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About seven years ago, I wrote a post on breaking into venture capital and I continue to point the five or six people a week who ask me how to break into venture.
Today, I want to add two addendum to it, based on the work of two up and coming women in the NYC tech community.
Yesterday, Amrit Richmond announced her new employment at RRE as Director of Community & Platform. The key to her getting the job was that she had essentially started doing the job long before it ever got announced. She had been running social media part time for a smaller fund and had built up a following with her own tech newsletter. No one was paying her to write the newsletter, but most of the team at RRE was already on it.
When Amrit was applying, I told her she was a lock for the job. When she asked why, I said it was because if anyone was better qualified, we'd already know about them by now. The candidates for venture capital roles are already out there and usually in plain sight and there simply wasn't anyone out there doing what Amrit was doing who wasn't already fulltime at a firm.
Another case in point, Spark Capital just hired Kate Bolin--someone that had been interviewed at a portfolio company of theirs that had made a good enough impression that they labeled her as someone to stay in touch with.
If you need to introduce yourself to a VC firm, you're probably not getting the job.
The opportunities, however, are different than they used to be. At the early stage, the ranks of the non-partner investor are disappearing. VC firms are going back to being mostly partner driven shops, where dealflow and decisions stay up top. They are, however, staffing up with specialists. Like lefties out of the bullpen, VC firms now have recruiting partners, pr and marketing experts, technologists-in-residents--and USV even has an on board activist. If you can't walk into a firm and tout a specific skill that is a benefit to portfolio companies, you're going to have a very tough time getting in.
And no, analyzing startups is not a portfolio company benefit. That's a benefit to the VC firm. To the company, as a recently minted MBA with no startup experience who wants to run the 4th year numbers, you're just a pain in the ass.
One thing that I see too many people moving from the finance world doing, both in attempts to get into VC and to startups, is relinquishing the resources they have at their old job. They can't wait to get out of their bank or consulting firm, but they forget that they have connections to something that startups want desperately--money. If you want to break into the startup world and you come from investment banking, don't forget the one thing that your resume says that actually speaks to entrepreneurs--you know potential investors.
Christina Bechhold didn't forget that--and so she co-founded her own angel group. It's a group of her peers from the professional world--up and coming titans of finance and consulting with good salaries and not a lot of dependents. She and her co-founder Graham Gullans went around to all the other early stage investors in NYC to learn best practices, and present themselves as a good potential co-investor. There's really no easier way to get into venture than to find some money, reach out to smart folks to learn, and start writing checks. Being good at it takes a bit of luck, hard work, skill, etc., but in a city like New York, with it's access to capital, "getting in" shouldn't be the hard part.
The NYC startup community maintains a positive, supportive atmosphere. We celebrate a strong effort.
However, that often makes it hard to tell who actually excels at their job and who just mails it in or got lucky. This goes for founders, employees and investors alike.
I was just noticing that a professional acquaintance of mine just changed jobs for the third time in two years--going from startup to startup to startup without, ostensibly, accomplishing much at any of the companies. They certainly didn't become huge successes. Yet, for some reason, everybody seems to think he's really good at what he does. Why?
The same goes for investors. There are a few obvious investors with great track records of repeat success, but when's the last time you really tried to value an investor's portfolio. That VC speaking on the panel, are the deals you know about really doing that well? They raised more money, but when? How long ago? At what valuation? Are they making real revenue? Are the exit prospects for the company any good?
Even if their record looks good because of that deal, was it really their deal? Did they lead it? Will the entrepreneur count that investor among their most helpful? Would the entrepreneur enthusiastically include them in the syndicate of their next venture?
There are a lot of founders with questionable records, too. If someone bought a company for $50mm after a year, before it became a business with actual revenue, what are you really crediting the entrepreneur with? Could you really call what they did building a business?
There's really no substitute for research. If you're going to pick an investor, hire someone or invest in a founder, you need to figure out what they specifically did to create value--and how what they did was something unique to them. Could anyone have done what they did, or do they have their own special way of creating magic?
We need to raise our expectation level--especially in the media, on panels, and in our everyday discussion. Let's be a little more discerning when we're dishing out praise. Let's figure out who actually went above and beyond, versus getting lucky riding a wave.
Go pitch a VC with an idea, and they'll tell you to build it.
Go to them with a prototype and they'll tell you to launch it.
Launch it, and they'll tell you to get more users.
Get users and they'll tell you to get paying customers.
Get paying customers and they'll tell you to get bigger, enterprise clients.
Get enterprise clients and they'll tell you to get them faster, because it seems to be taking too long.
It frustrates me to no end. If someone actually did check all these boxes, it would be a Series B deal, not a seed investment.
Last I checked, taking risk, and being ok with uncertainty, is supposed to be our job. No risk, no return.
Technology is moving faster, markets are changing more quickly and uncertainty seems to be increasing.
In my mind, that creates the opportunity for increasing returns. New markets are available. We're doing things in personal health, mobile, and physical products that we never could have done ten years ago. TVs are changing. Finance is changing.
Risk, over the long term, is going to be rewarded, but there are no sure bets. Let's remember that, people.
If you're not cool with risk as an investor, may I interest you in some very nice fixed income jobs.
*This post was not directed at anyone specific.
In 2007, I met Rob May for the first time in person at the first SXSW I ever went to. In 2010, I funded his company, Backupify, which has gone on to raise over $19 million in funding and is set to have their best year of revenue to date. I didn't meet Rob at a big flashy party. We just hung out in a small group of nobodies, having chatted a bit through our respective blogs before.
In fact, as I look through the photos from back then, I realize that I funded two nobodies from that group--the other being Michael Galpert at Super.cc.
In 2008, I went to breakfast with Hilary Mason while I was down there. This picture was just after we got back to the conference center, just hours before the meltdown that would be the Mark Zuckerberg interview. That breakfast would lead to me hiring Hilary to work at my startup, Hilary deciding to stay in NYC fulltime, co-founding hackNY, and just generally being a great community advocate for science and tech in NYC.
Just breakfast. No big party.
Last year, my friend Danielle Gould invited me to a small FoodTechConnect dinner, where I met Stephen Plumlee from R/GA. Stephen is a great guy and a Brooklyn resident. We connected around R/GA's role in the tech community and here I am now, a mentor in the R/GA hardware accelerator.
Over and over again, it's small groups and conversations that I've had down in Austin that seem to have the most lasting impact on my business and career--so as the parties get bigger, and flashier, I find myself retreating to smaller enclaves. The best spend of sponsorship money I've ever seen might be the $50 in balls and chalk that Dennis probably spent building the Foursquare court that beat Gowalla in 2010.
This year, I might not even leave my apartment for maximum ROI.
I'm only half kidding. I'm putting together a small series of dinners where I don't have to worry about reservations and long lines to eat and get rushed out. I've got some local chefs lined up to make some fun and authentic meals and I'm putting the coolest folks I can find around the table. SXSW with all its buzz and hype is just the backdrop to the conversation over good food, and I suppose also the excuse that brought all these people together in one place.
A few sponsors have inquired about participating and I might have a opening for more. The best part is, the cost pales in comparison to the huge blowout ragers that no one will ever remember and no meaningful business will ever get conducted at. Drop me a line at firstname.lastname@example.org if you might want to participate.
I can't guarantee you'll sell something, win VC dollars, go viral, etc... but I'm a big believer if you focus in on just a small handful of people at a time, or even just one, and give them your attention, that will pay back dividends over a very long period of time. Sometimes, all it takes to make a friend is to treat them like a person instead of a connection.
My dad, after a 20 year career as a New York City firefighter, went back to school and became an accountant. He was an early adopter of technology in his practice, buying a computer in 1987 and getting some of the earliest versions of tax prep software. To do the bookkeeping for some of his business clients, he used a DOS-based program called One Write Plus.
The program went over to Windows, but he never liked that version, so he stuck with DOS. He wasn't alone. Lots of people liked the old version better and stuck with it. Eventually, support for the OWP DOS version was discontinued, but he kept on truckin'. I'd bet anything he was one of the last active users of the program.
In the desktop software world, you could do that. You bought a version that you liked and you could use it for as long as you liked regardless of what happened to the underlying company. In a cloud world, software has a continuous cost of upkeep. When the company dies, the software dies. That frustrates a lot of users.
Today, one of my portfolio companies, Editorially, announced that it was shutting down. I can't say enough about the terrific job that Mandy, David, Jason and their team did to create a product that many people loved. Twitter is full of some really great things people had to say about it.
Oh no! @editorially is closing down. I wrote my entire book in that. It was such a good app. What a shame :(— Paul Boag (@boagworld) February 13, 2014
Unfortunately, the market turned out to be smaller than we had hoped for the potential paid features of the product, so it has to go away. It would be cost prohibitive for anyone to stay on to run it, and it would eventually brake. You're left with no cottage industry of users--a SaaS Cuba, where you can seemingly keep a 1950's car running forever.
Is there an opportunity here, perhaps? A holding company that could be the Land of Misfit toys for webapps? You run out of cash and then you apply to turn your code over to some caretakers--and if they think enough people love the business, they run the apps on a donation basis. Maybe you retain some small portion of the equity.
It's unfortunate to see all that work go to waste, but at least in Editorially's case, it wasn't all for naught. Lots of great writing was produced on the service--writing that will far outlive the service. Personally, I got to meet a great team that I hope to work with again in the future. Seed investing is a risk, and while things are playing out really well at Brooklyn Bridge Ventures, the portfolio is simply not going to have 100% success rate. Editorially was a risk well worth taking and I'd do it all over again given the caliber of the team I got to back.