Rolling Through the Wild Ride of Venture Capital: Equipping Yourself with "Venture Wheels"

What I needed to learn about Venture Capital

Hi everyone. I’m Ethan Hansen. Originally hailing from the scorching deserts of Arizona, I’m a recent graduate of Brigham Young University-Idaho, now finding my footing in the dynamic world of venture capital at Sputnik ATX VC here in Austin, TX.

I was walking through the mall with my wife last weekend when I stumbled upon a scooter rental spot named “Venture Wheels” (photo above). The wheels in my head started turning (pun intended) to create the perfect metaphor for my journey into venture capital. 

My interest in VC sparked during my sophomore year of college, thanks to an influential professor, Christopher Andrews. He described the world of VC as an exhilarating, glamorous, and endlessly captivating career path.There were stories he’d share of successful investments and ones that ended poorly. Experiences he had working with founders that were brilliant and ones that needed a lot of help. The stories he shared just kept making VC sound like the best job in the world,so I became hooked and knew this is what I wanted to do.

Soon after starting, I was awakened with what it actually takes to work in VC. From the careful process of due diligence to the necessity of investing time and the ability to form your own opinion, I quickly learned that success in this field demanded more than just enthusiasm.

Due Diligence: VC requires constant research and analysis. It's not just about making investments; it's about diving deep into market trends, assessing risks, and identifying opportunities that others might overlook.

While interning, I was tasked with completing an investment memo for one of our portfolio companies. It was an intensive process that required several days of work and multiple meetings with the founder to gather the necessary information. After completing the memo, I was asked to present it to the team. However, during the presentation, I encountered numerous questions for which I didn't have answers, and important information was missing from the memo. I felt like a failure and embarrassed about presenting my work in such a state. But what did I learn from this experience? The importance of thorough diligence.

In response to the questions raised during the presentation, I conducted additional due diligence with the founder to ensure I understood some of the key things that we needed to know. I worked with him to have a better understanding of his pipeline, who his customers were, how long the process from lead to final customer takes, etc.

Due Time: Rome wasn't built in a day, and neither are successful startups. Patience is key in this journey. You work alongside your portfolio companies hoping to see them turn into Unicorns, but that requires a lot of time and a lot more patience. Most worthwhile investments take 6-10 years or more from inception to play out.

During that time, you must stay steadfast, prepared for the ups and downs of the startup landscape. You have to keep the mindset of positivity and focus on the long-term vision. We have portfolio companies that I’m excited to see grow and develop into one day future Unicorns, but that’s going to require time and patience.

Forming an Opinion: In venture capital, shaping and expressing opinions is crucial. You've got to dive headfirst into opportunities to let those opinions take shape. Each investment demands a deep dive into markets, competitor analysis, and strategic positioning. As you delve into these aspects, your own perspective evolves with each company you evaluate. This process helps distill information, allowing you to form clear opinions.

Having an opinion isn't always easy, but it's necessary when you're taking significant risks. Take, for instance, the task I was given to create an investment memo. It wasn't just about diligence; it was also about developing my own perspective on the portfolio company. As a newcomer, I didn't have a clear opinion at first. However, through this task, I learned the importance of having a well-founded opinion, supported by clear reasoning.

I’ve realized the importance of having a reliable set of “venture wheels” when navigating the world of VC. After all, it’s the excitement of overcoming these obstacles that makes the journey rewarding.