. John was at the track the next morning and landed the role.

Like Doerr, Robert Nelsen chased Brooks, too, but found his calling elsewhere. “I remember cold-calling Brook Byers, founder of Kleiner Perkins Caufield & Byers, about a hundred times. . . . I was always interested in venture capital,” says Robert (Bob) Nelsen. Nelsen went on to be the cofounder of ARCH Venture Partners (ARCH), which has now grown to manage multibillion in assets. In his 20-year investment career, Bob has led nine companies to valuations of $1 billion or more. “Venture capital was my first career choice,” he says. In his first year of business school, Bob read about the launch of ARCH Venture Partners and approached the founder, Steve Lazarus. “I told Steve I would work for him for free.” Nelsen started with ARCH as soon as he finished college.⁷

      “I heard once that all venture capitalists operated from 3000 Sand Hill Road,” says David Cowan. Sand Hill Road was the mecca and Andreessen Horowitz, NEA, Sequoia Capital, Draper Fisher Jurvetson (DFJ), Battery Ventures, and more were all stationed in the same neighborhood. David, who had a brief two-year stint at Oracle, was eager to explore possibilities in the venture universe. One fine afternoon he drove to Sand Hill Road and walked unannounced into one of the venture firm's offices. The lady at the front desk was firm: “No, we don't have any openings.” But David persisted. “I am sure you know a few firms who would be looking.” The lady pulled out a copy of the Western Association of Venture Capitalists directory and circled a few names. “I wrote letters to five firms. Two of the five offered me a position,” recalls David, who has been with Bessemer Venture Partners, for over two decades years.

Cold-calling a venture capital firm rarely works — especially in the modern day. “I don't think that approach will work today. The business is much more complex and competitive,” warns David.⁸ What might work is likely a web presence. Famously, Union Square Ventures