Young VCs & Performance
I was talking with one of my friends who is an associate at a large PE fund and he brought up the interesting point that he has “no idea whether or not my bosses think I’m doing a good job.” He believes he’s performing and is putting in the requisite time in the office - but at the end of the day, it’s unclear how he (as an associate) is being judged by the partners in the firm.
This made me think about young VCs - the associates and principals at venture funds who often don’t have direct voting say in investment decisions but are many times the “feet on the street” most accessible and meaningful to know for entrepreneurs. Venture funds have a relatively long life cycle with respect to understanding overall performance - the typical fund can have a 10 year investment horizon during which it will realize returns. Funds are judged by fairly simple, quantitative metrics - an internal rate of return.
But there’s an additional and important question to ask - how are (and how should) the individuals in the firm be judged? For the partners, performance is likely tied to specific investments they “own”, and partners are inherently tied to the lifecycle of the fund.
I wonder, though, what is the best way to understand the impact a younger member of the fund investment team is making. For the young investment professionals out there - how do you find you’re currently reviewed? Is it mainly qualitative and based on partnership feedback?
For entrepreneurs and related parties in the VC world - it’s important to understand the dynamics of different funds and how they operate. In some funds, non-partner professionals have a lot of say in the final investment decisions; in others, this sway is almost nil. Attempting to get a read on a investment professional’s place in the fund hierarchy can have a huge impact on efficiency and effectiveness of interaction for your specific goal.
