The Unearned Arrogance of Venture Capitalists – Bite Your Tongue

Over the years I have met many venture capitalists starting at age 12 years old. No, at the time I was not looking for funding, I had started an aircraft washing service out at the airport using a small pressure washer, box with a trailer towed behind a golf cart. I was cleaning their aircraft.

Boy I must say as a young child I was often treated very good and very poorly by people. Some took advantage of me, others helped nurture my future business career. The ratio as 10 nice people who explained business to me and helped me by giving me business and I returned the favor by doing excellent work, on-time and at extremely competitive prices.

Of the mean folks they were two types of people. Newly Rich, hot shots and most of them were attorneys, temporary wealthy individuals, trust fund babies and venture capitalists. Some of the venture capitalists were nice, but so arrogant, the rest were jerks with unearned arrogance, nevertheless I took their money, for the aircraft cleaning and learned a lot about humans.

Although I never used venture capitalist money to build my empire, I have some advice for you. No matter how much they piss you off or act like asses. Smile and be cordial if you are looking for funding. Do not tell them what you really think of their unearned arrogance or sexual preferences. Trust me in the long-run you will be better off with their networks of friends than without, even if you never take a dollar from these vulture capitalists. Consider this in 2006.

Interview With Fairview Capital’s Senior Analyst, Aakar Vachhani

If you have considered working for a venture capital firm, you have probably discovered that obtaining a position as an investment analyst is extremely challenging. Recently, I have been in the process of determining if this is the career path that I would like to pursue. Before exhausting all of my efforts to attain a spot in this incredibly competitive and exciting environment, I decided to interview Aakar Vachhani, a Senior Analyst at Fairview Capital.

Aakar joined Fairview’s team in 2008, where he is involved in research, due diligence, investment monitoring, and business development. Before joining Fairview, he was an Analyst in the alternative asset performance group at Cambridge Associates where he was responsible for tracking fund and company performance metrics for private equity, venture capital, and real estate funds, as well as analyzing and producing due diligence reports for select funds. In addition, Aakar has also worked with consulting teams to provide portfolio performance reporting to endowments, foundations, colleges/universities, public pensions, and family offices. Furthermore, at Cambridge Associates, he led quantitative research and analysis projects on private equity and venture capital benchmarks. Aakar has studied at the Royal Melbourne Institute of Technology in Melbourne, Australia and graduated Magna Cum Laude with a B.S. in Economics – Finance from Bentley College.

I wanted to know the best way to get a job in the venture capital industry, so I asked Aakar how he landed his position at Cambridge Associates and Fairview Capital. He told me that the industry is relatively small and that there are not a lot of positions available for younger people. It is difficult to find employment with a firm, especially straight out of school without any relevant experience. Aakar said that Bentley’s career service department helped him connect with Cambridge Associates, one of the most well respected consulting firms that specialize in consulting pension funds, endowments, foundations and family offices on private equity and venture capital investment portfolios. They happened to have an opening for an internship in their performance reporting group. Unfortunately, getting this position was difficult. Aakar got through two rounds of interviews and was turned down. The next year, Cambridge Associates posted a full-time position. Aakar decided to apply during his fall semester, went through three rounds of interviews, and was ultimately rejected. In the spring, he applied again and after another three rounds of interviews, and an incredible amount of persistence, he was finally offered the position.

Working at Cambridge Associates was a great way for Aakar to learn about the venture capital industry. He said that he was constantly looking for ways to get involved and increase his knowledge. After two years of experience, Aakar decided to look for other opportunities. He noticed that Fairview Capital had an opening for a research analyst and decided to apply for the position. Since obtaining the position, he has been promoted to a Senior Analyst on the investment team.

After learning about how Aakar got involved in venture capital, I asked him about what he does on a daily basis. In any given day, he accomplishes a variety of different aspects of the business. While he is performing due diligence on potential investments, he is meeting with venture capitalists, analyzing performance and crafting recommendations. With regards to business development, he builds presentations for clients or potential new investors and puts together marketing material for new funds. Aakar also assists with annual and semi-annual reporting and writes summaries on fund activity and performance. In correlation with research, he explores investment themes and writes about them in newsletters and research reports. Aakar has also helped developed hosting symposiums, web conferences and even podcasts with venture capitalists.

Aakar has a broad role and it was important for me to learn about his daily responsibilities. Having the drive to be involved in venture capital is certainly not common among most individuals. I went on to ask Aakar about when he knew he wanted to be involved in the industry. He said that he started to develop interest when he was in his third year at Bentley. In his senior year, he became interested in venture capital, but he never knew that working for a fund of funds would be a good fit. Aakar’s defines his interest of the venture capital industry to be more of an evolutionary process.

I enjoyed putting together the interview and learned that persistence is crucial when trying to be employed in the venture capital industry.

Private Equity Stocks

Using the words Venture Capital and Private Equity are usually used together, however there is only one category of private equity, and that is venture capital. Private Equity has different risks. For example, some companies will go through growth changes overtime and this usually requires capital in various different amounts. This capital is also coming from multiple sources. Each stage during a company’s growth is looked at as a “risk continuum”. If your company is young and is barely generating a cash flow, then it become a high risk to fund. Typically a company in this situation would be required to obtain capital from family or friends or angel investors. Once the company starts generating revenue, then the risk becomes much less.

Venture Capital is usually for established products or services that are looking to get out into the market. Various investors are always seeking for the newest and greatest product that consumers will absolutely love. Some of the major computer companies have used venture capital to fund their operation. This type of funding is looked at as a private partnership. Venture Capitalists will provide the equity financing that is needed in exchange for a stake. They usually will play a day to day role for guidance in order for the investment to take off within a few years. Most of venture investments do not make it far but for the ones that do, they can bring a huge return making their overall investment back and then some.

There are other private equity options such as LBOs and Mezzanines. These are often used once the company has grown some and is a little more secured. They may require some debt and equity however the overall risk is much lower with a low fail rate.

LBO stands for Leveraged Bayouts. They are one of the most common loans that are used for private equity. A company obtains a loan from a private equity firm which is then secured by cash or company assets. Sometimes the LBO is sold in several pieces and any cash that is generated would be used as a down payment for high leverages. This type of process was very big a couple decades ago however now LBO deals are more focused on purchasing businesses with the intent to add value to the companies assets rather than having the company sell pieces of their structure.

Mezzanines Financing is just a private loan. This type of loan either comes from a commercial bank or a venture capital firm that specializes in Mezzanines. They usually include subordinanted loans or common stocks. When you don’t take on a full equity position, then a firm that specializes in mezzanine debt can decrease its risk. This is based on capital preservation.

In order to engage in a private equity or venture capital partnership, the investor should be accredited. Sometimes even the net worth must exceed a million dollars. For investors who’s net worth is a little lower, then they have the option for exchange trade funds. Exchange Traded Funds are a Private Equity Index. There is a list of numerous publicly traded companies that will invest into private equity.

Overall private equity has several forms and venture capital is just one of those that can assist a company during different growth stages. It’s all based on how the market is turning and the existing cycles.