Written by Fred Brown
“What is Venture Capital? …Okay, but what do YOU do?”
These are the two questions I face most frequently when telling my friends and family about my summer internship at Notion Capital. The easy answer “we are looking for unicorns ($1 billion potential companies)” rarely satisfies their curiosity, therefore, I have to provide a more developed answer: “Venture Capital firms raise funds, research companies, invest in the best ones, help them to grow and exit the company earning money for their LPs.” This satisfies the venture capital half of the question but then they want to know where I, the history student intern, fit into this cycle. This is the purpose of this article, to give you some insight into what a venture capital internship has to offer. With that in mind here are a few things I have done and learnt:
The journey of a startup
So, how and where do you look for unicorns? I quickly learnt that you start by analysing companies’ key areas. These include the team, business model, target market, innovation, scalability, traction, employee growth - especially recent senior management hires and ESG impact. As an initial guide, the investment team presented me with a list of companies to analyse, from which I created a shortlist of those that I considered to be potential investments. The next step was a meeting with the team, where I presented my research and they assessed the opportunities, leaving only the most interesting companies and those that fitted Notion’s vision.
From here a member of the investment team would reach out to the founders and schedule an initial meeting. I sat in on these and towards the end of my time at Notion, I was able to lead the discussions with prospective companies. The aim was to get a clear understanding of the founders, business model and traction, acting as an additional layer of screening. If we concluded that the opportunity had potential we would invite the founders to present their “pitch deck” to the senior of the investment team. It was here that they had the chance to sell their ideas to Notion, and where the decision of whether to invest would be made. I was fortunate to be able to attend, listen and provide my opinion. I found the ensuing discussions just as interesting because very rarely did the whole team agree on the opportunity. Those who were against challenged the lead investors and posed questions that would need convincing answers for them to change their minds.
Once a company is signed, Notion’s lead investor remains in close contact and often sits on the board. The founders are put in contact with the platform team who supports them with all commercial, strategic, personal and organisational challenges to help the company grow and develop. This stage makes up the bulk of the cycle, as Notion aims to enter companies early and stay with them throughout their journey. I worked alongside the platform team and saw how they went about analysing talent, supporting companies in improving their sales and increasing company exposure.
The final stage of the journey is “exiting” the company where VCs look to sell their shares, through IPOs or mergers and acquisitions. However, “exits” are rare and none were concluded during my time at Notion. However, I did sit in meetings between the partners and a private equity firm that was co-invested in a company, discussing what a potential exit could look like. This gave me a good insight into the complexities and time scale needed for exiting a business and the work required to realise a return on investment. What surprised me the most was that from as early as the initial pitch deck meetings, the investment team considers potential targets for mergers and acquisitions of the company. Therefore, when the time comes for Notion to sell their shares, they have a clear strategy.
The importance of individuals
My preconceptions of venture capital, being a sector of the financial industry, was that it would be heavily institutionalised with numbers and facts directing decisions. However, from the moment I started, it became clear that this was far from the case. It was, in fact, individuals and personalities that were the driving forces. Founders needed to be able to persuade people to invest in them personally as well as their idea and investors rely on networking to find opportunities. For firms, the partners’ reputation is essential for leading rounds and raising funds.
The importance of individuals became clear to me when researching startups, where I would be ranking the potential of opportunities. However, after the pitch deck and meeting the founders, my thoughts could be completely reordered. The founders’ enthusiasm, ambition and ability to present are crucial to the success of their startups because it encourages confidence in them. Investors are not only providing the capital, they are committing to working alongside the founding team for a considerable time. Therefore, the personality of the founders can be as important as the ideas and numbers supporting their opportunities.
Equally, the founders are assessing the personalities of venture capital firms. The partners’ influence the company culture and principles creating an identity attracting LPs and founders. The venture capital space has become increasingly crowded and funding rounds increasingly competitive. Therefore, to earn a place on the cap table or win investments from LPs venture capital firms have to provide more than just money. Values, reputation and identity all help to promote the firm but above all relationships are essential to succeed. The timeline for meeting a potential investor, to signing them on as an LP can be up to 10 years. Often partners have to create a relationship with the investors first to earn their trust and support. The same can be seen with founders, who are often discovered and nurtured from pre-seed rounds so that when they reach series A (Notion’s primary target round) they have a strong relationship with Notion’s team and want their investment.
Venture capital is not the rigid, structured, data-driven industry I thought it would be. Instead, it is fluid, driven by people and their relationships. This makes it a unique environment in which to learn because you find yourself interacting with people passionate about their work and are exposed to high-class talent. Reflecting on what I have done, what I have learnt and the experience as a whole, here are my key takeaways and advice for future VC interns:
These are the lessons I will take from my internship into the future, regardless of whether it is in venture capital. I want to thank everyone at Notion Capital for helping me throughout the summer, inviting me to their meetings and offering their support.