VC Associate: 5 Lessons learnt + Actionable takeaways

I was lucky to land a position as an associate at Brighteye Ventures, a vertical European EdTech VC, in January 2018 and it has been my dream job since then. Having come from an operational and consulting background, I think now is a good time to reflect and share the 5 key lessons I’ve learnt as a new associate. I’m still at the beginning of my VC journey so this post is by no means a way to share my wisdom, but hopefully my thoughts will provide other VCs and/or people transitioning into the VC world with some insights and actionable takeaways.

👯‍♀ Lesson #1: VC is an apprenticeship business & new VCs need to be like a sponge

I’m convinced that the most efficient way to learn how to become a VC is by receiving guidance from someone who is more experienced, who deeply understands the mechanisms, and who is willing to accompany you on your journey. If you think about it, it’s very much like mentoring. You (the mentee) need to acquire a specific skill set in a short period of time such as sourcing deals effectively, spotting great opportunities according to your investment thesis, negotiating terms, closing deals, managing relationships with founders/other VCs, among others. Trust me, these are skills which cannot be learned independently via books/podcasts/articles/etc — they need to be transferred by a more experienced person (the mentor). In my case, I work directly with two Partners — Alex & Ben — and therefore am fortunate to be able to learn directly from them, which is priceless. Let me explain: this structure gives me direct daily access to two mentors with different backgrounds and styles who constantly share insights, knowledge and advice. I’m seated in the front row and get to witness their thought processes from A-Z every single time we see a new opportunity, close a new deal or come across a new challenge. On top of that, these are the three best pieces of advice they have given me to hit the ground running:

(1) Don’t trust the hype. It’s easy to get FOMO on a “hot deal” and follow social signals but that only triggers irrational thinking and it clouds your judgment. Trust your gut feeling before anything else.

(2) Build your own network ASAP among key players in the ecosystem, including other funds. Be transparent and don’t be afraid to give more than you receive.

(3) Find and leverage your superpower. In my case I’d like to think it is marketing. So I have been empowered to create content around EdTech marketing (a series of EdTech marketing guides with leading CMOs + a global EdTech marketing report) and spend time with the CMOs of our companies in order to be as helpful as possible.

Takeaways: Find more experienced VCs (including at others funds) who are willing to provide guidance, support and encouragement during your journey. Absorb their knowledge and constantly assume that you are the least knowledgeable person in the room (…and you probably are 😉). Focus on your strengths and real domain of expertise to stand out and be authentic.

💎 Lesson #2: Spotting the difference between a VC-backable & a lifestyle startup is often challenging

To be clear, the term VC-backable means startups that we -VCs- believe have a strong potential of reaching >€100M in revenue within 8–10 years and/or can be exited for >€400M. The truth is that returning a fund is not easy, so every shot you have at investing in a company must be backed by a strong belief that this company has what it takes to become HUUUGE. To strengthen my point, Atomico’s great report “The state of European tech 2018” stated that there were only (1) 49 exits of companies valued at $500M between 2013 and 2018, and (2) 61 companies in Europe worth more than $1Bn USD in 2018 (since 2003). These numbers show how challenging it is to build large and successful companies, especially in the education space (where my fund is focused). The tough part is when you come across startups with great teams and promising products & visions — only to discover after digging deeper that for whatever reason, it is not a VC-backable business. It is a company which may have a high probability of becoming a successful lifestyle business (i.e. generating tens of millions of EUR in revenue) but that does not fit the VC model. It’s frustrating but that’s the nature of the game. In this case, the hardest part for me is having the conversation with founders, in which you may need to explain they are not VC-backable. I try to empathize with founders in these situations because they simply don’t have a strong understanding of how the opaque VC business model works. The latest book by Scott Kupor, Secrets of Sand Hill Road, does an amazing job at demystifying the VC world. I highly recommend it to any entrepreneur looking to raise funds and any venture capitalist.

Takeaways: You receive several fascinating pitch decks on a weekly basis and it is easy to fall in love with the wrong companies. Believe me. So, when reviewing a deal, be honest with yourself and deeply meditate on the true potential of that company to become a “billion dollar company”. This is VC 101.

🧐 Lesson #3: Building a strong conviction for an investment is hard – really hard

As most of you probably already know, common VC wisdom advises being a nonconformist, thinking differently about a market while taking into account general business/societal trends, and betting on trends before anyone else. It sounds easy, right? It’s not.

What is the key to effectively building conviction for an investment?” 

I’ve asked informally this question to 10+ VCs from Partners to Analysts, and nobody has a strong and clear answer on how to build effectively conviction for an investment. I think it’s fair as it’s incredibly hard. You’re simply biased by your own personal & professional experience, way of thinking, and most of the time you have little data to rely on because you’re “betting on the future”. You need to be comfortable making bets in a timely fashion based primarily on your gut feelings and your own idea of what the future might look like (… and some research too obviously). This conviction building process is by far the most exciting part of being a VC, but it is also the toughest part of the job as there is no right or wrong way of doing it. In other words, you need to come up with your own process. The way I’m building mine (which to be fair, is still a work in progress) is by (1) trying to really understand the rationale behind investment decisions (i.e. strengths, weaknesses, challenges) not only internally but also at other funds, and (2) forcing myself to develop my own hypotheses on how the future might unfold in different verticals.

Takeaways: Closely observe others’ decision making processes whilst trying to develop your own personal predictions about the future of specific markets.

👉 More info on building conviction as a VC (falling in love with startups)

🛠 Lesson #4: Having an operational background allows you to be more empathetic with founders

You will always find exceptions to the rule, but I truly believe that VCs who have worked in operational roles — especially in a startup (no matter their position) — have a higher sensibility and a true understanding of how hard it is to build and run a company. Having spent time in the weeds myself for almost 4 years in a healthcare startup which scaled quickly (the team grew to 180+ people in less than 4 years) has taught me 2 key lessons:

(1) The real rock stars are the people on the ground, running the operation. Not only the founders -> the entire team. To this day, it still surprises me when I talk to investors who simply forget about the real guts of building and running a company.

(2) While you can certainly experience how to scale a business from an investor’s perspective, being on the ground gives you a deep insight into the real challenges startups face in terms of budgeting & forecasting, culture, people, pressure to hit the targets, founders’ thinking, and the list goes on. My point again, people on the ground facing these issues on a daily basis are hustlers; managing all these moving pieces requires a great deal of effort and amazing operational skills.

Takeaways: Be humble when interacting with entrepreneurs and put yourself in their shoes. They take major personal risks and usually have more to lose than you as a VC. Keep that in mind when you decide to either move forward with an investment or to pass on it.

👷‍♂️ Lesson #5: VCs work FOR their portfolio companies

The way I see it: you need to make your portfolio companies’ lives easier in any way you can (at least, that is what I’m being taught at our fund). So as an associate and as the portfolio of companies grows, you start seeing your focus shifting from constantly sourcing new companies and preparing investment recommendations (I’m oversimplifying to illustrate my point) to becoming an available and accessible resource for companies in your existing portfolio. You may be tasked with whatever companies needs help with: providing analyses to help a company to better position themselves on the market, assisting with recruitment, researching competitors and sharing best practices, etc. You may not always be able to offer an easy solution, in which case the challenge is to be able to reach into your own network and knowledge base to at least point them in the right direction. As an ex-consultant myself, I obviously like this part of the job as well because it is a thrilling challenge which also forces me to stay on top of new trends. This also adds a whole new dimension to your role as an investor; As you become a key knowledge resource for the companies you back, you consequently find yourself pulled in their daily operations, which is fun and challenging!

Takeaways: Don’t underestimate the value of providing ongoing support to your portfolio companies. Be a genuine resource for the entrepreneurs that you partner with, and make yourself available 24/7 for them. Try to put yourself in a position of working FOR the company that you back.

I truly hope that these thoughts will be helpful for others associates/aspiring VCs. Please, feel free to reach out as I would love to hear your thoughts and lessons as well. Many thanks!

Un grand merci à Alex & Ben for giving me a shot at being a VC. It’s a real privilege.