#14 - Venture Capital Fund Modelling: Masterclass II & Breaking Into VC As An Undergrad From Pillar VC

👋 Hey there! Welcome to Saturday's edition of this week's Break Into VC Newsletter. We've got a packed issue focusing on everything you need to break into venture capital.

• Deep Dive On Venture Capital Fund Modelling: Masterclass II

• Today’s Tips From VC Professional Advice From Pillar VC To Break Into VC As An Undergrad.

• 20+ Venture Capital Job Opportunities.

• Upcoming Global Online and In Person VC Events

• Must Read Articles on Startups, Tech & Venture Capital

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DEEP DIVE

Venture Capital Fund Modelling: Masterclass II

In Wednesday’s edition newsletter we discuss about How VC Firms Calculate the Average Check Size For Startups - Masterclass I. If you haven’t read that I highly recommend to spend some time to read. Here’s the link.

In today’s writeup, I’ll share the math and process on how VC calculate the target ownership stake in a startup. Let’s deep dive into it.

Consider VC Fund Size = $20 M and 10 years of tenure (Life of fund). But $20M is not the investment capital that VC going to invest in the startups.

There are other costs that be deducted from this amount to come up with the investment capital.

So, let’s first look into the cost associated with the VC Business.

Investment Capital = Fund Size - Organizational Fees (One-time fee) - Operational Fees (Annual) - Management Fees (Annual)

• Organizational Fees (One-time fee) - Fees required to set up the fund (Legal or administrative activity)

• Operational Fees (Annual) - Required to manage day-to-day fund activity.

• Management Fees (Annual) - Annual 2-2.5% of fund size.

Continuing with the example -

The fund takes Management fees of 2% annually mean for 10 years. And operational fees are $50K per year. As und tenure is 10 years then the total operational fees for 10 years is $500K. And let’s consider the organizational fee is $50K.

Hence, the Investment Capital = Fund Size - Organizational Fees (One-time fee) - Operational Fees (Annual) - Management Fees (Annual)

Investment Capital = $20M - $50K - $500K - (2% size 10) = $20M - $50K - $500K - $4M

Investment Capital = $15.45 M

So - $15.45 M is the total investment capital that the VC fund will invest in the startups. But before that, they will decide on the investment capital into the initial investment funds and follow on investment funds.

Let’s assume the fund decided to keep the 30% of investment capital for the follow-on investment. hence- Follow on capital = $5M.

Hence Initial Investment Capital = $15.45M - $5M = $10.45M

And the fund will invest in 20 startups initially.

Hence the Initial Check Size for A Startup = $10.45 M / 20 = $522.5K.

This is the average check size that the fund planned to invest in a startup.

Now, we have the average check size that the fund is going to invest in any company.

So let’s move to calculate the ownership percentage of VC in any startup.

Assume the post-money valuation of the company = $5M.
Hence Ownership percentage = Investment Amount / Post Money Valuation

Ownership Percentage = $522.5 K / $5 M = 10.4%

Hence the ownership of VC funds in the startup is 10.4% at this funding round.

That’s it. It looks simple but most aspiring venture capitalist can’t answer this in interview process. So, please spend some time to digest these numbers.

TODAY’S TIPS FROM VC PROFESSIONAL

Breaking Into VC As An Undergrad From Pillar VC

Subaita Rahman from Pillar VC shared her journey of breaking into biotech venture capital as an undergrad. While her experience is specific to biotech, the insights and lessons she learned are broadly applicable across various VC firms and sectors.

VCs look for these three things:

1. ability to connect others to opportunities/jobs

2. creating network effects within your own network

3. access to high potential individuals + ability to pool knowledge

These areas translate into roles that VCs often hire for such as scouting or community roles. For undergrads - building communities is the easiest and most high value way to break in. Growing and maintaining a network is a skill.

Other types of roles ranked by how easy it is to get in:

• Content / writing - VCs often have dedicated content teams to push out pieces that they want founders to know or thesis on areas they want people to build in

• Scouting - difficult if you don’t already have a deep network where people are starting companies relatively often

• Venture associate roles - highly competitive, VCs usually don’t hire undergrads for VA roles and only PhDs but exceptions can always be made

• Biotech Investing - probably the least accessible to undergrads. almost every person doing full time investing has a masters at the minimum, or are/eventually pursuing graduate degrees. there is a shift these days though!

Ways they hire:

1. you convince them to by having access to networks they don’t have access to and regularly be around high potential individuals or founders

2. they are looking for someone and you serendipitously are in the right place + time

How to be in the right place/time?

1. find good mentors

2. imbed yourself in core circles

3. make sure it's truly a fit for you ie. if you want to help build a biotech company, don't do vc.

Feel free to check out the detailed article here.

VC JOB OPPORTUNITIES

20+ VC Job Opportunities - Internship to Full Time Job Roles

• VP People & Culture - Airtree venture | Australia - Apply Here

• Junior Legal Counsel - UK - Apply Here

• Founder Scout (Internship) - Antler | Sweden - Apply Here

• Associate Counsel, Funds and Compliance - 500 global |USA - Apply Here

• Investment Principal - Munich Re Venture | USA - Apply Here

• Analyst - Qi Venture | India - Apply Here

• Program Manager - Plug and play tech venture | USA - Apply Here

• Partner Success Trainee -  Plug and play tech venture | Spain - Apply Here

• DevRel - GrayScale Venture | India - Apply Here

• Fund Operations Executive - TNB | Singapore - Apply Here

• Events Lead - Upfront Venture | USA - Apply Here

• VC Analyst Intern - eurazeo | France - Apply Here

• Marketing & Community Manager - Agfunder | Singapore - Apply Here

• Strategic Venture Capital Investor - Winde Venture | USA - Apply Here

• People and Talent Leader - Playground Global | USA - Apply Here

• Analyst, ClimateTech Venture Creation - Diagram | Canada - Apply Here

• Investment Associate, Compute - Playground Global | USA - Apply Here

• Investment Associate - Blumberg Capital | USA - Apply Here

• Associate, Tech Team F Prime Capital  | USA -  Apply Here

• Investment Associate - Forum Venture  | Canada - Apply Here

• Principal - Blackhill fund | India - Apply Here

• Portfolio Manager - Scientifica | Italy - Apply Here

Want daily VC Job updates/want to learn about VC from basics... Join our VC Crafters' Slack community to learn, network and craft your path to venture capital...

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DON’T FORGET

How Can a Software Developer Break Into VC? - Read the Journey.

Check out SWE2VC article’s to get updates on how can someone from SWE break into VC.

Get High-quality software startups delivered straight.

Get access to venture scalable software startups direct to your inbox. It’s read by leading VC firms, check out here.

VC EVENTS

Upcoming Global Online and In Person Startups & VC Events

• FREE 3-hour Masterclass on AI & ChatGPT (worth $399) designed for marketers & founders makes you a master of 25+ AI tools, hacks & prompting techniques to 10x your marketing efforts & revenue. Register & save your seat now (100 free seats only) → (Highly Recommend)

• TEN Capital Network AMA: Climate Tech Investing | July 30th - Reserve Your Seat (Online)

• Fireside Chat with Rand Fishkin (Founder of Moz & SparkToro) on the DNA of an Entrepreneur | July 31st - Reserve Your Seat (Online)

• EXITS: power plays & maximizing returns By Apex Venture Partners | Aug 1 - Reserve Your Seat (Online)

• Fireside Chat: Leadership Paradigm for a Disruptive World with VC Partners | Aug 1st - Reserve Your Seat (Online)

• Climbing the VC Ladder: Analyst to Partner, 'Anti-Dilution' Learning Series by India Quotient | Aug 1st - Reserve Your Seat

VC CRAFTER’S PICKS

Weekend’s Must Read Articles On VC, Startups & AI

• Y-Combinator Partner: Some Of The Best Startup Ideas Live In A Grey Area of Legality.

• 15 Steps to Know If Your Company Can RETURN a VC Fund.

• Investment Memos (How do Investors think and write investment memos?)

  • The investment memo by NextView

  • Sequoia's Investment Memo on YouTube

  • Memos by Bessemer Venture Partners

  • Sword Health Investment Memo

Even if you visit any venture capital firm, website you will find section where they have shared about why they have invested in this company? I highly recommend to go through those article, this will help you to get idea on how investors think while making investment decision - what things they consider and what not.

• The AI Plateau Is Real — How We Jump To The Next Breakthrough By Emergence Capital.

• Picking winners is a myth, but the Power Law is not.

• Compensation at Big Tech, Startups, and VCs. (If you are looking to compare the salary across various job roles - the best article to read).

Join our VC Crafter slack community to learn, network and craft your path to venture capital.

That’s It For Today! We’ll be back in your inbox On Monday.