Equity Co-Investment

Finance a la shmoop what are five questions you can expect to be asked in

a venture capital investing interview? okay so if you're watching this video

we're gonna assume you're not an already successful entrepreneur who takes a seat [Woman watching shmoop video]

as an EIR or entrepreneur in residence which is a completely different kind of

interview in that case you're likely investing five million or so of your own

dollars into the fund as a limited partner and then opining on which

investments you like and don't like as the firm is rating your rolodex and in

this case it's more like the firm is interviewing you than the other way [Men appear beside woman]

around so we're gonna skip right through the EIR thing we're also going to

assume that this is a Sand Hill Road Silicon Valley VC firm that you're

interviewing stunningly few great companies have been built outside of

that little bubble on earth so there is understandably not a lot of demand from

investors to throw money at such tech hubs as Clearwater Florida Nashville

Tennessee and burnt corn Alabama you know that's a real place but ok so you

just graduated the business school at Stanford or you have a PhD with a whole [Woman standing beside her details]

lot of work experience at Google or Facebook or Amazon or one of the blessed

hot companies fast on the rise you're likely in your mid to late 20s

and you're not really sure what you want to do with your life maybe become an [Woman walking through the park]

investor maybe become a founder of a hot company yourself you just haven't found

that great idea yet or maybe you want to be a very early employee at the next

Google or Facebook hundreds of amazingly talented

candidates want your seat they're all fighting for them and there are precious [Woman with candidates for interview]

few seats you actually want that are available like there's a lot of really

bad VC firms you don't want to work for you note that only a dozen or so venture

funds are actually demonstrably good most of them kind of sort of almost

break-even year after year but have a prayer of something grey maybe someday

but investors couldn't get into Sequoia or kleiner or f8 so the overflow goes to

the next dozen or hundred or thousand and yes,

there are actually thousands of mediocre VC firms who exist and yes, only a few

of them are actually good meaning that they have returned to investors

consistently better results than they could have gotten just investing in an

S&P 500 index fund so beware that you're entering the lottery ticket business [Person scratches lottery card with coin]

yeah that's kind of what the world of VC is great work if you really know how to

flip head 16 times in a row and we have an award-winning video on that subject

if you want it first up why are you doing this? why are you here

and the person asking you that question will have kind of some rancor in their

voice with the eyebrows knitted... best answer in the world because I couldn't [Baseball thrown into air from stadium]

throw a curve ball yeah if we could all be pitchers and make like a million

bucks a game like why wouldn't we do that but we can't so we don't and well

here we are but you give it to them straight I don't know what I want to be

when I grow up and most VC's will laugh at you with no investing track [VC woman laughing]

record if you tell them that you want to be a general partner at the firm in

order to get a portfolio to run money to manage well you have to have a long

track record of making money for shareholders a magnetic history that

attracts the best entrepreneurs to want to take money from you instead of the 87

others all throwing money at them and so on so be straight you don't know all

right second question what do you know? well you're an ABD; all but dissertation

PhD from MIT now expert in underwater robotics [A robot under water]

particularly with the military applications

well you detail for them the challenges in operating machinery in cold saltwater

battery issues volts recovery when one fails the cost structure the

state-of-the-art like what the Russians and Chinese are building and what

they're doing in Atlantis and then you regale them with your amazing knowledge

on this arcane but hot investment area like imagine digging for gold [Robot digging under water]

robotically under the sea under the sea and then you dangle the golden nugget a

golden nugget yeah you talk about the discovery show gold and dream about an

army or fleet of automated underwater drilling robots who just drill all day [Woman celebrating]

and night at non-union wages and return a week later with pot loads of gold well

who knows maybe one of the VC's will be so enamored

the idea they'll want to angel fund you to go start that company and you amused [VC woman celebrating with arms in the air]

yourself that the VC's who funded Google made like 8 billion bucks

the founders made 80 billion so in a bake-off being a founder of a company

that does well is always preferable to just being the one who poured coffee and [Man takes sip of coffee]

equity for them but being the investor right better to be the founder than just

the investor all right third question what do you expect your day to be like?

well early on in a VC career you're just smiling and dialing you literally do [Woman answers phone]

nothing all day long other than email and cold call CEOs and key executives of

hot startups asking if they need money well you'd better know this in advance

it's called deal sourcing and it is the hazing entry job of the VC world so why

do they need PhDs and Stanford MBAs doing this perfunctory task well because

the VC firm has to appear smart on the other end of the phone line it's kind of

a firm branding thing like an ego thing like the firm wants the best and [Candidates lined up for interview]

brightest of the country to be their front end and firms always think they're

better than they actually are or at least perceived the clients want

the Harvard Stanford MIT moniker and so the VC's pay up for that highly

synthesized talent and they pay a lot all right fourth question what do you

want to earn? well if they are already asking you that question in the

interview that's a really good sign they wouldn't be asking if they were trying

to convince you to take a job as a business development exec at pre-

bankruptcy.com yeah and the right answer whatever you pay will be just [Woman waving arms in the air]

fine I'm sure you guys have a rep for being fair to your young people that's

the right answer when they ask you about comp whether they do or don't VC's love

hearing crap like that so feed the beast you're marketing yourself here not at a

confessional right all right fifth question what happens if you wash out?

well as we mentioned the VC business is largely the business of picking the

right lottery ticket there are thousands of VC's actively managing money and only

ten good deals happen in a year a good year so the odds of you washing out are [Man discussing chances of washing out]

extremely high and if you do well there's no option to stand on the street

corner holding up a sign saying we'll roll dice for food [Man holding sign to roll dice for food]

so what do you do well I'm really good at creating financial models so I could

work for an investment bank right? no you'll be too old when you wash out

you'll be 30 or more oh well it could be a CFO for one of the companies right?

no the skill of a VC is about investing high risk capital, not about counting the

beans of an already going concern well after a long silence you ask about the [Boy sitting at desk with PC]

interviewers belief and trust and tarot cards and psychics and ask about job

opportunities in that field yeah you wash out there's no mercy

so may the spirits be with you roll them well roll the bone...