Girls Who Fund is an internship programme for budding female investors, run in Australia in conjunction with three major VC firms. It inspired another programme, VC Internship, which ran for three weeks in July. Vyoma Patel was one of the interns. Here, she gives a personal account of the lessons she learned along the way.
Looking at me, you wouldn’t have guessed that I spent the past three weeks at an internship for young women to explore careers in venture capital (VC). The inaugural internship was held at three of Australia’s top VC firms, which together control almost half a billion dollars in investable capital.
I had the opportunity to spend time at Blackbird Ventures, Main Sequence Ventures and Reinventure, respectively. I found myself at the centre of many meetings in which leading VCs and start-up founders deliberated on deep tech such as quantum computing, launching Australia’s space industry or the application of machine learning to financial services.
During my internship, I learned some valuable lessons.
Creating your own opportunities is a competitive advantage
To me, VCs make investments in catalysing the future and I wanted to learn exactly how. My journey began with a DM on Twitter, which led to pitching the idea of interning at Blackbird.
Taking that initiative was how I knew that an internship programme organised by Blackbird Ventures and Reinventure was in beta. I applied immediately after the official launch of the internship at The Sunrise conference.
I’m not a start-up founder but cultivating the spirit of entrepreneurism taught me that ambition coupled with action is how you try and create opportunities in a world bereft of it.
Being a VC intern requires stamina
The three-week internship was jam-packed, starting the day at one part of Sydney and ending the day at another. With an all-access pass, I was involved in partner meetings, pitch meetings, board meetings and investor meetings as well as flying to Melbourne and spending the day at Startmate, attend Vogue Codes and Blackbird’s investor day.
I learned about what’s involved in crafting portfolio reviews, conducting due diligence, how VCs raise funds from limited partners, the mechanics of portfolio return in a typical 10-year lifespan of a fund, or fielding questions on the future of venture capital.
The state of venture capital in Australia
I had the unique experience of interning at three VC firms with diverse portfolios. Blackbird invests in ‘global from day one’ companies, ‘interplanetary from day one’ companies or in the infrastructure for the transportation of the near future.
Reinventure invests in emerging fintech, agencies of data or security, and embedded financial services.
Main Sequence Ventures is a new fund investing in start-ups with a connection to public research such as universities or research institutes.
Collectively, A$568m in venture capital was raised in 2016 – however, this is a fraction of US VC funding. Venture capital in Australia has historically garnered upended returns on investments and yet, the nascent Australian venture capital industry is in a regrowth phase.
The true impact and size of the return on investment of venture capital for Australia will be reported within a couple of years as the concurrent set of investments reach fund maturity.
Think like an investor
Charlie Munger advocates for building mental models to better equip and aid in understanding a problem from multiple dimensions. For a VC, intuition guided by heuristics while challenging your cognitive biases prevents missing a potential investment because a VC with broken heuristics is likely to fail.
The difference between a good VC and a great investor is being able to derive the simplest equation, that being able to convert $1 into $3. It doesn’t matter whether it’s a GP raising a fund from LPs, or a founder pitching to VCs for capital.
Finally, helping someone who reaches out to you should be incentivised like any investment because you never know how and when that investment will pay off. Success is not a zero-sum game.
The best founders have the ‘get stuff done’ gene. As a VC, it’s about distinguishing this quality in founders who are praxis-oriented versus those that are not. Some of the most formidable founders with unparalleled strength of character and business acumen that I had the opportunity to meet were Jessica Glenn and Gen George, founders of Tamme.io, and Flavia Nardini, founder and CEO of Fleet.
Here’s an interesting statistic: more women VCs do not equate to a greater number of female entrepreneurs getting funded. However, the success of female-led start-ups increases when backed by women VCs from the investing team.
Changing the ratio starts by challenging the entire start-up ecosystem, which is exactly why initiatives such as this are so pivotal. To all the VC firms out there, run this internship to encourage more women to consider a career in VC.
The future of venture capital
The long-term future of venture capital is closely related to the recent phenomenon of initial coin offerings (ICOs) to literally everything from China and the emergence of micro VC funds.
Money raised from ICOs in the past two months have already surpassed venture capital funding in internet start-ups globally and four times more than VC-backed blockchain start-ups. VCs invest money and provide value-add in an advisory capacity.
If ICOs disrupt the traditional VC model, it will be by start-ups raising a stupendous amount of money through ICOs, then offering equity at 3pc to a VC such as Fred Wilson in exchange for an advisory role and board seat. This is financially more lucrative than laboriously raising funding from VCs, which also happens to be more competitive.
Imagination as an investment strategy
A question I tried to figure out the answer to during my internship was just how VCs see around the corner to invest in the future that will transpire and select the winning team to build that future.
For example, how did Peter Thiel assess his angel investment in Facebook? Naval in Twitter? YC in Airbnb?
For seed-stage companies, there is limited data to assess in order to make a successfully prescient investment. Due to limited data, VCs depend on pattern-matching and the most important factor is the founders, then the magnitude of the problem, the market and the business model.
Think of it this way: instead of asking whether a start-up will succeed or fail, ask, if it does succeed, how big can it get? Here’s where using your imagination to grasp the uncapped potential of an investment comes in to play.
VCs are about convex options, ie to opt in to really big markets. Investing is about increasing the probability of success, not guaranteeing it. A diverse fund portfolio will have a high hit rate of failure and perhaps a few will reach more than A$1bn in valuation, but that’s the potential for upside.
For series A, B and C, all of that retrospective forward-thinking as well as business fundamentals play into an investment decision. Arguably, nothing is more humbling than crafting an anti-portfolio as the hallmark of all your omissive mistakes versus commissive mistakes.
My investment thesis
My investment thesis centres around solutions that provide utility and enrichment to every single person in the world.
I want to invest in those building AI scientists to accelerate the rate of scientific breakthroughs, disruptive innovations for the internet, regenerative materials (self-healing concrete, self-healing polymers), robotics, streamlining or automating legacy systems but, most importantly, fixing Sydney’s public transport.
For me, this internship was a stepping stone to becoming an impactful investor.
By Vyoma Patel
Vyoma Patel participated in the VC Internship in Australia.
A version of this post was published on Patel’s own Medium page.