Our profile series “What makes a good VC?” is starting a new chapter, where we speak with VC Analysts and Associates about the expectations vs reality of joining a venture capital fund, as well as the skills they rely on and the challenges of both finding a job in and working in VC. The first guest of this chapter is Eugenio Sabbadini, an Associate at Tel Aviv-based early-growth venture fund New Era Capital Partners.
A: Hi, Eugenio! Would you like to tell us why you chose to enter the venture capital industry and why you thought it would be a good fit for you?
E: I grew up in a family of antiquarians, so finding a discovery was always exciting for me. However, I am not personally into art history, so I knew I wanted to study Economics and Business, which is what I did in the US. Then, I thought that VC was the only means for me to find that excitement of discovery through something that is not art history. That is how I started. I have to say that, even though you are not the founder who is growing a company as if he is raising a child, you still get that excitement by being the first investor at the early stages. That’s the feeling I enjoy; I love the idea of being the one who supported a company that in 5-10 years will be a well-known established entity. That is the main reason.
A: Lovely! So, looking back at it, what skills did you think you would need to have to become a good investor when you were starting out?
E: I think it is mostly soft skills. It depends on what stage you are referring to: we do mostly early growth stage, so there is not that much quantitative analysis and it is mostly qualitative work. I think being good at understanding people is very important, because you are investing in the founders first, as the idea or the business model are likely to change, but the people will most likely stay the same. Especially in a fund like ours that is industry-agnostic, you get to speak with companies from all the different fields, and, in many cases, you may not know much about the area where the companies operate. So, you truly need to come with an open mind and a willingness to learn new things. If you go into venture capital thinking you already know everything, it is going to be a big failure. Overall, yes, it is mostly about soft skills like the ability to interact with people and the desire to be a student throughout your life. That desire to learn is vital, because you have to both follow the macroeconomic trends and go deep into certain verticals. For example, I had to look at companies dealing with mosquitoes, which I did not know much about, and I had to learn.
A: Really interesting! If you look back at the past few years, have there been any skills or qualities that you did not expect to have to rely on?
E: Definitely the aspect of understanding people. From the outside, that may sound obvious, but it is not at all. You are investing in people that may in a few years create problems for you. VC is an industry about big numbers. When you make an investment, it has to at least be worth a billion dollars. When you invest in an entrepreneur with an amazing idea, he may be fine with the prospect of selling the company when it reached 60 million dollars, which would be a problem for the VC fund. So, you need to understand whether the entrepreneur is mission-driven or if he is just looking for a quick exit to buy a house in the Bahamas. That is something that I was underestimating at the start. Of course, I still make mistakes, but this is something that comes with experience – you simply get better at it every day.
A: On the topic of making mistakes, what would you say are the most difficult parts of your job?
E: It is very hard to deal with private information. Every time you talk with a startup, the material you receive and the knowledge you have about all the competitors are limited. So, it can be hard to make educated decisions based on the limited data. Of course, every time you speak to a startup, the entrepreneur sells it as the next Google or Amazon, so you have to discern what is true from what may be exaggerated. That’s pretty hard. It’s not like stock picking where you have all the available information you might want.
A: That is challenging, indeed. How about the days when you were looking for VC jobs? Were there discrepancies between the hiring requirements you were coming across and the actual role once you started?
E: Yes, for sure. I think the reason that many job descriptions look for Investment Banking or Consulting as their main requirement may be that it is important for an Analyst or an Associate to know how to work hard. I did not do it, but I can see how it may give you that work ethic and the basic tools to deal with the everyday challenges of the VC world. It is a bit like needing a university degree to get into VC: most of the things I do in my job are not related to what I studied at school, but university gave me the basic toolkit.
A: Interesting. Could you tell us about your own journey of finding a VC role? Was it difficult? What was it like going from an internship to a full-time Analyst role?
E: So, I graduated in July 2017. I started an internship in Rome in September and got my full-time job in the VC I am currently am in March 2018. So, it took me almost a year. It is very hard, because there is not much turnover in the VC funds. For example, I am the only Associate in my fund, and the only turnover in the 5 years I have been there was one person who was a Principal. So, the main issue is finding open positions – it has a lot to do with networking. It is very hard to just apply on LinkedIn or cold email a General Partner, from my experience. It is mostly about expanding your network by going to events, using your university’s resources, showing interest in the industry on LinkedIn, but mostly by getting to know the General Partners in-person.
A: That’s very helpful, thank you! Lastly, what did you wish you knew before starting work as a VC?
E: That’s a good question! At the beginning, I thought that VC was more of a science with set formulas, so it was pretty complicated when I started to understand that there are no fixed rules when you analyse a company. This took me a while to figure out. Over time, you really start to understand that it is much more of an art. There is no right and wrong, and a lot of the answers will only be revealed in 5 years, so it requires a lot of mental flexibility.
A: Thank you so much! This was very insightful.
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