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Career as a VC

These are the slides from a talk by Subrata Mitra for pi-fellows programmes on different aspects of career as a VC

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Career as a VC

  1. 1. A Career in Venture Capital Subrata Mitra
  2. 2. § A word of caution § The role of a VC § India vs the West § Skills required to be a VC § Life in the day of a VC We’ll talk about
  3. 3. A Career in VC A word of caution Over a 10 year period… 2-3x >3x 1-2x <1x Over-performs the market Underperforms the market % of VC Funds 5% 10% 35% 50% 98% 5% 2% 95% Other VC funds Top 20 VC funds % of VC Funds % of Return Survivorship bias, selection bias and skew U.S is a saturated market; Potential for new funds in India 3
  4. 4. To the LP | To the fund | To the portfolio The Role of a VC
  5. 5. A Career in VC The role of a VC – to the LPs 5 Exit 1 Exit 2 Exit 3 Exit 4 Exit 5 Exit 1 Exit 2 Other Exits Equity, Fixed Income etc. VC VC Capital allocation 5-10% Expected return from VC = 3-4x Typical route Pareto LP Portfolio
  6. 6. A Career in VC The role of a VC – to the fund 6 1. Find great founders and teams that will scale with the company (early stage) Find great fast-growing businesses (later-stage) 2. Predict market trends – understand where the world is (probably) headed 3. Build your own team – funds have small teams, challenging to build 4. Fundraise from LPs – becomes a larger part of the job with seniority
  7. 7. A Career in VC The role of a VC – to portfolio companies 7 1. Provide a strong network that can be leveraged by the portfolio companies across Strategy, Hiring, Mentoring, Product & Marketing 2. Be a good board member – this is different from being a good investor 3. Follow-on fundraises – help companies get more capital and eventually plan an exit 4. Guide the founder along her journey – entrepreneurship can be a lonely path
  8. 8. Not currently. May converge in the future. Are VC roles the same in India and the West?
  9. 9. A Career in VC India vs. the West 9 India is unique – Entrepreneurs need to do a lot more things + + =E-commerce Payments Logistics Infrastructure is weak; no predictability of service + =Content Delivery 9
  10. 10. A Career in VC India vs. the West 10 VC Ecosystem in India is still very early (but growing) India-focused VC dry power by global and domestic funds $B U.S is ~$150B Total # of funded start-ups in India U.S is ~100k 000’s Accel - US Fund 1 and India Fund 2 were both $65M – 1985 and 2008 ~2% of funds have India focus; <1% have an India office, even fewer are India-based
  11. 11. A Career in VC India vs. the West 11 Only a handful of exits till now; secondaries and acquisitions are the norm Equity Markets U.S. has ~200 IPOs every year India in 2018 Maturity of exits will bring in a lot more interest
  12. 12. A Career in VC India vs the West 12 • Rounds are smaller, valuations are lower $10M Seed is commonplace in the US, reserved for rare occasions and serial entrepreneurs in India • Capital isn’t as freely available as in the West, raising is harder $500K seed in US will close on a paper-plan on a good day, much harder in India • Typical VCs in the West - Ivy League MBA, Investment Banking background, recently seeing entrepreneur VCs 65% of Midas List have MBAs • Typical VCs in India - Ex-entrepreneur or part of company leadership, MBA agnostic, recently seeing finance VCs • In the US, money was king. That’s not enough in India. Pendulum swung too much in the US in favour of capital; YC and similar initiatives are pulling it back India requires an entrepreneurial spirit
  13. 13. Maybe. Can I become a VC? Is MBA necessary? Not necessarily.
  14. 14. A Career in VC Skills required to be a VC 14 1. People reading skills Ability to pick the right founder, recognize patterns of success in individuals and teams Need to select founders that scale with the company 2. Understanding market trends and technology Specific - What is hot right now? Can it be big? Is it the right time? Generic - Where is the world headed? What problems need to be solved? (Domain expertise helps) 3. High Speed of Unlearning What you knew yesterday may no longer be true Need constant self assessment and re-evaluation
  15. 15. A Career in VC Skills required to be a VC 15 4. Pattern recognition What can you see that others cannot? Shadow senior partners, experience through cycles counts for a lot 5. Empathy for entrepreneurs You are not in control; parent-ego state (looking down) will not help What is not empathy? – Saying YES to everything, spoon-feeding, micro-managing 6. Connector style Who in your network can solve this problem or move it? Any gaps you can fill by hiring from your network? 7. Sourcing dealflow Build a strong and diverse network over time; founders will come back for their next company Sourcing has to proprietary at steady state – no use in having the same shopping list as everyone else Good founders do their research and pick their VCs, not the other way around
  16. 16. A Career in VC Skills required to be a VC 16 8. Board member skills You can only direct and nudge; let the entrepreneur solve the problem This is very different from being a good investor 9. Intellectual & emotional honesty To both the portfolio and the fund 10. Finance knowledge Common-sense framework is important both to enter the deal and after 11. Fundraising skills Pitching and raising funds from the LPs; Skill becomes more important with seniority
  17. 17. A Career in VC Skills required to be a VC 17 Finally, Risk taking & Risk Appetite You need to look things through various lens - Need to constantly assess risk vs. reward; Risk-taking and crystal-ball gazing must be calculated Market Size Growth Timing Competition Distribution Macro factors Business Users PM Fit Economics Defensibility Network effects Investments "7 year test" Team Knowledge Track record Dynamics Aspirations Can they scale?
  18. 18. A Career in VC Skills required to be a (deep-tech) VC 18 What to do? Be passionate about tech! What not to do? • Fall in love with the tech Important to see how tech will lead to 10x differentiated businesses • Keep the blinders on Look around and be aware of state of the art and competition • Be an expert Talk to experts, understand the core, validate the hypothesis and the tech • Rely on experts Incumbents often give negative feedback. Use their expertise to get your hypothesis well-rounded
  19. 19. Should I become a VC? Depends on your motivation. VC jobs are not a stint.
  20. 20. A Career in VC Life in the day of a VC 20 - Fund raising (from the LPs) - Build solid team (own) - Build strong pipeline - Selection process - Helping the companies and founders - Planning exits Few days are no wins – lose deal to a competitor, day full of uneventful meetings, stuck in diligence Most days are small wins – solving a problem with a portfolio company, introducing a new sourcing method, learning something new, meet good companies (and mostly passing), get closer to an answer; These work up to big wins – Company makes a new investment, portfolio company raises a new round Self Motivation is key! Lifetime VC - do most of these and enjoy it!
  21. 21. © 2020 Accel Partners, All Rights Reserved. 21 Thanks & Best of luck! What is the role of luck? Do the laws of probability play out in the long run?

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  • alekshendra

    Jul. 22, 2020

These are the slides from a talk by Subrata Mitra for pi-fellows programmes on different aspects of career as a VC


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