[Ventech Blog] How could a Junior Analyst become a Partner in a VC Firm?

Ventech is one of the few VC teams in Europe with Partners being both men and women, coming from different countries (France, Germany) and with ages between 40 and 60 years.

Yes, we believe that a Junior Analyst may become a Partner one day!

A Partner in a Venture Capital firm acts both as an investor and as an asset manager.

Few ideas on how to develop your ‘Investor’ skills ?

Strong analytical skills are required to invest in venture. During due diligence process, all aspects of a project will be carefully scrutinized : from value proposition, targeted market, product’s differentiation, business model,…

But it is not enough when it comes to identifying the winning team, or predicting the future : remember, we are investing in breakthrough technology, new business model, new usage! On the top, good teams often attract competition. So you need to add commercial understanding and experience to make your own firm conviction.

My tips:

  • Be very strong on the analytical review : work hard, practice on many due diligence…. Use that to assert yourself overtime.
  • Learn by experience: Venture capitalists are craftsmen. So, work with different partners to understand their reasoning to assess risk/reward, to get feedback on what has worked, not worked in other situations…
  • Build your added-value over-time: To build a strong network in the industry will always be an asset. Accept that you will not act as board member right away but nevertheless be pro-active to interact with the management teams on specific topics such as finance, market competitive analysis…
  • Develop sound relationship with CEOs: I am not speaking about being best friends but more about being someone that a CEO will trust and will call (early in the morning or late at night because the rest of the day is fully-booked!) to test ideas, get feedback with an open mind….
    Constantly look for the best way to communicate: Relationships between CEOs and investors can be difficult sometimes. I try to always remember 2 points : (i) the CEO is in the driving seat not the investor (the fact that you finance a company, obviously gives you some leverage but be carefull not to use it wrongly!) ; (ii) the CEO has ‘one’ baby, his company, while the investor is managing a portfolio of companies and therefore mitigating his risk.
  • Develop your autonomy…and not your independence : You will have to make decision on behalf of the fund. Some decisions require partnership approval and timing is key. Anticipate (don’t wait for the last minute for negative news such as ….the company is out of cash next week !), give regular and precise updates, get feedback from the partnership before you convey the fund’s position.

WARNING : This takes time ! You are building your credibility…and very importantly your own track-record .

Few ideas on how to integrate the Partnership?

To demonstrate your willingness to collaborate on the long-run (in French, we call it ‘affectio societatis’) is paramount to become a Partner…and then the existing partners will decide whether they feel the same for you! All partners depend on each other or put in a more positive way, jointly contribute to the fund:

  • First in attracting investors in the fund and investing their own money alongside them,
  • Second in making joint investment/exit decisions but also generally participate to the life of the fund : fundraising, HR, communication, finance,
  • Third in committing towards the team and the limited partners to stay during the life of fund (‘key-man clause’). This means that when you have issues with your partners (yes, it sometimes happens !), you need to sit down and find a solution.

My tips :

  • Show your ‘affectio societatis’, i.e., that you are interested in playing a collective game. The fund’s success is a joint contribution of each member and is not a one-man/woman show.
  • Understand the values of the team, be passionate and professional.
  • Develop sound relationship and satisfactory working mode with all existing partners and members of the team. Listening is important. Accept contradiction but be ready to fight to convince. Ask for feedback.
  • It can be good thing to have one ‘champion’ that will support your wish to become a Partner
  • Be ready to commit for at least 10–12 years and to invest your personal money
  • Timing is important : teams are usually completed for each new fund’s generation. This is the time to take your position.

WARNING : Selective process and Partnership’s decision!

Then, how long does it take to become a Partner ?

This is not a steady evolution where you go from one position to the other one in a very formal and pre-defined way and with a whole list of job titles. VC firms have few levels between the Analyst and the Partner.

Nevertheless, as far as I am concerned, I am much less bored by this type of structure than by what I have experienced in the banking industry. I don’t miss the very complex HR process based on so many useless criteria !

One last tip : BE PASSIONNATE !

Entrepreneurs: How to make the next generation of marketing happen?

How to combine the strength of 1-to-1 Marketing with the need for Omni-channel strategies ? How to make Marketing 3.0 become a reality for retailers ?

 As venture capitalists, we love industries that re-invent themselves. It creates opportunities for start-ups to challenge big players. Has 1:1 marketing already transformed the retailing industry ?

First transformation: from mass market to markets of size 1

The days where we were receiving by mail heavy printed catalogs featuring all the items sold by a retailer, or where our mailbox were stuffed with emails offering products that were of no interest for us, are gone. Great! I would call that mass marketing: 1to all.

Today, most of the time, we receive emails, SMS that are relevant to us. Thanks to CRM, tags put on website, fan page created on social networks, brands collect transactionnal and non-transactionnal datas on their customers and can then send personalized messages to targeted segments. I would call it ‘1to several’ marketing.

Then comes ‘1:1 marketing’ : with re-targeting solutions, we are being reminded of products that we have previously checked on other websites. In the adtech sector, the ‘1:1′ approach is rapidly taking off with the development of programatic advertising. Using Data Management Platforms, brands can push personalized advertising messages, (display, video..) to one single profile in real time.

Second transformation : One-to-One marketing combined with Omni channel strategy

Then, for retailers combining online and offline stores, the big revolution is to apply 1to1 marketing globally through all their channels, the omni channel strategy. The use case would be: walking in a street, you pass by a store which happens to have a website that you have checked some times ago and therefore you receive a special discount on your mobile to purchase the product in the store, since you had published on one of your social network that you really liked this product. In the store, the sales guy calls you by your name and sells you the product and it automatically credits your loyalty program. Brands would know their cutomers so well that they would target one person and, following a deep and real-time analysis, would determine the unique offer that will make her/him buy.

Even though I have heard many start-ups pitching this use case, as far as I am concerned, I have never experienced the situation described above.

Are the retailers here yet ?

The current situation is still that brands do email marketing campaigns, most of the time without even using marketing automation tools or predictive analysis tools. They are fully aware that they should do data-driven marketing actions but are stopped by (1) exisiting IT legacy system built over time by silos (CRM, web, mobile, social network, email…), not communicating with each others and certainly not in real time …so creating headaches to build a customer graph, (2) not enough experience in the marketing teams to extract the value of the datas collected and to conceive personalized marketing scenarii like data scientists do and (3) not enough time to spend on it !

Some advices to start-ups willing to capture new business opportunities in the 1:1 marketing space

  • brands need to be guided to develop relevant use cases. Software vendors will need to evangelize the markets. To convince customers, start-ups will most likely need to propose value-added consulting services and even offer specialized talent such as data scientists.
  • financial returns have to be clearly demonstrated to have retailers to put that in their top priority instead of using their existing marketing solutions. Best would be that the returns can be shown during trial phase!
  • new solutions will be integrated with existing IT system. So don’t ask brands to change their workflow. Provide tools with friendly user interface to limit as much as possible the need for specific developments and long trainings.
  • and finally a personal comment….: build the use case with the privacy issue in mind. I am now used to re-targeting engine on my PC but I still think that I would feel very intrusive to have someone, I have never met before, welcoming me in a store by ‘Hi Claire, welcome. I have this pair of running shoes for you since I saw that you gained weight recently!’

    tennis

Unicorn pre-IPO valuations: should we be worried?

Uber: 40bn$, Spotify: 6bn$, Dropbox: 10bn$. Do these valuations actually correctly reflect just mind-boggling business fundamentals or is there another less obvious common denominator? Well, while each of these equity stories is certainly unique, having Goldman Sachs as their principal cash-fuel provider turns out to be an essential element these players do actually have in common. A bunch of massively funded companies are currently seeking to make it to the public markets and are (quite rightly so) trying to advertise an unbroken and steep valuation uptake before going public. However, experienced investors are getting increasingly uneasy about the emergence of private convertible bond investors and hedge funds on board of these pre-IPO bandwagons.

“To me this looks like the precursor for significant post-IPO underperformance if companies with jazzed-up pre-IPO valuations finally hit the public markets” says Ventech Partner Christian Claussen. “Access to huge convertible debt facilities for notoriously unprofitable companies is just another facet of a general pattern”. Christian who has learnt his early lessons as a VC in the ’97-’00 tech bubble feels oddly reminded to stock-price boosting-techniques such as the famous ‘laddering’ which in hindsight were part of Wall Street’s bubble-tool-box heralding a 7 year nuclear winter for the European VC-industry (read the chapter on bubble #2 in this witty backgrounder).

For Ventech Partner Jean Bourcereau things are not even half as bad. “History does not repeat itself and I do not predict a 2000-like situation where excessive pricing was only one factor besides fundamentally unsustainable business models and systematically boosted market size estimations”. As a worst case scenario Jean rather foresees a potential 2008-like situation: “Who knows, we might eventually be in for a global 30% haircut on tech stock prices. And while this definitely hurts it doesn’t kill anybody as long as portfolio companies are well prepared and geared”.

Whether or not it’s already time for another issue of “Sequoia’s Doomsday Portfolio Briefing”, we strongly believe it to be good practice for European privately held companies to constantly prepare for a potential overall decline in investors’ confidence. Measures to protect your company against the odds of access to fresh equity include

· The build-up of equity reserves and permanent control of cash burn in order to have maximum runway

· A general focus on profitable and lean business models embracing early monetization strategies; we generally believe it to be rather risky for European start-ups to bet on strategic “zero-revenue acquisitions”; even an unproven “path to profitability” is in most European exit scenarios obstructing successful trade sales or IPOs

· Turning management’s attention to every company’s real assets: team quality, an on-going optimization process for the underlying business model, happy long-term customers, competitive entry barriers, margin control etc….Uber: 40bn$, Spotify: 6bn$, Dropbox: 10bn$. Do these valuations actually correctly reflect just mind-boggling business fundamentals or is there another less obvious common denominator? Well, while each of these equity stories is certainly unique, having Goldman Sachs as their principal cash-fuel provider turns out to be an essential element these players do actually have in common. A bunch of massively funded companies are currently seeking to make it to the public markets and are (quite rightly so) trying to advertise an unbroken and steep valuation uptake before going public. However, experienced investors are getting increasingly uneasy about the emergence of private convertible bond investors and hedge funds on board of these pre-IPO bandwagons.

“To me this looks like the precursor for significant post-IPO underperformance if companies with jazzed-up pre-IPO valuations finally hit the public markets” says Ventech Partner Christian Claussen. “Access to huge convertible debt facilities for notoriously unprofitable companies is just another facet of a general pattern”. Christian who has learnt his early lessons as a VC in the ’97-’00 tech bubble feels oddly reminded to stock-price boosting-techniques such as the famous ‘laddering’ which in hindsight were part of Wall Street’s bubble-tool-box heralding a 7 year nuclear winter for the European VC-industry (read the chapter on bubble #2 in this witty backgrounder).

For Ventech Partner Jean Bourcereau things are not even half as bad. “History does not repeat itself and I do not predict a 2000-like situation where excessive pricing was only one factor besides fundamentally unsustainable business models and systematically boosted market size estimations”. As a worst case scenario Jean rather foresees a potential 2008-like situation: “Who knows, we might eventually be in for a global 30% haircut on tech stock prices. And while this definitely hurts it doesn’t kill anybody as long as portfolio companies are well prepared and geared”.

Whether or not it’s already time for another issue of “Sequoia’s Doomsday Portfolio Briefing”, we strongly believe it to be good practice for European privately held companies to constantly prepare for a potential overall decline in investors’ confidence. Measures to protect your company against the odds of access to fresh equity include

· The build-up of equity reserves and permanent control of cash burn in order to have maximum runway

· A general focus on profitable and lean business models embracing early monetization strategies; we generally believe it to be rather risky for European start-ups to bet on strategic “zero-revenue acquisitions”; even an unproven “path to profitability” is in most European exit scenarios obstructing successful trade sales or IPOs

· Turning management’s attention to every company’s real assets: team quality, an on-going optimization process for the underlying business model, happy long-term customers, competitive entry barriers, margin control etc….