Photographic evidence that Windows 7 kills kittens!
Just kidding; the little guys are taking a nap. For some reason they love sleeping on my computer.
And I have to say, I like Windows 7. I’ve been using the beta version since the middle of the summer and it hasn’t crashed at all. I also dig the little universal search box; I still use Google Desktop, but MSFT’s search box has become part of my workflow. I have gotten used to the windows-button-tab-button way of circulating through open windows, and graphically it is very appealing. The help documentation is pretty good too, so I’ve been able to modify the preferences I want to pretty easily.
You want to get a job as a junior venture capitalist?
Really? Have you seen the state of the venture market? 10 returns are falling and there is not end in sight and the venture industry is shrinking… But, OK, you want to get a junior investor role at a venture capital firm. Having collected job offers at over a half a dozen venture and private equity groups (and having been rejected by countless more!) I’ve got a pretty strong opinion on how to prepare for an interview with a venture firm. This is what has worked for me. If it fits your style then go with it. (Note that I have never worked with biotech investments so this may not be a helpful if you are looking for a position as a life science investor.) I’ll going to need to do a couple of posts on this topic, so I’ll start with 4 questions that you need to have good answers for before you do the 1st interview.
The 1st questions to have answers to when interviewing for a venture capital position
This is not an inclusive list of topics to prepare for, but these are probably the top few questions that you need to have solid answers – and you should have practiced them so they are concise and impactful. It should not take more than 90 seconds to answer each of these questions; probably less. Let the VC ask follow up questions on the issues they care about – do NOT ramble on.
- Why now? I mean, why do you want to join this firm at this moment? You’d better have an answer. Start by knowing what companies they’ve invested in recently and what exits they’ve had. When I interviewed, I created little packets on each firm. Recent deals, “mission statement” or focus, partner bios. How did my previous experience overlap with the people I’m going to connect with?
- You need to seem like you’ve got a process for approaching a new investment. Check out my venture capital investment memo template for details on what a VC uses to discuss investments. But you need to be brief. I would concentrate on three of the following five topics:
A. Management. Make sure you mention this as an important criteria, but it doesn’t have to be point # 1 on your list. Look for people who have run/managed and grown businesses before and who you trust to grow a startup, or if you are on the West Coast people who seem very coachable, who listen well, who seem like they can grow into being an effective leader and who are humble enough to be willing to bring in a “professional” CEO if the company eventually needs it.
B. Market. You want a big, growing market that has space to have a strong niche player or room for a new big player. For early stage investing the market doesn’t yet have to exist, but you need to be able to feel comfortable that you’ve got at least half a billion, probably more like a several billion dollar market in the foreseeable future. There need to be customers who want/need some sort of a solution and have a willingness to pay. You also need to be able to find and sell to these customers efficiently once you reach scale.
C. Technology. Hopefully the tech is unique, can be defended or can’t be recreated easily. If not, hope that it is at least cool. If it is some sort of a hardware solution it needs to be at least 10x, hopefully more, better than the existing solutions on the market. How much longer will it take and how much will it cost to develop the product and can this team do it?
D. Deal. Can you invest on reasonable terms? Don’t pretend to be an expert here if you’re not. There are lots of good technologists who have become VCs and who did not have any deal experience prior to joining a VC. This is stuff you can learn on the job usually. However, it is important that the capital needs of the company match up with the venture firm’s ability to fund it. How much will the fund need to reserve to support the investment, and does this match up with the capital at the fund’s disposal.
E. Exit. What does this company look like at scale? Is a way to exit the company? Can grow to be a big company and thus do an initial public offering, or are there numerous buyers who might find it strategic/good technology fit? Who are these buyers, and have they been buying?
- Be knowledgeable on several industries/spaces that you think would be interesting investment areas for the fund. This is pretty critical. The firm is going to be looking for your to be able to source new investment opportunities, and this starts with figuring out industries that are potentially interesting. Use the criteria laid out for what makes a market interesting, and cite facts and figures around the space you’ve picked as proof that you know what you are talking about. Finally, know of and have the ability to make intros to companies in that space that may be good investment candidates.
- Prove that you can learn to execute deals. Show that you are not an idiot mathematically – did you get good grades? Talk about analyses you’ve run at your last job. Mention negotiations that you’ve been part of.
This isn’t intended to be an exhaustive list of questions that you will be asked in a venture interview. Most of my interviews (at least the ones where I’ve gotten the job) have been multi-day affairs, so obviously you are going to get asked a lot of different questions. But you would be amazed – venture partners tend to ask pretty similar things. Stick to a solid framework, because the partners at the fund are going to be comparing notes with each other and you are going to need to be consistent.
I’ve completed the second step of my recovery from being a venture capitalist* and am now the head of marketing at Pixily, an online document management service focused on the small business customers. (Yes, it’s Prasad‘s company!) I’ve had the opportunity to get close to a number of startups since I left Atlas earlier this year, and have loved a bunch of them – particularly some of the ones over at TechStars. But I found myself slowly spending more and more time at Pixily, from a few days a week to 30 hours a week to 60 hours a week plus lots of brainstorming time in bed at night when I was supposed to be sleeping. Eventually Prasad and I decided that I might as well take the plunge and go full time.
I’m really excited about working with Prasad and the team at Pixily for a bunch of reasons:
- We are growing, and growing fast. Guess what – growth is fun! Even more fun on the inside of the company vs. being an investor looking in from the board level.
- It’s new to me. I’d been an investor/finance type for my whole career. But marketing is totally new. I think I’ve got a feel for what I want things to look like from a high level from my days as an investor, but actually getting there is the challenge.
- I still get to play with numbers, since marketing is now a metrics driven function. I always liked running different scenarios for potential portfolio companies – now I just get to do it in real time…
- Working at Pixily has really stepped up my passion level. Passion matters more than when I was an investor. One of the greatest investors I worked with was a partner at Summit Partners. He had the uncanny ability to dispassionately evaluate every little detail of a deal, and had no “sunk cost” fallacies. If an important part of a deal didn’t check out he would walk away, regardless of the amount of time we’d spent working on it – even if we’d spent a year and a half and had spent hundreds of thousands on due diligence. I think that is part of the reason he was such an amazing investor. But when you are company trying to grow, you can’t be dispassionate. You have to believe that what you are doing is going to work, even when little things go off the rails. So, while the ups are great, it is the excitement I feel for the company’s potential that keeps me chugging on through the occasional setback.
- It’s really cool to do something that actually, directly helps customers. I’m getting a lot of the passion I just mentioned from customers. It was after taking a few customer support calls that I really “got” the problem that Pixily was solving. Small businesses really like this service and they are changing the way the work and integrating Pixily into their everyday processes. There is a real, unmet need in the market – small companies are still paper-based and a new generation of business owners want to manage their businesses’ information online, not in filing cabinets, and from their phones, not from their desktop. Helping people make this change is really exciting!
There are a ton of other things I’m finding really fun – but the one thing I do miss (besides the deep, peaceful slumber of the money man) is having time to blog more. I hope to pick back up the blogging pace, since I’m experiencing all kinds of new things and want to share and get people’s opinions.
Finally, sign up for a free trial for your startup! Send us your paper documents, upload your digital files, and start using Pixily as a search engine for all of your companies’ paper! And you can use the “HJ2009″ coupon code for $5.00 off when you sign up for a paying plan.
*The first step was acknowledging that I had a problem
Tomorrow evening there will be a wine tasting event attended by many of Boston’s technology leaders and venture capitalists to benefit TUGG, a non-profit created to help fund organizations that promote youth entrepreneurship and technology learning in less-fortunate parts of the area. The event is organized by Hemant Taneja of General Catalyst and one of my former bosses, Jeff Fagnan of Atlas Venture. You can sign up for the event here – I will be there and if this is at all similar to the previous few years’ events it will be a great place to meet movers and shakers in the local tech scene (note that I’m suggesting that I’m a mover and shaker, just that real movers and shakers will be in attendance!)
The WSJ is reporting that Congress has rejected the Treasury’s plan to regulate venture capital firms as “systematic risks” to the US economy. This is good news to all my VC friends, and to the startup ecosystems that they finance. As I’ve mentioned before, I am against regulating venture firms as they do not create real risk to the banking and financial system because they do not aggressively use leverage. We’ll see what the Treasury comes back with, but there has to be some sort of a way to tell the difference between a hedge fund and a VC that is backing small companies.