Many first-time founders underestimate the value of junior VCs, which can be a costly mistake. Investors look for hungry founders because they have the grit to fight through sleepless nights, setbacks and roadblocks.
Similarly, founders should be looking for hungry venture capitalists; they will find none hungrier than the junior VC on the team. The hungry junior VC can be an entrepreneur’s staunchest supporter, both before and after funding. To understand why this is the case, you need to understand a little more about how larger venture firms operate.
Understanding The Junior VC
There are two main types of junior VC: partner track and non-partner track. The nomenclature at every firm is different, but Venture Partners are often partner-track VCs, whereas Associates and Analysts are often non-partner track. For partner-track VCs, their goal is to make full partner, which means they need to build a successful investment track record.
Junior VCs invest in a very volatile asset class, and the number of discreet investment decisions they will get to make before their career is deemed either successful or unsuccessful is relatively small. Therefore, pre-partner VCs are both financially and emotionally invested in each and every company on which they bet. The future of their career depends on how successful their founders are. Make no mistake, these VCs will fight for their companies.
The other group of junior VCs, non-partner track, have all the same stresses as the partner-track VCs, but they have even more motivation. For starters, they have less control over the investment decisions being made, but have a track record associated with their names just the same. Further motivating these VCs is the fact that they are often hired for a fixed multi-year term.
Never forget that the venture relationship, like all others in life, is a two-way street.
These VCs know they will be out of a job sooner rather than later. Non-partner-track investors need successful investments, and they need founders like you willing to endorse them. Junior VCs are on the clock, and only your success will help them build their careers. A junior VC who will be looking for another job in a year or two may not only be evaluating you as an investment opportunity, they may also be trying to impress you as a potential future employer.
Once you understand these pressures, there are a few things you can do to get the most out of your junior VCs both before and after you take an investment.
Before Funding
Be responsive and be transparent. Junior VCs often function as the gatekeepers for their firm. They may be reviewing hundreds or thousands of opportunities every year, and the easier it is to work with you, the more likely they are to build a case for your company and present it to the partners. If you try to play hide the ball from the associate, you’re just cheating yourself out of an opportunity. They need to find winners, and they don’t have time to pry information out of you.
Remember, the good, the bad and the ugly are all going to come out in the diligence process. Be upfront about your business and you will gain the trust and alliance of the junior VC.
Be human. VCs are people too. When they meet someone they like, they want to help that person succeed. Believe it or not, many investors primarily get into the business because they want to help founders succeed. How do you get your VC to like you? Invite them to your office, introduce them to your team or grab a drink together. Pretend like you are dating, because, in a very real sense, you are.
If the VC you’re working with doesn’t like you, you have no chance at an investment. But even an indifferent VC will make it much harder for you to secure all the yes votes you need. A VC who really likes you and your team will go to bat for you, they will highlight your strengths to the partnership at large and will help explain why the one or two problems found in diligence are surmountable.
Keep them involved. As an investment gets closer to closing, the junior VC on the team may start to slip into the background and the partner may assert themselves. It’s very easy to forget the junior investor at this stage, but it is important for you to keep them involved in the process. If the closing date starts to slip or if little issues arise in the diligence process, the junior VC can help move things along and can provide insight on what might be slowing things down. Getting an early warning from the junior VC on problems popping up in diligence can mean the difference between getting funded and hitting the dead pool.
After Funding
Now that you’ve closed your funding round and the senior partner is on your board, you can forget about the junior VC right? Only at your peril. It will now be easier than ever to forget your first champion; they are off looking for new investment opportunities and you are back to building your business. However, ignoring the junior VC at this stage will rob you of great ongoing value.
Remember, the junior VC is researching and meeting with thousands of founders. If you maintain your relationship they will forward information on new competitors to you long before those competitors surface on your radar. More importantly, their job is building relationships. They will, without a doubt, be able to make valuable introductions to you and your business development team. Unfortunately, the junior VC can’t help you with any of this unless they know your needs.
How do you keep the junior VC engaged after fundraising?
Keep them in the loop. The senior partner is on your board but that is no reason to keep the junior VC in the dark. You may not want to send them board materials every month, but you can send them the monthly updates you send to all your other investors. Make sure they get invited to office parties and other events, and let them know exactly what your needs are. If you did your job pre-funding, they already like you and want you to succeed. Now, they just need to be kept in the loop so they know how they can apply the most leverage for your business.
Help them. Never forget that the venture relationship, like all others in life, is a two-way street. When you meet with new and interesting companies, introduce them to your junior VC. When your VC asks for help vetting a deal in your areas of expertise, take some time to look it over. And when your junior VC asks you to provide a reference to a prospect, take the time to be a good reference.
If you follow these very simple rules, you have the opportunity to earn yourself a life-long ally. It doesn’t take much effort, and most of it boils down to just being a stand-up person — but it can go a long way to making your company successful.