Hi, it’s Maria from the HEC Paris AIS VC & Growth team. Under the Hood is a newsletter about recent developments in the Venture Capital industry, our perspective on key trends, and deep dives into how VC works.
The venture capital industry began in 1946 when Georges Doriot, the father of venture capital, and others started the American Research and Development Corporation, the first publicly owned venture capital firm. Their best investment was the $70,000 they spent in 1957 to help fund Digital Equipment Corporation. Eleven years later, that investment was valued at more than $355 million after the company’s initial public offering!
Now, seven decades after, the industry remains strong, really active, and as interesting as ever. Globally, in Q3‘20 VC-backed companies raised $73.2B across nearly 5,000 deals. According to Forbes, "2021 is shaping up to be a bumper year for venture-backed deals". In spite of the impact in the world of lockdowns and restrictions, the startup environment has proven quite resilient and in fact, seems to be counter-cyclical to the macroeconomy as most VCs are now back and active in the market. PitchBook research confirms that most countries are seeing some of their highest deal levels ever and the year is on a pace to top 2019 in terms of capital deployed into venture deals, and VCs are as active as they were pre-Covid now.
So, is it a good moment to break into VC? YES, IT IS! Apart from the obvious reasons of wanting to pursue a VC career (fun and challenging tasks, financially rewarding, having access to the best minds in the world, and having the chance to make a difference), the current environment makes working as a venture capitalist a unique shot to learn and make the most out of the opportunities provided by the crisis. The dry powder in the market, the disruption which is affecting every industry (putting pressure on organizations to act quickly) will offer big opportunities in the number of transactions we will see in the market. VCs cannot afford to lose a step in this volatile environment, which will make the experience extremely interesting and rewarding.
Moreover, the VC model is changing, with the inclusion of platform and network elements in the value offering of VCs to startups. This can be a unique opportunity to gain exposure to the operational aspects of building a startup.
Here are two excellent resources to help you figure out if you really want to work in VC:
But we are not going to lie, venture capital is a hard career path to break into, which is why you must nail your interview. VC is also far more heterogeneous than pretty much any other field — there’s a wide variety of professionals’ backgrounds, firms’ strategies, and many other aspects. For that, there’s really no consistent interview guide like, for example, in IB or consulting.
In an attempt to white-box the process to some extent, we've talked with VC analysts who have recently done their interviews in top VCs and put together a set of tips and resources so you can prepare and ace your VC interview and be part of this exciting world.
Something that you CAN'T fail at is the fit and background questions, as they are not only interested in your technical skills but probably more in you and your personality. These include ****the classic behavioral and motivation questions about your resume, why venture capital, why this firm, your strengths, and weaknesses, where do you see yourself in 5 or 10 years, etc.
Moreover, the interviewer will probably ask you market and investment-related questions: ****Which startups would you invest in? Which markets do you find interesting? For this, you should have a strong market awareness (in at least 2-3 areas of your and the VCs interest), read VC and start-up related news, but also pay attention to other macro and market-focused topics.
For firm-specific and process questions, know the VC as if it was a family member of yours, and have an opinion about their investment thesis and portfolio companies: What kind of companies do they invest in? What do you think about their portfolio? Which companies would you have invested in or not invested in? How would you analyze a potential investment and make a decision?
If you have experience working in adjacent industries such as Investment Banking, expect questions regarding deal, client, and fundraising experience: How did you add value in the IB deals you’ve worked on? If you worked at a startup, how did you win more customers or partners in a sales role?
Finally, regarding technical questions, you could get standard finance questions about accounting and valuation, as well as VC-specific questions about cap tables, key metrics in a specific industry, and how to value startups and size markets.
We have compiled below a list of resources you can refer to for your preparation. Feel free to write to us to suggest more resources!