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Breaking into VC

Updated: Sep 8, 2021

A guide to resources that will help you become a venture capitalist (VC).

VC has become a sought after career for many as technology becomes prominent in our lives today. I’ve received many questions on how to break into VC and what my job looks like. I hope this guide will serve as a guidepost and provide resources that will help you become a VC.

What’s a VC?

A VC manages an investment fund that invests into private equity of high-growth technology companies with an expectation to exit the investment and generate outsized returns from selling the equity shares in an merger & acquisition (M&A) deal or an initial public offering (IPO), when a company lists its equity shares on the stock market.

Investors who invest into VC funds are typically accredited investors: high net worth (HNW) individuals, institutional investors, endowment funds, corporate, to name a few. The reason why access to VC funds is limited to accredited investors is because investing into private equity is considered to be high risk. The investment takes 10 years before the investors can get their returns generally as it takes a long time for companies to grow. As such, investors expect high returns of 25%-35% per year over the 10-year lifetime of the fund.

What are the roles & responsibilities of a VC?

The roles of a typical VC looks like this:

  • Deal sourcing: You create an investment thesis and go out to find the companies to invest in. Access to deal flows is the most important thing because it is a numbers game in investing. The more companies you meet, the higher chance you’ll find an investment opportunity. There are 3 types of deal flows:

  • Inbound:

  • Referrals from other investors, accelerators, and founders

  • Unsolicited emails from founders to your mailbox

  • Outbound:

  • Companies you meet at events, pitch competition, networking events, etc.

  • Companies you intentionally reach out to

  • Commercial due diligence: The first step is to screen the companies by having an intro call or flip through the deck to see if the deal fits the fund’s investment thesis. If you’re lucky, you might find a company that you think have a chance to be invested. You then conduct a due diligence on the company by looking at the company’s commercial viability:

  • Solid founders

  • Product-market-fit

  • Proven business model

  • Clear competitive moat and competitive advantage against competitors

  • Market size >$1B

  • Traction

  • Team’s background and skill sets

  • Deal structure

  • Risks

  • Deal closing: If the deal makes it through all that, the VC will push it through an investment committee (IC) who will approve the deal. Typically an IC comprises the General Partners. Once the IC approves the deal, the fun starts:

  • Term sheet: A VC issues a term sheet for the founder to show an intention to invest with a rough guidelines on the investment terms. If the founder likes what you offer, he/she will sign in as a promise not to talk to other VCs.

  • Due diligence: A VC will then engage third parties to help draft investment agreements and conduct deeper due diligence on the legal, accounting/financial, and technical fronts.

  • Deal closing: If nothing comes up as a red flag and if founders and other investors in the round agree on the investment agreements, everyone will sign and wire. The company will then register the new investors as shareholders of the company.

  • Portfolio management: Sometimes, VCs who lead the investment round will ask for a board of director’s seat as a way to oversee the company’s strategic direction with the founders. It’s a great forum to discuss where the company is going, how the performance has been, and what changes are needed. Other than board seats, VCs try to be ‘helpful’ by introducing potential investors, customers, partners, and will have regular calls with the founders to check-in and offer advice.

  • Fundraising: This is where the General Partners typically spend their time, talking to potential investors (we call them Limited Partners). This is because VC funds have an active investment period of 3 years, then the fund will go into harvesting mode. So a new fund will need to be raised every 3 years.

...Rinse, repeat every 3 years.

If you ask me how I spend time, I'd say every day is very different and that's why I love my job so much. I typically get up very early to do 'deep work', work that requires a lot of 'thinking', e.g. investment thesis, or 'learning', e.g. learning about crypto and fintech, acquiring knowledge about new industries/technologies. Then my morning time is for 'execution work' where I may be reviewing deals/investment agreements, writing blogs, preparing materials for IC meetings. Afternoon time is for meetings with founders and networking with other investors and ecosystem players. According to HBR's survey, the table below shows how VCs spend their time.

What does a VC fund look like?

The organization looks like the following (top down):

  • General Partners

  • Partners

  • Principals

  • Associates

  • Analysts

For details on compensation and carry structure for each role, head over here.

What’s the typical profile of a VC?

Each VC has a very different career path, but most commonly, they may have backgrounds such as:

  • Former founders who have experience founding successful startups.

  • Former operators who have worked at startups and have unique experience running and scaling companies.

  • Investment bankers and consultants who have experience related to the technology sector, for example, helping technology companies with their IPOs, conducting due diligence on technology companies.

This list is not exhaustive and you’ll find that paths to VCs are often unusual.

What makes a good VC?

What’s important is to be a successful investor, you need to get access to good deals. Good deals are usually experienced founders who will want investors who can offer relevant advice. Thus, having started a successful company or helped a successful company scale will be extremely helpful in earning the right to invest, and ultimately, determining your success as a VC.

Check out Naval Ravikant’s talk, “Good Investing Is About Access, Not Deal Flow”.

How to differentiate yourself and be successful as a VC?

I love Naval Ravikant’s podcast about Angel Investing. I think it applies to investing in a VC fund also. TL;DR

  • Investing takes capital, judgment and dealflow

  • Capital is the hardest or easiest to get—depending on your circumstances

  • Everybody has dealflow—the challenge is getting in the good ones

  • You need a brand to get into hot deals

  • Investing in winners is the best way to build a brand

  • You can build a brand through content

  • The best deals come from your network

  • Be a shadow co-founder to create your own dealflow

  • Founders want to be backed by other founders

  • Early-stage investing is more about gut feel than due diligence

How to break into VC?

  • Build a company: Having experience as a founder and driving it to success (ideally an IPO or an M&A exit) is your best ticket for VCs. With a successful track record of founding and exiting a company, chances are you can angel invest your own money or raise a fund.

  • Join promising startups: As an early founding member of a startup, you’ll learn to operate and scale a company. This is as close to founding a startup as it gets. You’ll have unique functional skills that can be helpful for future founders. You want to choose one that has a high chance of taking off.

  • Start angel investing: Join a syndicate, do side jobs for founders to get allocation, get plugged into the founder ecosystem, angel invest your own money.

  • Share deals to VCs: Don’t just call VCs to ask for a phone call because you want a job, be helpful by sharing good deals to them. That’s how you build relationships. Like it or not, VC is still pretty much a people business where deal flows happen through phone calls and dinners.

My personal path to VC is also unusual. In case you’re curious, here’s a short story:

I have a background in financial services that spans across central bank, commercial bank, sales and trading. Technology was something very distant to me growing up in Asia. I’d never known much about venture capital and tech industry until I started my MBA in the U.S. in 2016.

I wanted a career where I could contribute to the democratizing of financial access to people in emerging markets. VC seems like a good place to be as I’ll be able to leverage my background in research, economics, and finance. So I leveraged my MBA school’s alumni network to get my first break into VC as an Associate Intern at Digital Ventures (now SCB10X). The framework that I used for choosing an internship was to work for someone who’s well-connected because they can open doors for you long after the internship ends.

And that’s what happened. Having interned with Paul Ark at Digital Ventures allowed me to leverage the experience to intern at other VC funds in Silicon Valley. I sent cold Linkedin messages to Pantera Capital and 500 Startups’ Fintech Fund in Silicon Valley and was able to secure internship opportunities there, something I never thought I’d be able to do and I still feel blessed every day since. Having worked with the partners at both funds was a once in a lifetime experience for me.

Before I graduated my MBA program, I knew that I’d have to return home to Thailand so I sent a cold email to the MD of a Thai bank’s newly established corporate VC fund called Beacon Venture Capital, asking him for a coffee meet up. He agreed to meet me and waited for a year until I finished my study. I then came home to help him set up the bank’s CVC arm. However, after a few years there, I moved to Monk’s Hill Ventures, where I am today.

To sum up, what’s important is to keep hustling, getting in the flow of things, and be helpful to VCs and founders alike. Since VC is a people business, knowing the right people and being helpful to them is the key.

That’s it for now. Hope you find this helpful. You can always find more posts like this at @wnattariya or my Linkedin.


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