(This post is one in a series of posts and third-party resources related to careers in venture capital.)
As a junior staffer at a VC firm, I think its important to understand where and how you can be helpful to portfolio companies. The advice I received from my venture capital teachers Stuart Ellman and Will Porteous of RRE Ventures (blog) has stuck with me, and I’ve tried to operate using that advice since starting my VC career.
I’m paraphrasing here (it’s been about a year since the class where we discussed it) but in essence, the advice was to simply be helpful and humble.
Here are some examples of ways that a junior VC can add value:
- Business development: Introducing the company to potential customers and partners in their network.
- Fundraising: Introducing the company to other VCs during the fundraising process and helping the company develop their investor pitch materials.
- Recruiting: Portfolio company is looking for a couple of engineers? Get the job description, post it on some boards that might be relevant and forward it out to your LinkedIn network. Maybe make some phone calls to folks in your personal network to see if anyone would be interested in the roles.
- Strategy: If you have an interest in corporate strategy and/or a background in strategy consulting, and the company is looking to explore new markets or the competitive landscape, see if you can lend some of your experience by helping crunch numbers, helping to put together the board presentation, etc.
- Listening and learning: Learn as much as you can about the company and the industry in which it operates. Attend board meetings and listen! VC is an apprenticeship business, so in many cases, the best approach is to sit down, shut up, and open your ears!
Company management, the VC partners who have invested in the company, and the founders will be adding the most value and steering the ship. As a junior staffer at a VC firm, your job is to be ready to help out wherever they identify a need they’d like you to address OR to identify a need and then socialize it with your boss(es) at the firm to see if its something they’d like you to pursue.
You definitely don’t want to go off half-cocked, ginning up initiatives and projects without making sure that they are viewed as value-add by the partners and company management.
If there are any other junior VCs out there (I know some of you are lurking!), it would be great to hear some of your thoughts on what works and what doesn’t related to working with portfolio companies.
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9 comments
John – Great post. You’re a lucky man to have been mentored by Will and Stuart! The one thing I’ll add is that I think Junior VCs can add a ton of value by sourcing new opportunities for their partners. But that might be something cultural at BVP. Is that valued at LCapital?
Sarah — thanks for the reply.
In this post I was trying to focus on junior VCs working with existing portfolio companies, but you are absolutely right – deal sourcing can be a valuable junior VC function.
Speaking of deal sourcing, I think some firms value it more than others. At my firm, the partners absolutely want me going out to find new deals. However, during my interviewing process, I spoke with another firm who couldn’t care a whit if I brought in any dealflow. They wanted someone to come in and do due diligence, and that’s it.
So, I think it depends, although in most cases I agree sourcing will be a fairly large part of a junior VCs job.
Totally agree with both your points John and Sarah’s addition on sourcing.
I end up doing all that stuff at one time or another… the other stuff I do that wasn’t mentioned is stuff on the LP management side. There are a few members of the LP-base that I’ve gotten to know almost as well as the partners and maintaining/aiding those relationships are important. But… that doesn’t really have anything to do with existing portfolio companies, so perhaps that’s besides the point.
Also, this is more day-to-day operation instead of high-level, but I think my job is often more important after 6pm. While the partners at my firm have families and lives after work, I think one way I can add value to our portfolio companies is by attending as many relevant networking events after-work hours that I can. I guess that falls under BD.
VC stands for many things. I’m not being derogatory in any way but expand the nomenclature of what those two letter stand for and you shall see what I will herein elaborate upon.
Akin very much so to what John proffered I firmly believe in what he says but must add that use of one of the ‘definitions’ I use for VC is of considerable and significant help to the value one has to offer.
Valued Connector is one of the best descriptors I utilize. In your role as NKOTB, a junior VC–or ANY VC for that matter– has to always be availed to demonstrate not only his/her value and expertise within the financing/financial arena, but in the myriad of situations I have been involved in, companies don’t always just need the money,..many times they need a trusted, respected, tenured, valued source that they can always turn to.
The ‘connectability’ you have as the VC is paramount to the success of the company once you are involved. Connections from their VC are implicitly at high value de facto, thus the suggestions, thought processes, strategy, recommendations, people, partners,..that are offered up to help the company are held in higher esteem than ones found–respectively–“on their own”. Why one may ask? Well, quid pro quo:
—you’ve got a part of them and they had to let go of it…that dilution is like a parent sending their child off to school entrusting a dear and loved piece of themselves to another to raise essentially
—and they have your money…so that kid better get the best of everything as you look for substantial growth and excellent return sans the pitfalls that abound.
So sure,…socialize things,…muse,…strategize,….fetch,…foster,. promote, and many other actions to delight the hell out of the company for their success is your success. Your Various Connections and a Valued Connector in the Venture Capital realm is critical to attaining that success. Knowing the right advisors, trusting the right consulting firms, recognizing the wrong moves, recommending the right people, involving yourself not in the ‘thorne in the side’ or ‘PIA’ many companies feel they get when attaining a partner VC, but that open, honest, respected ally that can do—no,—that WILL do what it takes, and will do it with a deep and personal conviction and with substantial Vested Concern.
-gary
http://www.facebook.com/people/Gary-Price/525071568
http://twitter.com/GaryWPrice
Gary – I think we’re in agreement on this one. I tried to make this point (although not nearly as eloquently as you) in this post: http://johngannonblog.com/2009/01/19/the-most-important-skill/
John – Nice post. I would say your last point is the most important – listen and learn. Help where you can. Some portfolio companies may be receptive to junior VCs helping and some not so much. It’s important to remember that junior VCs typically don’t have existing relationships with portfolio companies (some cases this isn’t true – i.e. you sourced the investment). The point is that as a junior VC you weren’t chosen to be on the board by the company – the partner or senior professional at your fund was. So be nimble and add value where you can.
A few key areas that junior VCs can help with are M&A evaluation, recruiting, fundraising and partnerships. Technology is another often overlooked area junior VCs can help with. As Sarah mentioned, there are a large number of junior VCs that focus on sourcing deals for their firms, myself included. These folks speak with and evaluate a large number of technology companies that could help portfolio companies (assuming your focus is on technology). Referring those opportunities can create goodwill on both sides. Last, as a junior VC you may have an opportunity to get to know portfolio companies “from the inside” and assist with non-board items like new product features, product testing and lead gen.
Hey John, what about exit development? I run into/talk to corp dev people at major tech companies all them time. I like to talk up portfolio companies to them and make connections to CEOs at the portfolio companies.
I think I’ve also added value by keeping a critical eye on the competitive landscape in a few industries. Summarizing & forwarding important research pieces/articles, pieces of gossip etc to CEOs within the portfolio. Either my CEOs are humoring me or they actually really find this helpful. I’ve also walked some trade show floors and reported back to my portfolio companies or attended conferences that they couldn’t make and come back with some connections/interesting observations.
I think both Jon’s original point and Mike’s pseudo-counterpoint are very important ones for newer VCs to consider. On the one hand, younger VCs should absolutely try to find ways to add value to their portfolio companies, particularly in today’s environment of fewer deals and hence more, ahem, bandwidth for the current companies.
That being said, the point that Mike alludes to is very important – not all management teams will welcome the involvement of a junior VC, particularly if that VC comes in guns-blazing as if they know everything about the business. You might be able to throw your weight around, particularly if the partner(s) at your VC firm empower you to make decisions on their behalf, but be very careful about landing too heavily on the portfolio companies you’re seeking to help. Some of them may not welcome your involvement and, frankly, might not think you have very much to add at this point.
This all came out very clearly during an founder panel we had at the last Kauffman Fellows module. We had four founders of venture-backed companies and we had an extremely frank conversation and break-out sessions about their relationships with VCs. While the panel was originally intended to be part of a larger discussion about Board dynamics, what came out with breathtaking clarity during the Q&A was just how much these entrepreneurs resented the junior VCs who tried to get involved in their companies (essentially, all of us in the room). Their perspective was that they lived the business every day, while we were occasional consumers of board updates, and that most of us weren’t the luminaries who sat on their board (but truthfully, I think their resentment was largely a reflection of the less-admissible resentment they feel toward the senior VCs as well).
What came out of this discussion was a clear message (and not one that I’d necessarily apply generally, but certainly these four founders felt this way): tread softly, listen hard, and offer help only when it’s value-creative to the company, rather than an unproductive use of management’s time. Or even shorter: help them make a model if they ask for your help. Don’t make introductions they didn’t ask for, since then they have to spend time on them.
All that being said, I agree with Jon’s core point that non-partner VCs can be an important part of the team. It’s just more delicate than, I think, some of us realize.
John, great entry and thanks for kicking off this very useful conversation. I would like to combine Sarah’s and Eric’s points into something which I have found valuable as a junior VC.
Sourcing is a key role for associates to perform at many (but not all) VC firms, but it is important to understand the different contexts under which you can source. While many times associates are singularly focused on finding new investment opportunities, as the person on the ground talking with the newest startups across industries, often times you can find great partners or even acquisitions for your portfolio companies. And given current market conditions, as companies in your portfolio may be devising strategies to move into new verticals or extend their product lines, there are many startups available that can provide a quick and capital efficient means to entering to doing just that, rather than having your company build out its own R&D or sales force and channel relationships, etc. etc.
That being said, it is definitely crucial to keep Eric’s point in mind. This type of sourcing has to be done hand in hand with the management teams at your portfolio companies. There is no bigger waste of time than sending one of your CEO’s an unsolicited introduction to a company that he/she may not have interest in chatting with. Depending on the size of the portfolio company, I typically chat either with the CEO directly or with the VP of corporate strategy or business development first, to see whether an intro is wanted, and then who the intro should be made into. This is often times easier with portfolio companies you either source or work actively with, but as an associate, you will often have the most visibility into interesting and emerging startups.
Anyways, great post, great comments, and I will definitely be sharing this with my peers who have just entered the VC world, and those that are looking to get in.