Developing a successful, long-term venture capital career means finding the ideal fit, both for the firm and you. Making the wrong choice early in your career can be difficult to recover from in this industry. It is important that you conduct the proper level of due diligence in your venture capital job hunt to ensure that the firm is a good fit for your career goals.
Start with web research
Almost all venture capital firms are private partnerships, and thus, there is potential brevity of public information. There are no annual reports or SEC filings that can be perused. However, with intelligent research online, you can find a great wealth of information.
Review the partners’ backgrounds
Start your due diligence at the VC firm’s website, perusing through the personnel biographies. The biographies shed light on academic backgrounds, along with professional commitments. From perusing the biographies, you can ascertain if your background and interests will mesh well with the VC firm. In addition, note where you may share similarities or differences with the partners, and this can make for interesting topics of conversation during the interview itself. And don’t’ forget to check out entrepreneurs’ comments regarding the VC firm on www.thefunded.com.
Read the fund profile
An excellent source of information during your due diligence process is the fund profile. Reviewing this information sheds light on the philosophy, performance, and history of the firm. Evaluate the firm’s committed capital, along with their past investment performance. For long-term success, the type of investment style the fund employs, along with the industries they are passionate about, should align with your own business passions.
Befriend social media
Unlike other alternative investment firms, such as hedge funds, finding information pertaining to VC firms and their funded companies before your venture capital job interview is fairly easy. No longer considered a “black box” of information, many venture capitalists have embraced the power of social media. In fact, many partners and principals of VC firms author personal blogs and create LinkedIn.com profiles, which provide valuable insight into both personalities, as well as current endeavors. Sites from Jeremy Liew and Susan Wu in Silicon Valley to Fred Wilson and Ed Sim in New York City provide insights directly into the workings of their venture capital firms.
Analyze the competition
While an important part of due diligence is ascertaining which firm is ideal for you – you should also determine which companies are not right for your venture capital career. An examination of the firm’s competitors will help you understand how they differentiate from each other, and which ones have a stronger reputation in the industry. In addition, challenges the competitors face may very well plague your future VC firm as well.
Analyzing your research findings
Talk with your network
Chances are that someone in your network has at least an indirect connection or experience with the VC firm you are interviewing with. Asking candid questions pertaining to the firm can reveal information not found through online sources. Whether the management lives up to its promises regarding the partner offers or expectation of work hours, much of this information can only come from your personal sources.
Looking to the future
Once you have delved into the due diligence process, the next step is to put that information into the appropriate context. As it relates to your venture capital job, the firm’s future prospects are very important. Thus, the depth of the funding and the track record of success are very important elements to consider. Funding sources will quickly dry up for a venture capital firm that cannot produce attractive investments.
In terms of the future prosperity of the VC firm, it is critical that you evaluate the availability of future investment proposals. In today’s competitive world of VC firms vying for the “next great idea,” the ability to attract viable companies is critical.
Keep in mind that it is all about “the exit.” If a VC firm can point to successful company sales or IPOs, then the money will keep flowing. If they have made 25 investments and can’t point to successful exits, you should keep looking.
What is work environment and culture?
According to research conducted by Private Equity Search Digest surveying venture capitalists, there is an overwhelming dissatisfaction in the industry – despite the lucrative compensation, generous vacation time, and future upside potential. Therefore, to find the best VC firm for your career, it is important to investigate the work environment. Will you be expected to work long hours and into the weekends on a regular basis? Even though you may be offered four weeks of vacation annually, will you have an ability to take it? What is the reality behind the partnership track? Some of these answers can be ascertained in the interview, while others require conversations with current or former employees.
Consider the offer
In the Private Equity Jobs Digest Compensation Reports they found that most VC professionals were unhappy with their current compensation. Some venture capitalists were unhappy with the value of their base salary, while others were frustrated with the limitations of their upside.
With this in mind, when you are conducting your due diligence for a venture capital job, it is important to carefully evaluate the compensation plan. Consider the history of fund performance, and in this context, ascertain how the proposed offer will meet your realistic monetary expectations. Speak with other members of the firm and enquire about turnover rates. Make sure that any promises discussed in the interview process be placed in writing before you accept an offer. Indeed, a venture capital career is lucrative, but only if you are with the firm long enough to enjoy a share of the upside.
Performing appropriate due diligence in your venture capital job hunt is critical to finding the best fit. Reviewing the VC firm’s track record, culture, and future prospects, along with an honest assessment of potential compensation, will help you identify and join the ideal team.