After Nine Months in VC, Here's Everything I've Seen
Having finally broken into venture capital, I'm sharing the lessons I've learned so far and why I'm inspired to make this community more accessible.
Learning the ins and outs of VC
The first rule I learned in undergrad was that networking was the most effective way to land a new job, which proved true. As a rising junior in college, I wanted to work at Bloomberg. I was very familiar with the company and intrigued by the idea of a large fintech firm constantly innovating to keep its place as the market leader. With my financial skills and passion for technology, I knew this was where I wanted to be so I focused all my energy on networking my way in. Using the school’s shared Bloomberg terminal, I created my @bloomberg.net email address and reached out to as many American University alumni I could find who worked at the company, setting up over 30 calls. That effort rewarded me with an internship and eventual job with Bloomberg.
After four years with the company, I was ready for my next career in venture. My time on Bloomberg’s equity research team allowed me to research tech companies which I loved, but I wanted to do something more hands-on and impactful, leading me to VC. To make my career shift, I thought that networking my way in would work once again. But I realized that without something to relate to investors with, like how the Bloomberg terminal connected me to all its employees, it was tough to even get started. Really tough. Cold emails and DMs rarely received a response.
Nine months in as a VC, I completely understand why. Already my emails and LinkedIn inboxes are stuffed. I couldn’t imagine what they look like for those investors with a longer history and bigger reputation.
But once my LinkedIn position changed to “Analyst at Precursor Ventures,” the floodgates were open and I was now receiving messages from other VCs who wanted to connect. And folks, VCs love to chat! There are so many group chats!
That was the first lesson I learned about VC: investors are extremely friendly and love to build relationships, but there has to be some kind of connection or commonality before getting their attention.
The same thing can be true for the investor <> founder relationship. If a founder sends a cold pitch to a VC, it will likely yield a lower chance of an intro call than if the founder is introduced by another investor or by another founder in the fund’s portfolio.
Removing the least common denominator
I understand the investor perspective of wanting a referral before committing to a first call – with crowded inboxes and busy schedules, trying to find the next unicorn/decacorn/Loch Ness monster becomes slightly easier if the startup is referred to them by a fellow VC they trust or by a founder they’ve already had success with.
Venture capital is relationship-driven so when a founder is reaching out cold with a great business idea and no network, what happens? What if they didn’t get an opportunity to create that network because they didn’t go to a top business school, they weren’t one of the first employees at a big tech company, or the idea of raising a “friends & family round” is laughable?
Without a common denominator to get founders in the door with a VC, it can be really hard to break into their network, build those relationships and get funding. Yet, many VCs require a referral to take a first call.
I learned in a very short time that Precursor Ventures was different.
Since I’ve been at Precursor, I’ve seen our team employ a different approach. I’ve learned how powerful it can be to open up communication with founders, whether they were referred or not. Precursor Ventures may not be able to invest in every idea but we recognize that in order to identify high-quality founders, we need to see enough of them. Currently, we see about 4,000 companies a year and make about 50 new investments. That’s when I learned lesson two: being open to meeting founders who don’t have access to VC connections enables our team to hear from more underrepresented founders and get the first look at potential business ideas from unique perspectives.
With our large portfolio, I was shocked to see how we can manage meeting new companies and make time to help our portfolio founders. But the third thing I’ve learned as a VC is that investors make their founders their TOP priority, not because they have to, but because there is true respect for the founders, and because when investors make that commitment to great founders, all they want to do is see them win.
Qualitative over quantitative
As a prior data analyst, stock market researcher and finance major, I’ve spent the last eight years focused on looking at numbers to help backup my opinion. Always using the data to tell a story that supports my narrative. But VC lesson number four is one that I may not have learned if I joined a later-stage fund, which is what to do when there are no numbers….
When our team speaks with companies that are pre-revenue or even pre-product, as so many companies that we meet are, it’s impossible to look at numbers, KPIs or traction, because there is none. This has taught me that a lot of what pre-seed investors have to do is instinctual and based more on whether we believe in the founders and the problem they’re solving than if we believe in the company itself. Precursor invests in people over product and doing that often means we can make quick decisions within one or two calls. The company can always change and the business can always pivot, especially when we get involved so early, but the founding team will likely be around for a long time and that’s a lot of what we judge the first calls on.
It’s only been nine months and I can say this has been the biggest learning curve for me. Learning to do “due diligence” by judging companies on qualitative aspects has required a seismic shift in my mindset. Trusting my instinct instead of relying on numbers will take time and experience.
And as startup valuations get larger across the industry and the round nomenclature loses all meaning, it’s only becoming more difficult for these first-time founders and companies with little-to-no traction to raise their smaller-sized rounds while still attracting institutional investors. However, Precursor’s focus on writing smaller checks ($100K-$500K) in pre-revenue, pre-product companies allows us to continue to invest in underestimated founders and make funding more accessible while maintaining our expectations for returns.
Who do you know here?
The team at Precursor has been incredible and I’m really happy I landed here (and not just because we don’t write investment memos 😊). I said it earlier – Precursor tries to give people a chance regardless of their background or whether or not they were referred. That policy holds everywhere, including in our own team hiring.
It took me a long time (about two years) to find my perfect match with a VC fund, one in which they met my expectations and I met theirs. It didn’t help that I didn’t have the traditional VC background (investment banking, consulting, or working at a startup). But when applying to the analyst role at Precursor, it was different: I didn’t network my way in, as I was always taught to do, and I didn’t have a common denominator with the team. I just applied online and went through the interview process, like the majority of other candidates. And as I’ve since learned, my unique background and my no-referral resume were welcomed here. This unconventional (and somewhat anti-climatic) process “breaking into” VC inspires me to change the way others can enter too. Our team is proud to help give people a lift into the venture capital community who may not have otherwise had one, and we value fresh perspectives, whether they come from founders, team members or our interns. Therefore, lesson five is something I should have made clear earlier, but if the first thing a VC asks someone who is trying to enter this world is “who do you know here?”, they’re going to miss out on some amazing people.
Authenticity
Lesson six took me five years post-undergrad to learn and that was five years too long. It’s so simple but has become one of the most important things to me: being genuine. I used to always have a “work mode” and an “offline mode,” and to some degree I still do. But the first thing that struck me about Precursor’s team culture is its authenticity. I’ve learned how important and natural it should be to express my emotions and share my honest opinions on a topic, which isn’t always considered “professional” for women to do in the workplace. Being on a small team means there isn’t time to hold things in. We’re just a four-person investment team so if even one person is quiet, then we’re only operating at 75% of our potential.
Beyond demystifying
One more thing I’ve learned from the team so far (lesson seven) is with everything we do, we have our founders in mind. The goal for me in writing this was to do more than just demystify VC, I wanted to use this as a way to carry out one of Precursor’s main goals which is to make VC and funding more accessible. One of the crucial ways we do this is by making our investment team more reachable by encouraging founders to send us their pitch decks right through our website. Once submitted, the deck is reviewed by myself or someone else on our small investment team, giving founders immediate access to investment consideration. We do this for founders but also selfishly for ourselves. We know there are a ton of great ideas out there but without the website, we wouldn’t be able to see the volume we do now (50+ pitch decks get submitted each week). So as a conclusion, I would like to give any founders reading this some simple but straightforward tips when sending us a cold pitch deck. I hope this post will leave you with something useful!
Founder Asks: Simple and quick tips/insights for submitting cold pitches
Clearly state what you do: A lot of founders are so entrenched in their company every day that they forget that someone who is reviewing the deck is learning about your company for the very first time, so break down what the company does clearly.
VCs love category-defining companies so if you are competing in a crowded space, you should have a really strong value proposition that makes your company incredibly competitive.
Answer the question: why do your customers need your product?
VCs are looking for a reason to pass. We can’t invest in every company we come across, even if we’d like to. Sometimes the reasons are obvious, sometimes there are many reasons, but sometimes we can’t think of a thing. And when I’m looking at a pitch deck and I can’t think of a glaring reason to pass, that’s when a first call comes.