What I've learned through my investing careerFeatured

I’ve always been incredibly passionate about businesses and understanding how a company works. While I was torn between an operational role or an investing path, I eventually decided that pursuing a career in venture after college provided the best way to learn an incredible amount and gain exposure to many different types and stages of companies. I’ve met and worked with inspiring investors and entrepreneurs and learned quite a bit in my first few years. I was originally at Insight Partners, a growth stage software investment firm, and now am on the fintech team at Oak HC/FT. The following is a synthesis of what I’ve learned during these last few years. This insight hopefully can provide more clarity on what investing entails (besides excel, market maps, and term sheets) to anyone who is in the early days of, or considering a career in, venture capital. Source what you are passionate about:While this may be simplistic, it was probably the best advice I received from my first days at Insight Partners. Your role as an investor is to be a resource to management teams and help build companies, so you should be excited about the space and products your portfolio is building. Insight was a great training ground to discover what I was interested in, given I was in a generalist-sourcing role, meeting with any SaaS company regardless of industry. While understandably not feasible for everyone, I would recommend starting out in a generalist role because you will gain exposure to the intricacies of many different industries and gain a better sense of what you’re invigorated by investing in. That being said, once you find what you are passionate about, dig deep, as it is important to develop an area of expertise to distinguish yourself as an investor, to build a network, and truly be able to provide value to companies in your portfolio. Moving from a generalist fund to an industry specific one (I cover fintech at Oak HC/FT) solidified this for me as I’ve seen first-hand how having a specialization helps win deals and support our portfolio: everything from an incredible network of operators to fill open portfolio positions, to relationships with FIs that we can facilitate for customer introductions. Lastly, the partners have had decades of experience with the intricacies of how fintech works and how the industry has evolved (before it was even called fintech!) that provide an unparalleled intimacy with the ecosystem as we consider future investments and provide a distinction to entrepreneurs considering what advisors they want around the table.Investing is about pattern recognition:My time at Insight taught me that through a velocity of cold emails and cranking through preliminary financials, you can quickly identify what makes a “great” software company and which management teams have the potential to be great. It's unique to have gotten that exposure to so many companies so early on in my career, but any way in which you can get more reps will improve your skills and judgement capabilities around potential investments and accelerate your progression as an investor. This point was solidified for me by joining Oak, as my team invested in and built the first wave of payment innovation and fraud solutions. The time they spent advising those companies and understanding the intricacies of those verticals has helped them to identify and invest in the next wave of innovation - a result of time and continuous exposure to an ecosystem. While potentially redundant, I’ve found that more reps will improve not just the ability to identify a good investment but also add to a repertoire of different strategies to help your portfolio grow and push through roadblocks: the more execution strategies you see and understand, the better you can advise management on what to do in certain situations. The work you do on every diligence, even if you do not end up making an investment, will inform your next diligence. Compounding knowledge benefits any investor. Seeing how my new team responded to the implications of COVID exemplified this for me, for as someone very early in my career, I had not experienced such calamity. However, the investors I work with at Oak had done so many times (multiple recessions, etc) and were able to quickly devise a plan of action for all of our portfolio companies to help them navigate the turbulent early months of quarantine.All the work happens post investment, not pre-investment:This may seem somewhat intuitive, but I started my career at Insight, where the focus was on sourcing, or finding, the deal. The investment ‘functions’ were broken out into different departments. While this was great for me personally to learn how to source and was conducive to achieve maximum efficiency at a larger firm, it was not until I moved to a smaller firm that I got exposure to the full spectrum of investing. While sometimes it feels like you do an obscene amount of work pre investment during diligence (and then the majority of the time you do not even participate in the investment), having been in a more comprehensive role, I’ve come to see just how much work happens post investment - and how that work can really distinguish you as an investor and your firm. As you build your repertoire as an investor you most likely will have evaluated and supported more companies than the management team, and hence will have more context on situationally successful strategies. Ultimately this knowledge compounds so you can continuously improve at being a resource to your portfolio, guiding them through difficult decisions and thinking through strategy, M&A, execution issues, hiring, and more. That continuous exposure (theoretically) improves your ability to spot great investments and to assist your portfolio during turbulent times. Other thoughts and tidbits:Targeted cold-outreach is 99% effective if there is no warm intro possible. If purposeful and well researched and portraying strong intent, most people will respond - whether it’s because you want to learn and potentially invest in a company, connect with another investor you admire or want to co-invest with, etc. A “good” deal is somewhat subjective and changes based on investor criteria; there can often be quite a bit of noise around a company and just because something isn’t high profile doesn’t mean it’s not a great investment opportunity. There are many incredible companies that are flying under the radar or are bootstrapped and the rise of geographic centric investing (i.e. Drive Capital and other firms focused on midwest USA) is proving that true.Investing is quite an individual-focused career relative to working in industry (team and people management is not something that is inherently prioritized the way it needs to be for a company to scale). Some firms are structured to accentuate that individuality and you see the emergence of “celebrity” investors, while other firms are structured to emphasize a team-mentality - find what works best for you!While I’ve only scratched the surface in my learnings as an investor, this is my attempt to capture more of the nuances that were never exactly obvious as I considered career paths. Always happy to connect if you’re considering a career in vc. And if you’re a fintech company (regardless of size) please email me at [email protected] would love to learn more about what you are building.Disclaimer: by no means am I an experienced investor, this is a perspective from a junior investor a few years into her career with experience at two different firms open to sharing advice on the more nebulous aspects of the venture world
Thank you for sharing @ssamutin! Just forwarded this to a few friends who are interested in breaking into VC. I'm sure we all can benefit alot from your insights. I'm also wondering if you can share more about "which management teams have the potential to be great" - what would be some characteristics or key indicators from an investor's point of view? I ask because it would probably help us identify cofounders who can make the company great as well. Thanks!!
thanks @chilliangie - and great question. Its usually helpful to think of it from two different lens, but regardless focusing in on past examples of their "grit" and ability to persevere as well as lead and recruit talent 1) repeat founders - how much scale did they reach with previous companies, how un/successful was the exit and what did they learn, is it the repeat team and if so how well did they work together, how did they overcome past obstacles, their experience and knowledge of the space of the new company 2) with first time founders - do they know the space well and why are they the right ones to solve x challenge, how does the team work together and what experience have they had working together in the past, what (not necessarily a company) have they successfully built in the past
This was an insightful read, I’ve toyed with the idea of going into VC so thanks for sharing 💜
Hi Sophia! Thanks for posting.I have a question about pattern recognition -- I've seen some investors cite this as a good way to vet investments, and other mention it as a bad thing, one of the major contributors to making Silicon Valley so white and male (since everyone was looking for the next Mark Zuckerberg). Can you expand on how you look to use pattern recognition in vetting companies without it seeping into the demographic characteristics of who the founders are?
for sure @kendall actually Oak has 2 founding female partners so its great to learn from them. I would say applying the lens of pattern recognition around strong management teams works well because you want (esp at the early stage) to back the team that really understands the space and the problem they are solving (whether from personal experience or perhaps working in an industry)
@ssaunders I really appreciate your perspective and ideas. Your disclaimer was also helpful as when I was reading your description, I was wondering what your experience level was in order properly categorize your suggestions. I think this information is exceedingly useful. I particularly like when you described how so much of your early time was spent on "deal flow" only to find out later that the real work applies post-deal. Great insights that help to explain the work and execution required from a VC. Sometimes I think VC's get a bad rap about their returns. Some may be warranted, but in general, when you take on that level of risk and effort large returns are necessary. Thank you for taking the time to share.
Thanks @ssamutin for this contribution! I think all of these learnings & advice are spot on and super valuable to those looking to better understand what a career in VC is like. Why did you decide to go after FinTech? I’d love to hear more about what sub sectors or trends within FinTech are most interesting to you from an investor’s perspective. I did investing for 3 years right out of college as well and covered software as a generalist. But one subsector I loved was FinTech and ended up working in an operational role at a FinTech startup & still doing it 4 years later :) eventually my plan is to go back to investing and focus on FinTech. I also wanted to say I know Insight & Oak pretty well - congratulations on your career so far, both are fantastic firms. I love to see another woman kicking ass in an industry that’s still dominated by men.
@jessss thanks sm! your trajectory sounds really great as well. I was actually pretty flexible, just wanted a focus field and I had looked at a few fintechs in the past at insight; but I was really drawn to Oak because of how great the team is. In terms of trends - have been spending quite a bit of time on ecommerce enablement and then b2b payments/fintech solutions.
I resonate with your key takeaways so much Sophia! I've been at a midwest VC (Cultivation Capital) for the last few years and while I started as an operations generalist, I've loved getting to dive in our Food & AgTech fund and run our accelerator program! I love how you broke down several great pieces of advice and couldn't agree more- source your passions, identify patterns, and work hard to support your portfolio. :)