One Day in the Life of a Venture Investor
Fancy parties, beaches, yachts, and ski resorts are not the only things investors are doing
The work of a venture investor is often surrounded by romance, and no wonder. Think about it, what are the first associations that come to mind when you mention it? You find a startup, put some money in it, sit back and relax. But this stereotype is far from the truth. The myth of venture funds as a resort is widespread for a number of reasons. The first is that most funds are closed to the public and few people know what goes on inside. Secondly, do you know a single full-time professional VC? That's what I'm talking about. In this article, we're going to look at the real day-to-day lives of people who, in theory, should be enjoying life but, in practice, have to work.
For the revelations, thanks to TA Ventures principal Elya Checheneva, whose story served as the basis for writing the material. Enjoy.
How One Becoming Venture Investor?
Unless you are lucky enough to be a serial entrepreneur with years of business experience, you have to start from scratch. The work of a venture investor is closely linked to finance, so a business degree is a good place to start. Usually, universities do not teach how to work with startups. That's why future employers should be satisfied with a basic understanding of numbers.
The first shining position for a young professional is an analyst. Analysts are hardworking bees whose job is to check pitch decks. This includes examining the competition, business models, metrics, and everything else found on the slides. After carefully reviewing the pitch deck, the analyst shares his or her data and conclusions with the partners. Typically, the analyst does not scout for startups nor make investment decisions (the funds have an investment committee and the decision is made by voting, never by one person).
It does not seem complicated. But this is just the beginning. Over time, your responsibilities will expand to include finding fresh deals, working with new and portfolio companies, research, and internal operations. From this point on, a weekday in the life of a venture investor begins.
Scouting
To invest in a startup, you first have to find one, and let me tell you, this is not a trivial matter. Startups are no longer standing around begging for money. There is a ton of free capital around, just waiting for the right moment. As a result, it is not funds that are choosing startups, but the other way around. There is a serious hunt for worthwhile and promising deals and fierce competition among VCs. This process is called scouting and can be so time-consuming that extra people are hired to do it.
How exactly do you find new deals? Methods include surfing the Internet and attending themed events, various conferences, dinners, or brunches. Then there is networking, news, rumors, and even the use of special software to scan the information field. In addition to routine computer work, you need to spend a lot of time in the field, as good deals are literally scattered all over the world. You are unlikely to find promising companies by staying in the office all day.
All of this is complicated by early-stage startups. Such companies can stay in so-called stealth mode for a long time, not showing up on investors' radars. Suppose you dug up a miracle startup, found its CEO on LinkedIn, sent a message, and then silence. Maybe that CEO has a mailbox full of unread investors. So what do you do next? Sometimes the only way to make contact is to make eye contact.
The investor has to find the right person, approach, talk to, get their sympathy, and offer to work together. It's like a film about British intelligence. Nobody is surprised by money these days. It's all about attitude, mutual feelings, and extra value, which we'll talk about a little later. It's good if the time spent searching is not wasted, but it's not always the case. Likewise, it may turn out later that the startup has not lived up to expectations, and you have to start all over again.
We have talked about the active search for companies. But there is also a passive one. Most startups find you on their own. Investors regularly receive pitch decks in their messengers, social networks, and inboxes. In Elya's case, it's 2–3 times a day, and it's her responsibility to research them all, so she doesn't miss the next big deal. It's not uncommon for venture funds, either through laziness or hubris, to pass on pitches, which is a huge mistake. It's hard to count how many worthwhile companies have suffered from the indifference of investors who didn't even bother to read the letter.
In summary, venture funds are constantly looking for good deals. Your salary and your job depend on the quality of your investments, so you can't let this process get away from you. The best deals usually don't fall on your head and are the result of hard work. Let's say, after many months of negotiations, you've closed a deal and are popping the champagne. Except that you have dozens of such negotiations in your organizer, and dozens more to find and start from scratch. Every day.
New and Portfolio Companies' Nursing
Once you have found an attractive startup to invest in, the negotiation phase begins and, if successful, the formal execution of the deal. Remember, a venture investor is an analyst, so it's time to turn on the mad skillz and look at the company in depth.
Get as much information as you can, have regular calls with the founders, and consult with industry experts and peers. The questions, as always, are many. How was the market size determined? Is there a real competitive advantage? Does the team actually possess the technology, or are they bluffing? The startup may be wrong, inaccurate, or exaggerated. If so, get a calculator and a comfortable chair. We'll have to check everything by hand.
There are a lot of companies and a lot of technologies, and they're all different. Investors can't know everything about everything. Often you come across something unknown (markets, business models, technologies), so you have to dig in and learn new things. And that's the case with any business. It hurts when you spend a lot of time learning about a startup only to be disappointed in the end. But at least you have gained experience.
Once the investment has been given the green light, the next stage of the routine begins: preparing and signing documents. Templates come in handy, but every deal has its own nuances. You need to be as diligent as precise and have a moderate coffee addiction. To remind, to coordinate, to control, to clarify… In a word, to manage.
But here we come to the main misconception: what do investors do after they have handed over the money? The answer is stunning – we kinda follow portfolio companies all the way through to the exit. This includes almost everything. For example, a startup may need help hiring a CFO or other staff, writing a business plan, marketing strategy, PR, or market analysis. In that case, the startup can turn to us because we share the success.
Modern venture funds are not just a bag of money, but also advice, useful contacts, and a knowledge bank. As you remember from the section above, investors compete with each other, and the essence of competition is to give a startup additional opportunities that it can take advantage of. So it's too early to relax.
Never-ending Research
Venture capital and technology have become synonymous. The modern investor should not only know the classics of finance, but also be aware of technological tendencies. Every year we see the birth, development, and demise of both individual areas and entire industries. It's difficult to keep track of this whirlwind, even for professionals who often have to consult people they know.
What is happening in agtech at the moment? Is the hype around the Web3 industry justified? Which verticals will boom in the next three years? Why D2C when you have B2C? These and hundreds of other questions are constantly on our minds. To answer them, we spend a lot of time poring over reports, presentations, commentary, and LinkedIn anecdotes from others in the space. Inside TA Ventures, we even have our own chat room where we share news and venture market updates. Either way, sign up for a speed reading course, it will come in handy.
Working in investment requires curiosity and a willingness to learn. Otherwise, you won't know where to put your money. The funny thing is that you won't realize you've made a mistake until several years have passed since you made the investment. And since that's the case, you need to have enough foresight to be able to predict the future a little and be, as they say, on top of things.
Internal Operations
Let's add the last wagon to our list of tasks. Operational work concerns the fund itself. First and foremost, we monitor the portfolio companies, which provide us with regular reports on their current situation. We watch them closely to identify potentially troubled assets and, vice versa, successful ones. This is done, among other things, to determine future investments in the industry, participation in future rounds, company revaluations, internal statistics, and a variety of dashboards. Based on the data we receive, we prepare information for other investors, including ICLUB members.
Bonus: How do Venture Investors Rest?
Speaking of Elya, she reads pitch decks, but, unlike on weekdays, she does it lying down. Looks like a déformation professionnelle to me. Write your opinion in the comments.
From the Editor
Next week we'll be tackling the big news in the venture industry for January. This will be the first monthly digest with an updated look and reorganization. I hope you enjoy it.
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