6 Steps to Becoming a Successful Venture Capital Analyst
Insights from my first 2.5 years as an early-stage VC and how to succeed at the job.
Landing my first job in VC felt like hitting the jackpot. After countless coffee chats, networking events and interviews, as well as a humbling level of rejection, I had finally landed the golden ticket to join this mysterious world of venture investing as an analyst with Distributed Ventures (fka NFP Ventures).
All the case studies and interviews taught me a great amount, but the learning was just getting started. I gained tremendous insight from reading several books on VC and learned from some very generous investors who shared their keys to success.
A special shout-out goes to Shawn, Mike and Adam (thanks team!) who took a chance on me and have invested significantly in my growth and development. Since others have been so generous with their wisdom and support, I’m motivated to share what I’ve learned with others just starting their VC journey (or trying hard to get it started). Regardless of our successes, there are always questions — “Am I doing this right? Am I a good VC?!” given the open-ended and nebulous nature of the role.
As we recently launched Distributed Ventures, a new chapter in our fund’s progression, the time seems right to add a more applied view to the role and pay forward what I’ve learned in my time in VC. Here are my six steps for becoming a successful VC analyst.
1. Find Your Tribe
One of the best pieces of advice I received when I first joined NFP Ventures was to “find my tribe” by building a strong investor and founder network.
Why? VC is a relationship-driven business. Ultimately, you’re investing in people and, beyond the LTV/CAC ratios and market analysis, you want to be as sure as you possibly can that you can work with — and more importantly, trust — the people you’re investing in. Is this founder going to accurately represent my value after I vouch for them to LPs? Are they receptive to feedback, or will they be difficult to work with if the business isn’t performing well? Case in point, it is crucial to build strong relationships with founders and start identifying the types of teams that you could see yourself working with and where you can add the most value. This will take time and instinct — tribe building requires many conversations and multiple perspectives (i.e. your own assessments and those from team members and colleagues in the industry).
It’s also important to build a network of investors that you trust. You need to be able to ask for (and be confident you’ll get) an unfiltered, unadulterated view of a thesis, investment, founder, and more. There’s a lot of value in building relationships with investors that invest at earlier stages for deal flow purposes, your exact stage for co-investment opportunities, and at later stages to support your investment through an exit.
Key takeaway? Networking is a crucial element of the role, whether you’re trying to land a venture gig (see How to Become a Venture Capitalist) or working to elevate your success in the seat.
2. Build Your Conviction
During my first few months in VC, I was a doomsayer across markets and asset classes. Interestingly enough, VC’s are largely perceived as having a bullish, positive view of the future. “VCs are optimistic and see the world through rose-colored lens”, is what I’ve heard from my growth equity and private equity counterparts. However, I still find myself continuously poking holes into initial arguments and taking a bearish stance on most of the opportunities that hit my desk.
I realized that building my conviction in a sector or specific asset required overcoming a larger barrier. I began to craft primers and hone my thesis-building skills within spaces that interested me. By frontloading my research, I was able to better understand how key drivers affected a particular industry and build stronger convictions on companies thereafter.
In a world where investors experience severe FOMO when missing out on “hot assets,” it pays to be prudent, especially as a young VC. Being judicious forces you to truly immerse yourself in the mindset of a venture investor as you jumpstart your career. Researching a market, building your conviction, and chasing after the most appropriate asset and burgeoning opportunity is essential to growth and success.
3. Own a process
What do Elon Musk, Andrew Carnegie and LeBron James have in common? They all left their mark in their industry (and, more broadly, the world) doing things their way. Although you’re not expected to become the next Alfred Lin as soon as you join a Venture Fund, VC is one of the few industries where innovation and diversity of thought are truly championed and appreciated.
The easiest way to enact change within your firm at the onset is by owning a process and making it your own. This can be something as simple as improving the pipeline meeting structure to something more complex like building a podcast for your portfolio companies or leading the development of a thesis in an emerging economy. By doing this, you’ll have the opportunity to lead a process, understand related challenges and appreciate the benefits of implementing it within the firm.
Be bold, and don’t be afraid to raise your hand when you see an opportunity to improve a process. And always be ready to lead a new project or take on a new challenge that makes your vision a reality.
4. Lead or source a deal in year one
Get one deal under your belt in the first year. This is the hardest one…Make a list of angels or earlier stage funds. Track their deals. Pound the pavement. Then once you have identified the company, you will need to demonstrate your conviction with your team and build trust with the founder.
— Nina Achadjian, Index Ventures
If I could quote the entire article by Nina Achadjian on “What To Do Your First Year As A Venture Capitalist,” I would.
For me, the above quote is the most crucial piece of advice. In general, my time in venture falls into two categories:
1. Pre-sourcing a deal, and
2. Post-sourcing a deal
Leading a deal and getting it across the finish line gives you an entirely new perspective on the process of venture funding and opens your eyes to the “sausage-making” you’re normally shielded from by more seasoned colleagues.
Even after spending countless hours on diligence calls and building investment memos for other deals at my fund, I went further and really dug into the term sheet, posed more hard-hitting questions to the founding team, and made sure the relationship was positioned for success. Ultimately, when you’re the point person on a deal, there’s added pressure to know every detail — the market, the model and where they’re headed — like the back of your hand.
In short, leading or sourcing your own deal makes you even more determined to back a company poised for success and help them reach their full capacity — because it’s your reputation, analysis and network on the line. For me, that’s when all the pieces of what it means to be a VC really fall into place — the sense of urgency, and ultimately the accomplishment and motivation to go further were invigorating. I encourage every junior VC to find an asset, build a case for the deal, and push it across the finish line as early as possible in your career.
5. Figure out how to add value
VCs don’t always get the best reputation when it comes to adding value. Here’s why:
1. Investors are constantly hunting down the “next shiny object.”
2. Most VC shops are relatively small from a headcount perspective, so investors are thinly spread across competing obligations that come with managing a fund.
3. There are no clear-cut metrics or obligations holding investors accountable after a deal closes.
In general, this causes many investors to overpromise and under-deliver to early-stage startups.
One of the biggest hacks as a young VC is following through with your word and showing you’re invested in adding value. Do you have a contact at a Tier 1 corporation that they’re targeting as a client? Pound the pavement and make the intro. Are you a whiz at Excel who knows how to make their financial model more dynamic? Offer up your services. You’d be surprised at how seldom this is done and how even the simplest gestures can make a positive impact.
6. Identify your superpower — and hone it!
Although this advice is generally appropriate for any person within any industry, VC is well known for empowering people to bring their individuality and specific strengths to the table. If you have a knack for building relationships, lean into your networking skills. If you’re fantastic at researching complex problems, sharpen your thesis-building skills. Ultimately, there’s no clear path or formula to becoming a top venture investor, so double down on your strength.
Grit, determination and persistence are key to becoming successful in a broad sense, but your unique skills will ultimately lead people to want to include you in their cap table. So, overall, focusing on those points of differentiation will enhance your success.
Distributed Ventures is hiring an investment team member based in NYC or Chicago! Learn more about the role and how to apply here.