Building a company is fueled by highs and lows, but one of the few moments of potential ecstasy (or perhaps for grizzled veterans, deep annoyance) is the VC outreach email. You are building your startup on deforming IKEA desks eating frozen dinners when out of nowhere, a major VC firm reaches out and wants to discuss a potential investment.
But then you look up your interlocutor online and find that they have that completely enigmatic title of “Associate.” Heck, that email may well have been from me over the years.
What do you do? Do you connect with someone who may well be working at a prominent firm and try to engage? Do you flat out ignore it? Do you equivocate and delay?
In short, do VC associates matter to your fundraise?
First, what exactly are associates and what do they do?
The best way to understand the work of a venture firm is to look at their actual activities rather than the titles or listed duties of any individual person. On the investment side, there are three main activities: analytics, networking / deal sourcing, and closing.
Analytics is all of the market mapping, thesis development, tracking, and tech conference going taking place at a firm. The goal of all of this effort is to understand what’s happening, what spaces are interesting, what startups are great, whose investing in what, etc. This is the world of the VC blogosphere, and even parts of Extra Crunch. By doing all of this work, VCs hope to prepare themselves so when they run into the next Facebook, they know it when they see it.
There is this common linear view that fundraising startups migrate from an analyst’s market map to an associate’s intro coffee meeting to a partner’s check. This is pretty false
Next, networking and sourcing is the coffee meeting hell that pervades a VC’s life. This is all the demo days, email intros, lattes, and meetups that are required in order to find great founders and invest in them.
Finally, there is closing, which encompasses everything from selecting companies to invest in, to convincing the founder to take your money, to closing the round and performing the diligence required.
There is this common linear view that fundraising startups migrate from an analyst’s market map to an associate’s intro coffee meeting to a partner’s check. This is pretty false, at least from my experience and the experience of many of my venture friends. Partners don’t get to their positions without building great sourcing networks and thinking through great investment theses. Far from being at the end of the chain, they are often at its head. They are the first to learn about hot new deals, they are the first to take a meeting, and they substantiate their investment on a thesis they designed themselves.
So what, then, does an associate do?
In my way of describing it, they extend the normal patterns of activity of the partners they work for. After a decade or two in the industry, almost all partners have established certain ways of doing their work. They know where they have found their best investments, they have their key centroids in their social networks who source them great deals, and they have mechanisms in place to find and refine new investment theses.
But the world is always changing, which means that those established patterns can quickly become stale — and perhaps without the partner even realizing it. That to me is where associates fit in. They horizontally add new contacts, events, coverage, theses, and more into the investment loop. In other words, they extend the range of a partner, and if an associate is fortunate to find fertile new grounds for investment, they can start to migrate their firm to where the next wave of investments will be.
Sometimes this “extension” is clear. For instance, a partner may not have done anything in VR, so they might hire a sort-of designated VR associate to expand the franchise in that direction. More typically though, associates just add a bit to everything in the investment process.
The best associates tackle new territories, and in the process, build out their own deal sourcing networks and theses. Longer term, assuming they are spending time in an interesting space, they will either get promoted or switch firms to move up the career ladder.
The one job that associates perform for founders
So that’s what associates do for their venture firms. What then do they do for founders?
In my view, associates have exactly one purpose, which is getting you as quickly as possible in front of the check writer that will sponsor your investment round. Associates can and should be bridges between the Kremlinology of the VC partner meeting and you as a founder. They should be able to tell you who will do your deal, why they would and should do it, and help facilitate that transaction.
Associates can be helpful, they can and should be nice, and they have a useful role to play in the venture landscape. But let’s be clear: they can’t write checks, and checks is what you are looking for.
This shouldn’t take a crazy amount of work to make happen. It always fascinates me that some associates seem to take their founders for a loop with multiple coffee meetings, phone calls, customer diligence calls and more just to have a meeting with their partner. My general rule was one meeting (sometimes two if there were multiple founders and they weren’t all there in the first meeting). Either you feel comfortable getting other people on your team involved or not, and if you are not comfortable, then why the hell would you take more meetings with that founder?
Now, let me provide one caveat. The power of an associate is generally inversely correlated with the scale of a venture firm. Associates at smaller and higher-velocity seed funds often have a lot of influence (there simply isn’t that much of a team to begin with), while their brethren at late-stage growth shops have almost no power whatsoever.
If you feel that the associate you are talking to is dragging their heels, then just cut them off immediately. Venture firms move quickly, particularly at the earliest stages. If an associate can’t just send an email and schedule a meeting with a decision-maker, why bother? That handoff is a low bar — associates will do it several times per week if they are at full productivity. You either meet their bar or you do not, but meeting after meeting is not (likely) going to change that calculus.
Outside of this one job though for founders, associates can be useful as an intelligence tool on what is happening in a market. If you’re in VR let’s say and the associate you are talking to covers that space, they should (not always, but really, they should) know everything going on in that market. Pick their brains, ask questions. You might find out about a couple of competitors you didn’t know about, or about a larger company’s new initiative that might be an interesting sales lead. Even if you aren’t the right fit for their firm, the associate might also have some insight on other firms that might be worthwhile to engage with.
The importance of relationships in venture
Associates can be helpful, they can and should be nice, and they have a useful role to play in the venture landscape. But let’s be clear: they can’t write checks, and checks is what you are looking for. They can be useful mechanisms to get the right meetings with the right partners at exactly the moment you are ready to fundraise. You probably shouldn’t piss them off by being an asshole to them, but at the end of the day, they are not the decision-maker. And if you learn anything about sales, it is that you want to pitch the person that holds the purse strings.
So VC associates matter in so far as they can get you a meeting with the right partner. Of course, many other people who aren’t associates could presumably get you those meetings as well, but then again, they aren’t employed exclusively for that purpose either. If the associate path doesn’t work, consider alternative avenues.
Ultimately, these sorts of relationships fit with all the other relationships required in building a startup. As I wrote a few months ago about working with the press and doing PR:
The single greatest secret of building any venture, actually, the greatest secret of life is that relationships are everything. We live in a free world, and no one is obligated to do anything for anyone. Venture capitalists aren’t obligated to write a check, partners aren’t obligated to sign a deal, and customers never have to buy your product.
So it is strange then that when it comes to working with journalists, so many founders lose their relationship-building mentality and treat writers as an afterthought or someone to refer to the VP of Marketing. You don’t hand your top investors to your CFO, and you wouldn’t hand off your top customers to your VP of Sales. So neither should you hand off your top journalists to someone else.
This applies as much to junior investors as it does to journalists. Relationships always matter, and you should be building them all the time. But just be cognizant of what your counterpart might actually be able to do on your behalf. That will ultimately save you an enormous amount of time in your fundraise, and hopefully net you that lucre at the end of the process.