Breaking into VC
On this episode:
Conor and Alex interview Caroline Yeager, a Senior Associate at Vitalize Venture Group, and discuss the fundamentals of venture capital, how to break into VC, and the role of an entry-level analyst. Drawing from her experience sourcing potential investments and managing the due diligence process at Vitalize Venture Group and GE Ventures, Caroline provides her perspective on what makes a successful startup and touches upon the differences between corporate and traditional VC.
Interview Recap:
What is Venture Capital?
In simple words: Investing in startups.
In slightly more complex words: A pool of money is deployed into various startups, in the hopes that these startups will go public or get acquired by a larger company.
What do venture capitalists look for in a startup during the seed stage?
- Founders with a clear vision
- Exit strategy/potential
- Market size
- Competitive landscape
- Founding team
- Sales strategy
- Financial projections
What do Venture Capitalists do?
Analysts do a lot of analysis - analyzing fund performance, how portfolios are performing, identifying trends, helping with due diligence, conducting market research.
Senior associates source deals through their own network.
Sounds cool! How can I get into Venture Capital?
There isn’t one common path, although most venture capitalists have worked for a startup or started a startup themselves.
As an undergrad at Notre Dame, Caroline recommends taking venture capital courses, interning for startups, and joining venture capital clubs. She also emphasized that your ability to learn quickly and adapt is more important than your major.
Types of Venture Capital firms
VC firms are differentiated by their stage - Pre-seed, Seed, Series A, Series B, and Series C. Vitalized Venture Capital is a seed-stage firm with 2 investing entities:
1. Venture fund, focusing on B2B software
2. Angel group that looks at anything
Corporate Venture Capital Funds are closely tied to the corporation, which means that the decisions are in the interest of the corporation.
Indicators of Successful Investments
- The founder’s ability to take on multiple different roles and see things from different perspectives
- Revenue growth, which could indicate better performance later
- Successful co-founder duos, in which one is technical and one is sales savvy
Say What?
Limited partners: People who invest their capital in a fund. Eg: university endowments, pension funds.
General partners: The “middlemen” who invest the money from the limited partners into startups. They make money off of these investments.
Pre-seed stage: The idea stage in which founders raise a small amount of capital from their own funds, family, and friends.
Seed stage: ($10K - 2m) In this stage, the company first officially raises money. If investors invest in the company at this stage, they will receive a large portion of the equity in return is the company is successful.
Series A: ($2-15m) In this stage, the money is used to generate long-term profit. The focus is on how the company is going to make money and usually 1 single investor gives the majority of the capital.
Series B: ($30-60m) At this stage, the company is growing, has a substantial user base, and is focused on succeeding at a larger scale.
Series C: Companies in this stage are usually quite successful. They’re focused on entering new markets, building new products, and expanding.
Angel network: A group of investors pool their money together and choose the investments themselves based on research from an outside source.
VC fund: Money is given to a management team (such as Vitalize Venture Group) and the management team chooses where to invest that money.
IPO: The value of the company is put on the public market, so anyone can buy shares of the company. This is a great way to raise a lot of money!
Investing off the Balance Sheet in Corporate Venture Capital: The value of the investment isn’t put on the corporate balance sheet, so there isn’t any incentive to grow the investment as much as possible.
