What I Learned From My First 6 Months in Venture Capital
Six months ago as we started to learn what Shelter in Place means, I made the leap from a familiar territory of working at early-stage startups to investing in them: I joined a seed-stage venture capital fund called NFX. Having spent the majority of my career in the operational weeds of building and scaling new companies―first in China with AppAnnie, then in Korea with Uber, and then in San Francisco with Ethos―being on the investor’s side of the table has proved a unique challenge, made all the more exceptional by the COVID-19 pandemic. The last six months have been filled with adrenaline and a steep learning curve. I’ve summarized my learnings here for other fellow operators looking to transition into investing:
You’re not Alice in Wonderland.
What makes venture capital such an exciting industry is that the job exposes you to cool new things every day. It’s easy to be lured in countless directions and new ideas, buoyed by the passion of the founders you meet each day. Entrepreneurship is indeed a wonderland, but my power as an investor comes from my ability to resist rabbit-holes and instead develop key areas of expertise. You wouldn’t want to go to a dentist with joint pains, or to a carpenter with a plumbing issue. To be really helpful to founders, I need to be able to give relevant advice, which comes from sharper judgment often aided by pattern recognition. By focusing on specific industries — like looking at labor marketplaces and applying my lessons at Uber or consumer fintech startups based on my time at Ethos — I can assess new investment opportunities with more context and understanding and, once committed, serve as a knowledgeable and thorough partner to startup leaders.
Be proactive in leveraging your networks.
A career in startups is built on the foundation of being proactive. With no defined path forward, you need to push ahead through uncertainty, with confidence in your own instincts (and a dose of good luck.) The same is true in venture capital. When you’ve decided on your industry (see above; you’re not Alice!), actively build out your network of other experts, customers, and companies you can constantly learn from. When you’re on the offensive in developing your own expertise and cultivating your relationships with others, you get ahead of the time-consuming process of networking. When the right opportunity comes, you’re not being introduced. You’re picking up a conversation you’ve already started.
Cultivate the art of a graceful “no, thank you.”
“No.” Regardless of the context, it’s a powerful and painful word. I’ve come to appreciate the importance of “no” in the VC world when that Venn-diagram slice of “good business” and “venture scale returns” intersects so narrowly. There are also cases falling within that narrow slice that just aren’t good fits for the fund I work for―despite the founder’s savvy, or the market’s potential, or the technology’s ingenuity. And when it’s not a fit, communicating “no” as promptly, clearly, and gracefully as possible is paramount. It’s the right thing to do to be respectful of everyone’s time — and most of all, for the founder, who could be spending that precious hour with another investor who may be a better fit for them. A “no” delivered with a sincere “thank you” is the crux of being graceful here. Showing gratitude demonstrates your respect for the founder’s time and ideas, but also keeps your own pessimism at bay. Learning to say “no” repeatedly was probably the most surprising part of transitioning to VC, and it can wear on you. Acknowledging the good in what you reject keeps you objective and humble, accepting the inevitability that sometimes you’ll make the wrong call and wish you had given more weight to the positive signals instead of focusing on the risks.
Good people are everywhere. Pay attention.
Fundamentally, being a good investor means being a keen people observer, always seeking to surround yourself and cultivate relationships with those who equally value good work. Since joining the VC community, I’ve learned just how important it is to keep your antenna consistently tuned for talent. One anecdote that stuck with me comes from Pete Flint, founder of Trulia, and my partner at NFX. In a board meeting Bill Gurley, general partner of Benchmark, asked Pete if there were any employees who left regrettably — meaning if there are any smart people who moved on to work on new things whom Gurley should notice. That someone like Gurley, one of the most respected investors out there, proactively looks for people means that no one can afford to not ask around for good people.
What type of founders do I admire, and who embodies them in my network? How can I better cultivate these new relationships, and help nourish existing ones? What can I learn from the talent I let get away? As an investor, you will constantly meet sharp and skilled individuals. Pay attention to them, source them, and continually reflect on how you can retain them.
Study your fears, honor your failures, and improve.
When I was twelve years old, I left my family in Korea to start school in the United States. Navigating the privileged and imposing confines of boarding school and then moving on to the elite echo chamber of the Ivy League as the only person in my family who speaks English was an intimidating process, one that fine-tuned a doubtful voice in my head: do I belong here? Can I do this? Transitioning to the cauldron of the start-up environment was instructive for me; I didn’t have much time to doubt myself. I had to execute and do it calmly with a steely disposition. I still get overwhelmed with insecurity sometimes: how could I dare predict the future? But many years as an operator in high-pressure environments has taught me to tame the impostor syndrome — the false belief that I can’t, or the fear that I’ll fail — and trust in my own conviction and ability to learn from mistakes I will inevitably make. For whatever reasons — including getting lucky often — I made it to the epicenter of innovation at Silicon Valley, in the privileged role of a venture capitalist, as a first-generation immigrant after working at four startups that grew over 20 times in valuation often the only woman in the room to do so. I can’t predict the future, but my experiences and instincts count for something, and I can use them to inform my judgment. I can tell that this delicate dance of insecurity and confidence will always be a companion in my career path.
I admire Bessemer’s approach here: embracing the “screw-up.” When I acknowledge and study my failures, as Bessemer’s does with their anti-portfolio, I recognize that failure is instructive and, when accepted, can be an important aspect of what psychologist Carol Dweck calls the “growth mindset:” the belief in improvement.
The beauty of career transitions is that they come with new challenges and opportunities to reflect and grow. As an operational manager for most of my career, I’ve enjoyed the challenge of building companies from the ground up. I’ve taken this ability to confront fears and embrace failures to the other side of the table in the venture capital community, and this new perspective has proved equally instructive. Fellow colleagues who’ve made this same transition, what have you learned?
Brittany Yoon joined venture firm NFX in 2020 after crisscrossing the globe as a seasoned start-up operator. She is a veteran of AppAnnie, Uber, and Ethos, and a graduate of Dartmouth College and Harvard Business School.
