Law --> VC Work?

[Anonymous User]

Just curious if anyone on here can speak to attempting (successfully or not) to make the transition from law to actual VC work (not legal VC work). Are there any recruiters that work in this space that are worth speaking to? Any successful strategies?

[SFSpartan]

There really isn't a playbook for making this transition - some lawyers have done it, but they generally had an intermediate step between being a lawyer and being a VC (e.g. Peter Thiel). That said, starting a business blog, going to a top B-school, etc. are probably good ways of making the transition.

[RedGiant]

I would say this is quite uncommon. Most VCs have deep industry expertise (tech, retail, whatever) and most lawyers just don't have that skill. Possibly if you were, say, a consultant or banker pre-JD and then did a JD/MBA and then networked your ass off. You may guess too--most VCs don't love their lawyers. They see them as a necessary evil. So while you'd be able to negotiate a term sheet easily, I can't see how this would be much of a value-add relative to a rock star investor. I'm not saying don't try...but I haven't seen it done much, and I've bounced around the valley a lot.

More common is lawyer to startup lawyer or lawyer to startup founder.

[Anonymous User]

I did a good bit of VC/emerging company work in biglaw; I honestly can't remember anyone going in-house on the business side of things at a VC.

[s1m4]

Ive actually seen this with smaller / niche funds.

Progression ive seen is this:

EC/VC lawyer deeply entrenched in an industry as the go-to guy, meets some high networth individuals with connections,helps them form fund, becomes outside counsel/advisor of fund, becomes very close friends with fund partners, invests his own money at fund, becomes partner at VC fund, makes business / investment decisions at fund.

Ive seen variants of the above three times.

[LBJ's Hair]

TL;DR at bottom, but I figured I'd write an exhaustive response because venture capital/tech generally have become trendy and this topic has popped up a few times.

So. Most venture capital funds/growth equity funds/private equity funds with an early-stage component/whatever have a small in-house legal team, but that's probably not what you mean when you say "work in VC" - you mean like, investing.

Traditionally there...hasn't really been a set path to VC, unlike private equity, where there are annual "classes" of new pre-MBA associates coming from investment banks and (occasionally) top consultancies. Which makes sense - the investing style is fundamentally different.

[This will seem tangential but it's relevant.] Private equity funds traditionally make their money via financial engineering: you're buying businesses with debt, de-levering over a period of 5-7 years, and selling them/taking them public. So you need young guys/gals to like, do all the mundane, time-consuming stuff that goes along with buying a business: screening potential targets, building financial models, performing due diligence, securing financing, blah blah blah. Ie, former junior investment bankers. You hire a couple (or a small army, if you're a big fund) kids every year, work em, and kick 'em out after two years before they're too expensive. They're happy to do it because they get $$$, prestige, useful work experience, and a good shot at a top MBA program. Most private equity associates will NOT return to PE post-MBA, even from Harvard/Stanford/Wharton (to a lesser extent): too many good applicants, too few spots. Mathematical reality. If I'm a middle market fund with a 2 year program with 6 associates per class, I make *maybe* 1 post-MBA hire a year?

Venture capital is different. For one thing, there are fewer funds and each fund manages less money. The asset class is much smaller. Again, mathematical reality: it takes less money (i.e. equity from X fund) to START the next Twitter than it does to BUY Twitter today. Fewer funds with smaller fund sizes = fewer jobs. But more importantly - there's not much for a junior VC to *do*. A private equity fund needs young workaholics to do lots and lots of rote but important financial analysis to analyze any given investment opportunity (i.e., those Excel models and PowerPoint presentations). A venture capital fund doesn't because...there aren't any meaningful financials to analyze. Instead, you're looking at the technology, the market, the quality of the founders, etc. It's qualitative rather than qualitative. More importantly, though, VC partners are using their network to *find* the next Twitter and giving advice/making introductions to their portfolio companies. Sourcing. All stuff that generally comes from having founded your own company, worked in Silicon Valley for a long time, etc. You don't "how to create a billion dollar company" sitting in an office making a 100 page presentations. And that's really what VC is, right - you're making an investment of $ but also time/expertise.

That said...these roles exist. Few ways to get in:

1. Straight out of undergrad: You go to Stanford or a top Ivy or Stanford or a tech-y prestige-y school like Berkeley/MIT or Stanford or Stanford or maybe Stanford. You have a STEM background - but it's not like "I'm an engineer learning to code" STEM. It's "I'm considering dropping out to join/launch a start-up" STEM. So the VCs aren't hiring you because they think you want to invest. They're doing it because they want in on your start-up. Alternatively, you're at an investment banking/private equity/hedge fund feeder school and formally apply through on-campus recruiting/network. Insanely rare even at these schools. If you read the previous paragraph and didn't immediately think "that's me," it's not you.

2. Pre-MBA: You work in investment banking or private equity or at a top management consultancy, probably covering tech or biotech companies. You meet with recruiters, sell yourself, and go through a formal interview process. This is really new and only exists at larger VC funds, and again, it's reallllly competitive. Alternatively (honestly, probably concurrently) you're networking with partners at these funds, trying to figure out if and when they're taking on an associate. Sometimes funds just like, decide they like you and create the role. At a larger fund you could end up doing a fair amount of private equity-like valuation and shit for Series C/D/etc investments, i.e. basically growth equity. But for earlier stage investments, you're an unqualified version of your bosses, the partners. Taking a lot of meetings with founders, pointing partners to anything that's interesting, doing market research, a little portfolio management...basically trying to convince them that you're worth $120K a year and an office. (VC doesn't get you BigLaw/finance money unless you have equity.)

3. MBA: You go to Stanford or Harvard. Possibly Wharton. Probably not another M7. Basically the same as #2 but maybe you have formal tech-y experience instead. Alumni network, small number of openings via recruiters/on-campus stuff.

4. Tech: You're part of the Silicon Valley scene. You know founders and VCs and whatever. Probably went to Stanford. It just kinda...happens.

Any theoretical law school to VC route would be #3/#4. You're involved in the Silicon Valley scene professionally and socially. You went to Stanford or maybe Harvard (I will repeat this ad naeuseum). You *know* VCs. How do you get to that point? IDK - Wilson Sonsini or similar have deep Silicon Valley roots, so maybe work there? But it's not really...qualifying you to invest or evaluate tech companies in a substantive way. Maybe you go in-house at a Google or Facebook? But this is just practicing law with a tech flavor. Contracts are contracts. I can think of a few well-known JDs-turned-VCs. They went to Stanford. And they did not really...practice law. They joined start-ups and became entrepreneurs.

So...TL;DR: go get an MBA at Stanford. Or maybe Harvard. Schmooze and pray. (Don't worry, only half of your incoming class is doing the exact same thing.) If this isn't feasible, leave law asap to join a start-up because nothing you do as a lawyer will qualify you for VC.