Revolutions

You may have heard the adage that it takes 10,000 hours to master a skill. When it comes to the business of venture capital, it’s no exception.

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However, there’s one caveat to this theory that is often overlooked: deliberateness. If you’re a firm believer that practice does, in fact, make perfect, yet your definition of practice is just mindlessly going through the motions, you’re wasting your time. To truly master a skill, you need not only significant training volume but also excellent quality. Quality training, in its essence, is more efficient training. Meaning there is less time needed to achieve the result desired. One surefire way to ensure that your training efforts are of high quality is to incorporate a serious amount of variety.

If you’re still with me, I’m going to show you how this can all tie into venture capital with two examples.

Running Pitch Meetings 

There are a few things that go into running a good pitch meeting; the main one is asking good questions. When a general partner asks you how a meeting went, and you can’t answer some of her basic questions, it is utterly mortifying. I’d know, I’ve seen me do it.

The advice I’ll give here is twofold. You can’t learn how to run a pitch meeting well if you don’t try your hand at running them yourself. Also, you won’t learn how to run better meetings if you don’t observe how others do it. At Venture University, I make a point to not only hold meetings with our general partners there, Sky and Andrew, but also with many of my coworkers. I’ll often bring in people from other teams or sit in others’ meetings to observe the types of questions they ask and learn from that. Otherwise, I’m just sitting in the conference room day after day asking the same questions, not getting any better, and not learning anything.

Building and Analyzing Financial Models

This is a great example where volume training has a significant effect on your ability to master this technical skill. Yet, your ability to compare one company’s business model to another drastically enhances your ability to understand and ultimately create a model. If you’ve built a model for 50 restaurant companies, you’ll inherently know what standard metrics to expect and can see when something is out of whack. You’ve got to get your revolutions in.

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The key takeaway here is to get comfortable with being uncomfortable. My old high school rowing coach used to tell our team that “every day you have the option of getting better or worse.” Maybe that statement was profound, or maybe it just stuck with me because he was a 6’5″ German dude that scared the living daylights out of me.

Doing something familiar every day won’t help you grow as quickly as trying new approaches, and entertaining new ideas.

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The DIY VC

At the end of the day, the Venture Capital business is a knowledge race. The more you know, the more intelligently you will invest. This is one of the primary reasons VCs will expect analysts and associates to have some operational experience before joining a fund. If you’re trying to break into VC, one of the best tactics is to show that you add value to a firm. A few ways to do that are:  having unique technical skills, having proprietary deal flow, having a valuable VC & LP network, and having profound market expertise.

The last one I’ve mentioned is probably the easiest to attain as a young person. There are a ton of resources you can use to your advantage to self-educate on markets and the business of venture capital. This approach reminds me of this scene from Goodwill Hunting, but instead of wasting money you are wasting time.

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I’ll quickly go over a few different types of resources I use to get a competitive edge and share the ways I make time to read/listen to it all.

Podcasts

This one is an easy one, but an often overlooked one. You can listen to podcasts while you’re in the gym, during your commute, and as you’re winding down for bed. So, if I spend an hour in the gym, an hour total going to and from work, and carve out 30 minutes before bed, I can absorb two and a half hours of content every single day — that really adds up over time. Here’s a list of my favorites, which are all available for free on Apple’s podcast app:

  • The a16z podcast by Andreessen Horowitz: great for learning about evolving markets through the lens of intelligent VCs.
  • Machine Learning Guide by OCDevel: Great overview and starting place of machine learning as a subdivision of artificial intelligence. There are other resources that get much more technical. If you don’t come from a technical background, start here.
  • FringeFM by Matt Ward: This one is a fun one. It covers theories and conspiracies about the future and technology.
  • StartUp by Gimlet Media: A great podcast that is an in-depth, intimate, story of startups going from concept to successful business.
  • The Twenty Minute VC by Harry Stebbings: Harry covers many great topics in the VC business and frequently brings on great guest speakers.
  • How to Start a Startup by Y Combinator and Stanford University: This is an actual course covering startups with some really B.A. lecturers: Sam Altman, Dustin Moskovitz, Paul Graham, Adora Cheung, Peter Thiel, Alex Schultz, Kevin Hale, Marc Andreessen, Ron Conway, Ben Silbermann, Alfred Lin, Patrick and John Collison, Aaron Levie, Reid Hoffman, Keith Rabois, Ben Horowitz, Marissa Mayer, Hosian Rahman, Kirsty Nathoo, Carolynn Levy, and more.

Books

Books are something I’ll usually save for travel, vacation, or as an alternative way to wind down before bed. Unfortunately, you can’t read books on the go as you do by listening to podcasts. If you’re especially busy, try to find an audiobook to make it work.

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  • Venture Deals by Brad Feld: This one is great for getting an understanding of term sheets. Brad Feld and Jason Mendelson also offer a free online class for this, from which you can get a certificate.

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Online Classes

Repeat after me: Coursera is your friend. Coursera offers an awesome array of online classes to take in advanced topics. This is great for more technical stuff, or, if you have a technical background, business topics. This is just something you need to make time for. If you want to take the fast lane to a career in something like VC, you have to put in the hours. For the moment, I only have one recommendation here, but Corsera, again, offers a wealth of knowledge for free. For a small fee, you can also get a certificate which would be a great line item for your resume.

Blogs/ Newsletters/ Articles/ Magazines 

There are so many resources out there for gaining new perspectives and staying current. Staying current in market activity is especially valuable if you plan on holding an interesting conversation with a VC who is interviewing you. I usually start my mornings with this stuff when I show up to work to prepare for the day.

I usually am able to get in 3+ hours of self-education each day with relative ease. It’s an absolute must if you are trying to get into venture at a young age. These resources just scratch the surface of what’s out there, but it’s a great starting point. The most surefire way to get a job in VC is to be extremely well informed and have a strong, opinionated investment thesis that is enticing to potential employers. Plus, this will help you actually become a better investor once you do break into the space.

Why Do You Want To Be An Entrepreneur?

I ask the same question at the end of every interview I do with a founder: “Why do you want to be an entrepreneur?” You might have guessed that based on the title of this post.

When you invest in early-stage companies you need to collect a lot of intangible data — I kind of touched on that in my last post. I like asking this question in particular because it says a lot about the founder as a person. The founder is what you are ultimately investing in — not the product.

To be an entrepreneur you need to be a bit of a psychopath. If you’re 90% of founders, you’re looking at spending 3-10 years of your life working your ass off, working after hours, and working weekends just to end up broke, back at square one. Yet, great entrepreneurs don’t bat an eye at that statistic because they simply don’t care. To them, their work is vastly more important than the risk. Most entrepreneurs have the world’s biggest grin on their face when you ask them this question — and they should. The entrepreneur is a brave, passionate creature. These are perhaps two of their most defining, essential characteristics. If an entrepreneur isn’t overwhelmingly curious and driven, that’s a big red flag.

I’m not really looking for a specific answer when I ask this question. I’m looking for any response that is believable and authentic, and, of course, I’m also looking at how the founder reacts, not just what she says.

Churn: The Crystal Ball Metric

One of the responsibilities of a good venture capitalist is to have a good understanding of what the future holds. Between shifting markets, developing technologies, and disruptive entrepreneurs, the details of the future prove to be a bit of a moving target. Venture capitalists do their best to understand what may happen in the future but have to admit that no one truly has a crystal ball.

When evaluating a company, you must do your best to create potential answers for the elements that are unknown. Ask yourself: What are the narratives that convey the value the startup offers and why it will ultimately be successful? This is especially difficult for early-stage companies with limited data and performance metrics. However, there’s one metric that may provide you with a snapshot of a startup’s customer experience: churn.

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Churn, which is essentially the inverse of retention rate, displays the rate at which a startup is losing customers. High churn rates indicate that there may be something wrong with the physical product or service and that user growth may merely be a result of an effective marketing strategy. Plus, high churn adversely affects the growth that you’ve worked so hard for. Running a startup with high churn is like trying to ice skate uphill.  Low churn rates often translate to a long customer lifespan, a wonderful customer experience, and most importantly a high likelihood for gaining cheerleader customers.

download-2.jpg You may be wondering what I mean by cheerleaders — allow me to explain. Folks in marketing will often categorize different types of customers in a multitude of ways, but there is one type that is typically the most coveted: cheerleaders. These customers will be active advocates of your company to all of the people in their own network without any incentives from the company like a referral system. These cheerleaders create somewhat of a network effect where they strongly encourage their friends to use the product too. They create an infrastructure for the most powerful type of advertising: word of mouth.

Here’s a great example of a cheerleader I think we can all relate to.

Low churn rates and a high number of cheerleaders are two excellent metrics that create a narrative of a valuable customer experience, which typically equates to an extended customer lifecycle and high lifetime value.

So, does low churn singlehandedly give a VC the green light to invest in an early stage startup? Absolutely not! It’s like getting the corners done in a 1000 piece puzzle. However, it’s a great way to get a read on how the product is being received by the customers when there is limited information available.

When facing a significant amount of uncertainty, I often think back to some advice from my high school physics teacher: Use everything you know to figure out what you don’t know.

In VC, we can equate this to finding these crystal ball metrics for early-stage startups that will give us hints about what the future of the startup may look like.

The Art of Developing Deal Flow

Famous venture capital firms have a lot of what I like to call “passive deal flow.”
download.jpgEvery single day reputable VCs will get their inbox blown up with pitch decks from entrepreneurs. Often times, a good bit of their job — or the analysts’ job — when it comes to deal sourcing is to merely filter this massive influx of pitches.

 

But what about us new kids on the block? When you’re just starting out at a new fund with a limited industry network, a much more substantial portion of your deal sourcing comes from “active deal flow.” This can mean a whole laundry list of things, which is at times overwhelming for new associates. In this blog post, I’m hoping to shed some light on the situation.

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Simply put, the only goal of working on one’s deal flow is to find the winners — the ones that are going to return that 10x, 20x, or even 100x for your fund. Above all else, you don’t want to miss the big one — the Uber, Snap, Facebook, etc. You can’t make the best deals in the industry if you never see them, right? However, in an ideal situation, you are spending less time sifting through deals that aren’t interesting to you so you can spend more time evaluating the great ones. So, there are two sought-after elements here that you must optimize for: quality and volume.

Some bad examples of hijacking your deal flow for high volume while ignoring quality would be to manually scrub all startups on crowdfunding sites or blast out an ad campaign for your fund. Quantity does not necessarily equate to quality. While you may be able to find that winner you’re looking for through a sheer volume play, wouldn’t you rather save the time?

The unfortunate truth here is that most high-quality deal flow is relationship based and takes a while to develop; however, in the meantime, here are some actionable items to improve the quality of your deal flow.

Network, Network, Network: Attend each and every networking event that you can, so long as it is relevant to your investment thesis. A networking event can mean a tech conference, an accelerator’s demo day, or anything really. As long as there are investors and startups there, it’s worth your time. When your at these things it’s important to tumblr_nuc9gavynl1rf6ailo1_250.gifactually meet some folks, otherwise you might as well have stayed home and worked on your computer. Here, you can do a multitude of things to up your game. You may befriend another investor who could share deals with you. You can learn a considerable amount from industry experts speaking on panels. You can even speak on panels — which gets you a lot of attention.

 

Develop an Investment Thesis: Not only is it smart to think hard about what particular types of startups you find attractive but if you become super passionate and opinionated about a specific topic in venture a couple things can happen. First off, you’ll have a much easier time connecting with VCs who may share deals with you. Convincing another investor of a compelling investment thesis will not only get her interest but will also cause her to want to see your thesis in action. If your thesis works and it leads you to a massive exit, you guys are buddies now. Additionally, becoming vocal about this thesis could get you featured on certain online media like blogs, vlogs, podcasts, press releases, etc. In a perfect world, VCs or entrepreneurs who share your vision will reach out to you.

Leverage Your Own Personal Network: Whether you think you have one or not, everyone has a valuable personal network. Your peers are slowly becoming professionals in their various industries. If you went to college, your alma mater has a multitude of resources including, teachers, current students, and possibly entrepreneurial programs — all of which can prove to be a fountain of information and valuable deals. Being active and open on social media about your investor status, also, will let enable online connections to refer you as an investor as any and all of them meet entrepreneurs or see ideas by happenstance.

Follow Other VCs: Examining other VCs portfolios and their investment theses allows you to check the pulse of the startup community, so to speak. For example, you may notice that one VCs most recent fund invested a ton in robotic food prep. Follow up with someone at that firm. Ask why they thought that was so attractive, and how the companies are doing now. There may be an allocation for you and your fund in some of the companies, and your VC contact will have tons of research documents prepared on these investments.

These are the things I’m currently doing to work on my deal flow, but I’m always trying to find more creative and effective ways to source deals. The VC that is more efficient with their time spent on finding deals has a larger opportunity to self-educate, conduct due diligence, and be a better investor in general.

Alright, that’s it, guys. What are you looking at me for? Get out there and find that unicorn.

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Intro: Couch to VC

Welcome to the Boisfonblog! Allow me to introduce myself — my name is Carter Boisfontaine and I’m building a career in Venture Capital. Welcome to ground zero of the mission.

A little background on me: I’ve just recently graduated from USC’s business school. USC is where I fell in love with startups. You’d be hardpressed to find a collection of people as crazy, hungry, and brilliant as entrepreneurs — it’s infectious. I mean, innovation, at its core, is rocket fuel to any economy. New successful products are to startups as new successful startups are to a country’s economy; startups make a new thing to sell to the world to make it happier and more efficient. Failure to innovate is a failure to stay profitable, and the analogy goes on. Entrepreneurs are not afraid of challenges, they are excited by them — they feed off of adversity.

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You get it. I’m fascinated by startup culture. So I think I’m in the right field. I got my first VC job at Canyon Creek Capital in Los Angeles, where the managing partner, Buck Jordan, opened my eyes to the world of frontier technology (a fancy term VCs use for new tech like robotics, AR/VR, artificial intelligence, etc.). Since then, I’ve been doing everything I can to break into the space.

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I’m sure many of you have heard of those running apps that say something like “Couch to 5k.” Well, that’s kind of what this is — call it Couch to VC. So here’s the plan: as often as possible, I’m going to use this blog as an avenue to collect my thoughts, ideas, and experiences down this path — and hopefully share some valuable knowledge along the way. If this blog ends up being nothing but a glorified notepad for me, great! If it amasses a huge following and develops a community of learners, thinkers, and sharers, double great!

This blog is for anyone looking to start or build a career in venture capital, or really anyone looking to learn about VC at all.

So, what am I up to now and why do I feel like I know a thing or two? Great question, glad you asked. I’m currently an investor at Venture University, a fund/program in San Francisco that ironically aims to disrupt the business of disrupting. I’ll get more into what VU is later, but, for the purposes of this introduction post, I’ll share the highlights. Also, here’s a nice piece by the Harvard Crimson in the meantime.

Effectively, VU is an 11-week program I’m taking this summer where individuals aspiring to build a career in VC can learn from some of the best and do everything a VC does from deal sourcing to deployment. That’s right, we’re all investing real money into real startups. Over the course of the summer well be meeting with and get lectured by some of Silicon Valley’s most famous VCs, entrepreneurs, and startup influencers.

The program is lead by two phenomenal guys that are VC war veterans, Skyler Fernandes and Andrew Zalasin. Skyler is the founder of two funds; his most recent fund is Clevland Avenue, a $150M fund co-founded with Don Thompson, the ex-CEO of McDonald’s. Andrew has worked in VC for over 25 years and has proven himself as one of the highest performing VCs out there. He’s been early on companies as reputable as Facebook and Twitter and has realized some of the best returns on the market. However, all you’ll really find out about him on the internet is that he loves cars. I think it’s by design; he likes to keep a low profile.

The two have a very “yin and yang” type of dynamic — their difference in style has yielded a fantastic learning experience.

All in all, the program is going to be one heck of an experience, so I’m sure I’ll have some worthwhile experiences and wisdom to share!

So, what’s next you ask? Will I join another fund? Work at a startup and get some operational experience? Who knows! This blog is about learning anyways, isn’t it?

Down the rabbit hole we go!

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