PS#048: My 2023 Guide for VC Recruiting
In the last issue, I walked through the venture capital recruiting cycle.
In this issue, I’m going to walk through my plan for approaching it.
If you haven’t read my 3-Step Guide to VC interviews, I recommend doing so before diving into this issue of Preferred Shares. In the guide, I walk through three steps…
Take control of the interview process.
Demonstrate the venture skill set.
Highlight your unique value.
This was the very first piece I wrote for Preferred Shares. Almost a full year later, I’m going to build upon this guide with all of the content I’ve created.
Let’s get started.
1. Take control of the interview process.
As we discussed, venture firms are pretty bad at recruiting processes.
These processes (as they stand) don’t really provide the best opportunity for you to demonstrate your venture capital skill set. If you follow the process, answer the questions, it’s a toss up on whether or not you’ll get the job.
However, if you take control of the process and use each opportunity to demonstrate that venture skill set, your odds increase dramatically.
In my view, there are two ways to do this…
Reach out to firms before they even open a formal interview process.
Come to interviews with your own plan to show that you can do the job.
In either case, we need a means of taking control of the situation, something tangible that we can leverage to catch the attention of established investors.
We need to build value.
If you’ve been following my work, you know that this is my top priority. Build value and share it broadly. That’s how you succeed in this game (and life for that matter).
Thankfully, within the venture world, it’s relatively straightforward to build and create value, even as someone who hasn’t broken into the industry just yet.
However, it does take a good amount of time and work to create something that is truly of value. If the work you’re producing is surface-level, it just won’t be that interesting to most experienced investors. We need to go deeper.
So how do we do this?
I recommend building an investment thesis with a list of 50-100 startups that could be potential investment opportunities.
This is far and away the best approach for landing an internship or full-time role. Honestly, I recommend building multiple investment theses to give yourself some optionality.
For building this work product, I suggest reading the following…
If you’re looking to share this content and create opportunities for yourself, check out…
2. Demonstrate the venture skill set.
The point of the interview is to figure out if you can do the job, if you have the venture skill set.
Well, what exactly is the venture skill set?
I’ve divided it into 4 key components for new investors…
Sourcing
Evaluating
Diligencing
Investing
Let’s break these down, define them, and outline how you can demonstrate them in the venture capital recruiting process.
Sourcing
Demonstrate that you can source high quality investment leads.
Check this one off the list. If you’ve built out your investment thesis (or theses) with a corresponding list of startups, you’ve already demonstrated the skill. You just need to share it with the interviewing investors.
This can be done in a few ways…
Share your thesis with relevant investors and create an internship opportunity
Submit your theses alongside your resume or application
Bring your theses to discuss in the first interview
When I was recruiting, I used all three of these approaches.
For now, I’d like to highlight the 3rd option. This is a great way to take control of the interview. Instead of running through a list of ambiguous interview questions, share your thesis. Walk through it with them and highlight companies that could be of interest to the investor.
Now, instead of answering generic questions, you’re discussing deal flow, like a legitimate venture capitalist.
Alongside this approach, I recommend reading a few of my pieces on deal flow so that you understand the lingo and processes behind VC sourcing efforts…
Evaluating
Demonstrate that you understand the process of filtering and identifying the opportunities to pursue for their specific fund.
For this skill, let’s again take the investment thesis (or theses) that you built in step 1.
Venture investing comes down to picking the right startups of the thousands that will be reviewed over the life of a fund. To showcase this skill, pick 10-20 startups that you think make for the best investment opportunities.
Be prepared to quickly highlight why these startups by preparing the following…
Again, if you can steer the conversation in this direction, you’ll actually be performing the job. Most firms have a Monday morning investment meeting, where investors will share the most promising deals they’ve identified over the past week or so. They will discuss the deals and decide if they should move forward with the opportunity.
Firms may also test your evaluating skills by asking about their own portfolio. I address how to handle those questions in issue PS#014: The Interview Series – Portfolio Question(s).
Diligencing
Demonstrate that you can lead diligence for a startup by recommending a plan for vetting each of the top 10-20 startups.
This is actually where I see a lot of candidates fall short. They can identify startups, make the connection, but don’t have a plan for deciding whether or not to invest.
Most case studies are aimed at seeing how a candidate will work through a potential investment opportunity. Investors are looking for candidates to identify the key risks, establish a plan for better understanding these risks, and use that plan to come to a recommendation.
For this skill, I recommend leveraging the following…
Particularly in my course How to be a VC Associate, I will walk you through how to design and execute a venture capital diligence process.
If you can bring an example to the interview, you’ll again show that you’re not just talking about it, but instead doing what is required of a venture investor.
Investing
Demonstrate that you can structure a hypothetical investment by walking through the key aspects of the investing process.
This is yet another pitfall for aspiring venture investors.
Venture capital structures are complicated. Properly structuring an investment is just as important as identifying the right company. In order to properly structure an investment, an investor needs to have a strong understand of how to value startups and the potential structures available to them (i.e., SAFEs, Convertible Notes, Priced Rounds, etc.).
OK, so how do we prepare for this skill?
First and foremost, I recommend my course How to be a VC Associate. I’ll walk you through exactly how I negotiate, structure, and execute venture capital investments. Even better, I will give you templates and step-by-step instructions for modeling out your returns.
I’ve watched a lot of my students secure a venture capital position by building out a proper returns analysis (with the template I provide). The returns analysis often encapsulates all of the key aspects of a venture investment into one piece of analysis.
If you understand it and can do it well, you’ll have a significant competitive advantage.
I’ve also written about this skill quite a bit…
These first few posts will give you an introduction into how I think about and calculate startup valuations.
These next few pieces will walk through the main structures used in venture capital as well as how to think about using them.
Finally, these pieces will help you stay up-to-date on the current market environment.
3. Highlight your unique value.
Venture capital is all about storytelling.
You tell stories about your investment theses. You tell stories about why a startup/investment will be successful. You tell stories about the purpose of your fund and the value you bring as an investor. In the end, that’s what we are – storytellers.
So, the question is… What is your story?
Of course, this is personal to each and every individual, but I do have a few tips…
Create a narrative that showcases your unique value
Weave this value into your resume, theses, interviews, etc.
Highlight how this value will add to the venture firm’s strategy
If you can do this, combined with steps 1 and 2, you’ll dramatically increase your odds of breaking into the venture capital industry.
