Summarizing my exit interview with a venture capital intern 

Two interns finished their learning cycle with Artha this week. One of them wanted to speak to me and get my feedback on his performance during his 4month internshipThe schedule short feedback session went on much longer, and at the end of it, we got into an exciting topic – the importance of forming an opinion.  

I believe our discussion applies to anyone who wants to work in the investment business, especially earlystage venture capital. I am sharing a synopsis of that conversation with the permission of the intern.  

 

Intern: What is one piece of advice for me? 

Me: Form an opinion and be vocal about it. It is acceptable to be wrong, completely wrong, and heinously wrong. However, it is cardinal mistake to have the ability to accumulate and analyze data but lack the courage to form a decisive opinion. The best investors have often sought out views from their peers and from people who could provide them with a fresh perspective. In fact, the investors I emulate often seek out contrarian views to their own to test their hypothesis.  

 

Intern: Why is the trait of forming and communicating our opinions so important? 

believe that investing is the ability to predict future outcomes of current decisions, and an investor’s brilliant foresight finds appreciation only in hindsight. That is why I consider investing more of an art than scienceA room full of experienced appreciators of art would almost inevitably have deep-felt disagreements on the value of Van Gogh. They could all be right or be wrong – we would only find out once the money gets transferred into the sellers account 

 

What should an intern do?  

fondly remember eyeopening realizations I have had during discussions (sometimes heated) with interns, associates, principalspartners, coinvestors, and even entrepreneurs over the last 10 years in venture capital. Initially, it was intimidating for me to showcase my opinions in front of the experienced hands of this game. But I realized that I wasnt learning anything by keeping them to myself. I learned more by expressing my incorrect opinions and recognizing the gaps in my understanding, over keeping my opinion to myself for fear of getting called out.  

A newcomer to the investment industry should seek out experiences where they can form these opinions. Join investment clubs, seek out investors who have strong opinions, even if they are contrarians to their own, but learn how to build and present your investment viewpoint. 

 

Don’t be afraid of being wrong; we learn best through the mistakes we make. Expressing your opinion is a win-win situation. You either get called out and learn where you went wrong, or your opinion contributes valuably to the discussion. Most importantly, you grow with each interaction and learn to receive constructive criticism. 

The Fastest Path(s)

The fastest path to the CEO chair is very different than what you might believe!

Last week I concluded the appraisals for 2019 as well as inducting two analysts into our team at Artha Venture Fund. I attempt to have a conversation with each of the new inductees, and one of the questions I ask them is where they see themselves in the next five years. Most of them have plans on doing an MBA or becoming a manager, but very few have plans to become entrepreneurs.

Therefore when I do their appraisal, I ask them the same question once again, and it isn’t surprising that most of them have had a shift in their five-year goals. Invariably they would like to be in some entrepreneurial position whether that was in a start, proprietorship, NGO or as a fund manager. I hold the entrepreneurial energy that flows within the walls of our office responsible for this shift, and I am confident that I am the one responsible for dropping cans of fuel to flame any evidence of an entrepreneurial spark.

While I have recalibrated the goals for many team members, I have found that like the entrepreneurs that I have met, my team holds misconceptions about the path one should take to becoming a CEO/Founder. I could harp on my own experiences as a case study for them to follow, but it was a pleasant surprise to learn that the team of Nicole Wong, Kim Powell, and Elena Botelho were conducting a study that I could share!

In a ten year study, the trio assembled data on 17,000 C-Suite executive assessments, studying over 2,600 of them in-depth. They wanted to analyze who gets to the top and how and they went onto publish a book based on their findings called, The CEO Next Door.

Their study (aptly called the CEO Genome project) took a close look at the career paths of individuals that they have (once again) aptly called, CEO-sprinters. Their study discovered that on average, it took 24 years from the date of joining their first job to become a CEO. Therefore CEO-sprinters are those individuals that got the CEO title before 24 years.

Some of the data sharing from the study are thought-provoking:

  • 24% of the CEOs had an elite-MBA
  • 7% graduated from an Ivy League school
  • 8% did not complete college
  • 45% had had a significant career blow-up

The study concluded that the CEO-sprinters had three types of career catapults that got them to the CEO chair early viz:

  • Go Small to Go Big
  • Make a Big Leap
  • Inherit a Big Mess

Understanding these career catapults and experiencing them is crucial. Their importance is inferred by the fact that:

  • 97% of the CEO-sprinters had had at least 1 of those experiences
  • ~50% had had at least 2

I will review the book in a future post, but until then you can learn about the career catapults as well as other findings from the CEO-genome project at   

I concur with the findings of the CEO Genome project, and it has once again confirmed what my mentor & ex-boss used to ingrain into each leader that was led by him

The people that solve the most problems make the most money!

My Rules for Successful Angel Investing

When I first started angel investing in 2009 in India it was considered (and probably still is) a from of gambling that was reserved for haughty, tech-obsessed, introvert &  radical investors who were chasing a pipe dream in that one “jackpot” investment that would make tons of money to cover all losses.
Infact I vividly remember my father having a tough time explaining what I was doing with my career to friends or family with any semblance of pride.
I must be honest – I was very green and still learning the ropes of investing in public markets at that time let alone the world of the unlisted! I just knew that there was going to be a winning set of rules that will separate the winners from the losers in this space. 
So over the years I have read/seen/heard, tried & tested the theories many types of early stage investors from across the globe.  I have imbibed their knowledge & experience and combined them with knowledge & experience of the great investors (like Buffet, Soros, Munger, etc) in developing a set of rules that have worked very well for me.
Disclaimer: Probably none of these are my original creations and I have no intention to impart any investment advice. I am just jotting down what I follow as simple rules and could be handy for you too in evaluating a startup for investment 

  1. Invest a maximum of 5-10% of your overall portfolio into early stage
  2. Divide that amount into 10-12 companies to be invested into annually 
  3. Build a diversified portfolio 
  4. The earlier you invest the larger the risk and the reward
  5. Set a maximum valuation over which you will not invest – doesn’t matter how well the company is doing
  6. Bet on the founder & not the idea
  7. After the founder the “lead” investor has the 2nd most weightage in the investment decision
  8. Make sure you have set aside money to invest in follow on rounds
  9. Build a portfolio of startups instead of a startup that makes up your entire portfolio
  10. Invest in businesses you understand (conceptually)
  11. Completely understand their revenue & profit model before investing
  12. Take enough equity for your money to make it worth your time  
  13. Leave enough equity on the table for the founder to stay motivated 
  14. Be prepared to book losses quickly and workout a tax efficient strategy for winners

These are the rules that have helped me and have given amazing returns to many investors that I have met who have been generous to give me the opportunity to learn from their experiences. 
Would love to hear your thoughts on these..