TL:DR - reflect on why VC, what interests you about the sector, what you think you’ll enjoy doing and how you can meet people within the entrepreneurial ecosystem - VC internships are gold-dust and have to be hunted down, they will not come to you.
In the next posts I’ll share what I did during the MBA in order to get better connected within the London start-up community, and what resources students can use to connect with entrepreneurs and VC’s. I had no prior experience with start-ups, except knowing that I wanted to use the 2 years to explore and compare to a big corporate background.
I've had many e-mails from MBA students looking for advice on how to break into venture capital, the following posts will capture the various thoughts I have shared with them.
Before continuing, I would recommend any student must read this post by Charlie O’Donnell – it covers a multitude of points what to consider. It will make the following a whole lot easier to understand and is just as relevant for London as it is New York.
I cant count the number of times I’ve been approached by students wanting to hear how they can get a VC internship without knowing anything about the industry, or the role, or even what skills are required… Read the following and reflect on why you wish to pursue a career in venture capital and spend time going down this path during your studies.
Venture capital is an incredibly small industry versus traditional MBA recruiting sectors such as Consulting or Finance, and in recent years it has the added attention of being the ‘cool’ thing to do in the start-up world. Competition is extremely intense, and students must have a clear understanding of why they are looking for an internship. Students who secured internships were focussed on working with start-ups, learning about growing businesses and really focussed on engaging with the ecosystem in London – no thoughts were on Consulting, Investment Banking or Industry roles…
* Why you are interested in venture capital?
* What is it about this industry that interests you?
* How would an internship in a VC firm benefit your education / development?
* What else could you be better doing with your time?
There are no set job descriptions for an Associate at a VC firm, however I would propose there are generally 3 (deliberately vague) responsibilities:
1) Investment sourcing – can you find the needle in the haystack amongst all the business plans that you come across
2) Due diligence support – carry out research, analysis and investigations to why the opportunity fits the firms investment criteria
3) Supporting portfolio companies – anything from identifying potential hires, through to potential acquisition candidates
I’ll go into these in more detail in a future post, but the more examples you can highlight of having supported entrepreneurs to do some / all of the above the better. You will not be expected to have completed an investment before, however understanding where investments could be found in the London / European ecosystem will be a differentiator versus your fellow classmates who are looking for a similar role.
For example, being able to take a position on what technology trends are interesting to you right now, what sectors those trends are evolving (not disrupting!) and what companies are riding those trends is the clearest way to demonstrate some of the above.
* What do you know about technology trends?
* What start-ups are you following right now?
* Why is about those start-ups that you like / dislike?
* How many start-ups can you name?
Venture capital firms can generally be segmented by what stage they invest – seed / early vs growth is the simplest split. The different stages of firm, will have a significant impact on the type of work you will be doing, and the need for an intern.
1) Early stage firms – fund size of £5m – £30m and invests £250k up to £1m per startup.
2) Later stage firms – fund size of £30m to £100m and invests £1m to £5m per start-up.
3) Growth stage – fund size of £100m plus, and invests £5m upwards
These are just averages, and depending on who you speak to, you’ll get different answers. An early stage fund in the US might invest up to $1m and more in a Seed round, while that is very different to Berlin… Understanding the differences in each of the ecosystems will help you learn more about the influencing factors within the entire industry and where you want to focus.
Early stage firms could be a 1 or 2 partner team, with the support of an Analyst. Investment sourcing is incredibly important and everyone in the firm is responsible for identifying potential investment / partnership candidates. Arguably a typical MBA is not going to add much to an early stage firm as their network will be small, they have no knowledge of what it takes to build a pre-revenue company, and the content of the MBA curriculum is not geared towards solving early stage company challenges.
Later stage firms are more open to taking on an MBA intern. Typical investment opportunities will have more structure and data available to carry out due diligence, and there will be more defined channels for sourcing investments rather than the reputation of the Partners for inbound request / outbound marketing opportunities. The portfolio companies may be at a stage where they are looking for smart minds to solve problems, so carrying out project work presents an opportunity for a MBA student to get involved.
Growth stage firms will be carrying out extensive Excel modelling based on many years of historical financial information. This is verging on a Private Equity deal, and will require extensive financial modelling capabilities if the MBA is taken on board. Typically I have seen MBA’s with Investment Banking or Accounting experience take these roles.
* What stage is more relevant for your interests?
* What stage is your experience more relevant for?
* If you wish to explore a different stage, what have you done to mitigate lack of experience?
* Can you envisage products in 3 – 5 years, or do you prefer solid facts to work with?
Roles will typically not be posted on campus boards or through career services. They will rarely be advertised publicly and ‘social proof’ will be an immense benefit when approaching firms – going back to Charlie’s point, an existing network will be incredibly important. US firms are more open to advertising for interns, but in Europe, the MBA is not regarded even frowned upon in the start-up ecosystem, it is very rare.
Immersing yourself within the entire entrepreneurial ecosystem will be important to source opportunities. Use the 2 years to work with entrepreneurs, meet venture capitalists, and attend networking events. Focus on each of the 10 points that Charlie wrote in his blog post – it’s a good a place as any to start!
* Can you name any VC firms?
* Do you know any entrepreneurs?
* Have you been to any of London’s technology conferences?
* What is a recent investment you are following?