Want to Understand What Associates at VC Firms Do?

Posted on Jan 8, 2014 | 14 comments


Happy official New Year’s, all. It’s that time of year where we think about new beginnings.

Jordan Hudson Principal

And there’s none that makes me happier than to announce that Jordan Hudson has been promoted to a Principal at Upfront Ventures. Please help me congratulate him by Re/Tweeting this post (and following him if you don’t already).

I thought this was a good chance to talk about what Associates at VC firms actually do and define what on Earth a “Principal” is.

What is a principal at a VC firm and how does it work at Upfront Ventures?

Most firms have “associates” and “partners” and some have an additional role called a “principal.”

Associates have different functions at different VCs. Usually there roles are a combination of:

  • Deal sourcing for partners
  • Deal screening
  • Deal support / analysis / quant / legal for deals a partner is seriously considering
  • Portfolio company support & analysis
  • Portfolio community building
  • Industry reviews
  • VC firm admin
  • VC firm policy or fund analysis
  • Helping be the VC “presence” at key events
  • Alumni activities

And so forth.

Associates often shadow partners at board meetings so that they can help follow up with the company on important initiatives between board meetings. I’m a proponent of this (provided the associates stay silent during board meetings) because it gives the VC firm leverage and provides and extra set of eyes & hands to help support the company. Smart founders use this extra resource to their advantage. Just ask Rob Bailey ;-)

Most firms hire associates straight out of MBA programs and usually it is a “2-3 years and out” type of job. I think there are two reasons for this:

1. Most associates need some entrepreneurial experience before actually making investments
2. VC firms have a limited size & number of partners and therefore the model just wouldn’t work to promote large numbers of people to become investors

So the “VC associate” is largely a launching pad job for exceedingly bright and hard-working young tech professionals. I think it’s great for some people because it really does give you some solid benefits:

  • board exposure / experience
  • inside insight into VC decision-making
  • a really wide angle view of the tech industry since you see so many concepts / so many pitches and REAL data points on how startups perform financially
  • a top-down view on HR challenges at startups; and, obviously:
  • a great network

At Upfront VC we have a very strict policy to hire pre MBAs into the role.

Why?

Mostly it’s philosophical. What you need to be a great associate in my view are skills that an MBA won’t teach you:

  • Be super strong mathematically / quantitatively (which you either are or your aren’t but an MBA won’t improve)
  • Have really strong analytic skills to put large amounts of information into context
  • Ability to manage and prioritize large amounts of tasks since you’ll get many things thrown at you from various directions
  • Ability to source information easily to help build a thesis around companies / industries / competition
  • Great networking skills, which are critical when you want to be about to reference entrepreneurs & concepts and bounce your ideas off of other people in the industry
  • Great social skills – especially so that you don’t become an arrogant, callous, know-it-all that many VC’s can become

I say this last point only in half jest. In most VC firms partners are usually in their mid-to-late 30s when they join and I’d say the “sweet spot” for VCs is in one’s 40’s & 50’s (see Fred Wilson post on the topic).

So Then WTF is a “Principal” and Why are you Promoting Jordan?

Jordan joined us a couple of years ago from Fox Filmed Entertainment where he worked in corporate strategy and he previously had worked for GCA Savvian in investment banking. He was also an undergraduate of the one place that I think is cranking out some of the best young entrepreneurs and investors these days – Wharton. My wife is an MBA graduate of their business school (she’s the smarty in our house) and she always told me, “Wharton MBAs are smart but the Wharton undergrads are where the really talented people are.”

My experience tells me the same.

In Jordan’s first year he did company analysis at a level of insight beyond what we had ever produced internally. He jumped into some portfolio company exercises to help with pricing strategies, budget templates, M&A support, marketing function reviews, etc and started to show us how valuable he was to entrepreneurs. And believe me they were vocal about it.

After a year I asked Jordan to work alongside me as the head of our internal “strategy & operations” team as we worked to define the kind of firm we wanted to build for the future. He proved to be invaluable not only in helping portfolio companies but also in helping us run the firm.

In 2013 we launched many firsts to reinvent our firm. We relaunched our brand name. That involved a lot more work than you might think. We had to define our brand values to define a name that we felt was fitting. We had to create a logo and look-and-feel. And we had to then build out new marketing materials and a website.

We added new partners – Greg & Hamet.

We reinvented our annual meeting and now use the occasion to throw an LA Tech & Investment conference with hundreds of the best tech you’ll see in LA.

And we’ve begun relaunching our “platform services” for entrepreneurs. Our theme for 2014 is “teach a firm to fish” where we build more scalable support for portfolio companies.

And did I mention RELAUNCH A NEW WEBSITE! (finally ;-)) Jordan completely owned this process (although he had major support from Kyle Taylor and from our collaboration partner on this process – Red Antler. But Jordan was the owner and he managed the process as I imagine somebody inside of Apple would manage the quality release of one of their products.

So when we look at the entirety of his skills: great analytics, great operational support for portfolios, incredibly mature judgment on teams & companies and internal operational experience – we knew we wanted to see even more out of Jordan.

And of course we also think about the fact that as many entrepreneurs and entrepreneurial concepts gear towards a younger generation we also needed investment professionals who are in that demographic. Even though my wife  thinks my true mental age is still around 13, sadly I am not in this youth demo ;-)

Of course as a firm we will continue to hire and groom many associates and the model simply doesn’t allow most to become investment professionals and that’s a sad fact of life because we’ve worked with some amazing associates over the years but as it really is more of a staging ground we see our associates go on to take operational roles at companies and that’s as it should be.

Jordan has proved the exception. And effective immediately Jordan will have the authority to make investments. Of course our expectation is that Jordan will be working closely with partners as he considers the type of investments he’d like to make and as he learns the ropes. And he will still have many responsibilities that an associate will have. But he is truly empowered to make the case internally for an investment, lead the process, consummate a deal and take the board seat.

I have every confidence he will exceed our already high expectations.

Congratulations, Jordan.

  • http://www.pointsandfigures.com/ pointsnfigures

    Congrats. It’s fun building.

  • http://byJess.net/ Jess Bachman

    Jordan is a smooth operator. Congrats to him and the new site. Just looking over the Upfront portfolio it feels like there is a lot of fashion/beauty companies in there. I don’t recall you writing much about this, but it would be interesting to know why this seems to be a major theme of yours.

  • Greg Mand

    Congrats to Jordan and concur with the missus…Wharton undergrads are top-notch talent.

  • http://bothsidesofthetable.com msuster

    We’ve done many over the years but it’s certainly more the minority of investments rather than a large focus.

  • Alexander

    Congrats, Jordan! Great to read a story about Upfront nurturing talent and growing organically from within.

  • PookyCornweasel
  • http://krispennella.com/ Kris Pennella

    Congrats Jordan, and thanks for the insight into how Upfront is structured Mark. I hope we see some future posts about “teach a firm to fish”.

    On the topic of fashion & beauty investments – beauty/wellness alone is a high double-digit $B+ market space*, I could see why Upfront would be interested in the sector.
    *(I couldn’t quickly find my reference for the exact revenue number, so I decided not to quote a number that could be incorrect)

  • Allan Eshuijs

    Congrats to Jordan and the Upfront team and what an amazing way of putting someone in the spotlight, Mark.

  • http://www.DesignA.ws/ Design A

    Congratulations! Pop a bottle (or three)!

  • Guest

    The new site looks great.

  • Abhishek Rathi

    Congratulations Jordan and the Upfront Team. Thanks Mark for the insights.

  • http://eastagile.com kenberger

    Hey Mark- seems to me that you asked the question “what is a principal?” twice here, but never actually answered it. (?)

  • http://www.EyeOnJewels.com/ Darius Vasefi

    Congrats, will be looking forward to learn more about and from Jordan. I must say the new site looks impressive, combined with the complete re-brand this is a major project.

  • http://chrisarsenault.wordpress.com/ Chrisarsenault

    What a great post MArk. congrats Jordan.