As an associate at a small VC firm, it's easy to lose track of what really matters: deals. That's why I started following the 20% rule. Each week, no matter what else is happening, I target 20% of my time on sourcing and investigating potential deals.
The point of venture capital, after all, is to make money by investing in great companies. You do that by sourcing new deals. It kind of looks like this:
raise money > source deals > make investments > earn money > raise more money > source more deals
So why isn't that number higher than 20%? Mainly because there's an entire web of administrative and operational requirements to operate a fund. A good chunk of that is noise, in place so the firm can ultimately source more deals. Portfolio support and investor relationships, however, can be huge levers for value creation. Those are the areas of VC that excite me the most. My time generally breaks down to something like this:
The point of venture capital, after all, is to make money by investing in great companies. You do that by sourcing new deals. It kind of looks like this:
raise money > source deals > make investments > earn money > raise more money > source more deals
So why isn't that number higher than 20%? Mainly because there's an entire web of administrative and operational requirements to operate a fund. A good chunk of that is noise, in place so the firm can ultimately source more deals. Portfolio support and investor relationships, however, can be huge levers for value creation. Those are the areas of VC that excite me the most. My time generally breaks down to something like this:
- Sourcing and diligence - 20%
- Firm operations - 20%
- Deal execution - 15%
- Portfolio support - 15%
- LP relations/fundraising - 15%
- Networking/education - 15%
I don't know how this compares to associates at other firms. My guess is that it depends on the firm size. At a smaller firm, you get to see everything, so your time spreads more evenly across different functions. Friends at larger firms share stories of entire days spent taking notes for higher-ups.
I feel lucky to have joined a smaller team for my first job in venture. With experience, I expect my time to skew more towards the value creation side of the business.