“At the end of the day, to be a great investor, you have to want to be an investor for the long run because of how long the time cycles are. Wanting to be a VC for two or four years is insufficient. In consulting, wanting to be an associate consultant is very different from wanting to be a partner. Those are very different jobs so they have different value propositions and time horizons. Don't presuppose the answer that you want to be a VC partner because it's such a lifelong career.” - Jeremy Au
Jeremy answers listeners’ questions about becoming a VC, such as how to leverage founder-operator experience, which funds to focus on and if an MBA is necessary for the transition.
Jeremy Au: (00:50)
Hey, Adriel. I just got back from a great hike with you and 10 other founders, so I feel like I've achieved my cardio. And now we're going to do a listeners Q&A, so a lot of Adriel and Jeremy time. Adriel, what do you have for me today?
Adriel Yong: (01:08)
Yeah, so we have a bunch of listener questions and answers. I think, you know, this listener's profile, he has been a founder but also has very deep operating experience in consumer tech, gaming especially, and worked for a whole bunch of leading gaming companies both in the US and also in Southeast Asia.
And this listener is now thinking about a potential transition into VC and has a bunch of questions around that. So the first question is really around how do you leverage your founder operator experience to become a VC? And I think that's something you probably have firsthand experience with as, you know, a two-time founder.
Jeremy Au: (01:46)
So I think the good news is that in general, there are two paths to VC, right? One is on an investing route, and the other one is having a founder and operator experience. And the reason why both end up being relevant is that at the end of the day, the goal is to do three things. One is to be able to source deals. The second one is to decide on which deals are most likely to be high-performance and likely to become unicorn companies. And the third, of course, is to help and add value, which is to support these founders. So, on those two paths, being a former founder and operator means that to some extent you have that relevant network of other founders or operators. You have some domain experience and hopefully a high-growth area. And also, you have the empathy with the founder and operator about what it takes to build a company. And so, that comes across in a way that you source, in a way that you decide, and also in how you help them, you know, kind of get to the next stage.
So that is relevant, because you're intact and you're on a geography, you have a network. That being said, because you have found an operating experience, you know what is still unclear of course, is that it's one thing to have a network and understand and have empathy, but the question then is, can you still do the fundamental work that's about sourcing deals, deciding on them, and adding value?
So what needs to be done is that you have to demonstrate that conversion of your current assets and experience to what looks relevant to the fund. And so that can come across in a couple of ways. I've seen, I think first of all, what we often see is that many founders perhaps have started by either angel investing or running syndicates in a way to show that they have demonstrated network, but also the ability to source and add value, by actually doing deals with their own personal cash or the capital of their friends.
The second that you can see is that perhaps these folks are writing memos that are public to the public. So they're like doing some deep thinking about the space, the domain, et cetera. And so they do public open access memos and they generate an audience, but most importantly, they demonstrate that deeper order thinking that VCs do value.
So thirdly, of course, is you see a lot of founders are acting as venture partners or entrepreneurs and residents, so they're kind of like attached to funds or syndicates, and are really demonstrating that they can work in interface and be helpful to VCs either through phone calls or WhatsApp Messenger.
So they're demonstrating they have that ability to work closely as part of the team. So those are, the fundamental question is whether you have a great asset with your founder and operator experience. Then the question is, how do you demonstrate that it's actually relevant to the fundamental skillsets and you know, daily workflow of the VC? And then you have to be intentional about how you demonstrate that for folks.
Adriel Yong: (04:40)
Yeah. Thanks so much for sharing that high-level overview on how founders and operators out there can think about transitioning to VC. So, when you first came back to Singapore, you were also in EF, right? And shortly after, you transitioned into Monk's Hill as a VC. So what was that transition like? What sort of, I guess, examples could you share with the audience around the stuff that you have mentioned just now?
Jeremy Au: (05:07)
So that's an interesting piece where I had built two companies, right? And the first company I built in Singapore and after I built a second company in Boston and New York. So what was interesting was that when I kind of like moved back to Southeast Asia and Singapore, I think the first part that moved with me, of course, was my own operator empathy as a founder. Cause I was very clear about, personally, I met great VCs. I met average VCs and I met terrible VCs. And I've met VCs that I disliked initially, but actually turned out to have given me great advice and that, over time, I kind of understood where they came from and they became great VCs in my own eyes.
So I think I had that empathy from a founder perspective about what it is like to fundraise and so you know what kind of VC you wanna be in terms of what not to do. You know, don't be late, don't be under-prepared, don't jug the person around and kind of drag it out, et cetera. So that's really kind of like a lot of thinking that's there, so you actually know what the job description is.
That being said, one thing that did not move of me was my network. So I had built that network in Boston, New York. There were many great people who really liked me because I had been helping them. I give them advice and help them build businesses either because we had dinner parties or because we had long walks and all these conversations, and actually moving geographies meant that many ways that network was lost or compartmentalized away, right? And so I had to kind of like build from scratch. And the simple fact is that in Southeast Asia, a lot of folks don't know me or have a very shallow understanding of who I am and what I've done. And I actually see very deep relationships with people in Boston because I helped them when nobody would help them in terms of thinking through the business or going through the term sheet with them, or, you know, just eating sushi late at night and just kind of like making a decision about how to negotiate fundraising, right?
So, those are things I already was doing as a founder, helping another founder because you know, I'm like senior to them by one year. You know, which is meaningless in a long, grand scheme, scale of things, but very relevant when you are like dealing with term sheets for the first time, then, we're kind of like the one night men leading the blind in that sense, because I was blind one year previously. So, you know, that network, unfortunately, did not port with me and so kind of like start from scratch in the sense that, yeah, I just hang out. You know, I'm not rushing things right, but just meet people, talk about things I really care about, things like that.
So that was the thing that did not port with me. One thing that, another thing that did port with me actually was, for example, my domain expertise, right? So, it'll be in education tech and software service, in B2B. So a lot of these go to market about how to run companies, how to fire people, all that domain expertise ported with me.
And to some extent, actually, I actually got a masterclass of that in Boston, New York, right? So the level of thinking is very fast and advanced. Obviously has added benefit of Harvard MBA, which also had a lot of entrepreneurship classes and professors that were world-class because they were previous founders and operators.
So, I took that mindset right, and had that training and so I was able to port that back easily, while also having to actually be thoughtful about the localization requirements. So for example, B2B SaaS is like night and day difference to some extent. Like the fundamental routines and workflows are the same, but the customer is very different, right? In terms of GDP per capita, labor productivity, and therefore the intrinsic value of SaaS. Is this like an order magnitude different from the US where you know, there's a high cost of labor versus Southeast Asia where there's a low cost of labor, right? And so there's an interesting dynamic where you're like, okay, you know, a lot is relevant, but I have to reset and be thoughtful about what actually is right.
And so I think there are three ways that I kind of like was able to transition. Two things I brought back were my founder empathy and my knowledge of what would make a good VC from a founder's perspective, as well as my domain expertise, which had to be localized. But the thing that did not port with me was my network because of the geographic shift.
Adriel Yong: (09:30)
Well, thanks for talking through your international expansion strategy from the US to Southeast Asia. There's a very interesting way to think about it, right? Like porting over your networks, but also thinking about how you localize the domain expertise as well. And I think that ties in very nicely to, you know, the next two questions.
So the second question is around, this listener is thinking about whether he should focus on, you know, working with funds that mainly or only invest in areas like B2C gaming and consumer tech, which he's more familiar with, has both operated and found the experience. And so, you know, you have built two companies. What was the top process for you? Like when you were thinking about what sort of fund to join?
Jeremy Au: (10:15)
I think theoretically the truth of the matter is that yes, focusing on the funds that have a very high correlation to your domain expertise will probably bear better fruit because from the fund's perspective, if they are, for example, very deep on B2C gaming consumer tech, then obviously all of your domain expertise is gonna be highly relevant.
Your networks are probably in B2C gaming, consumer tech will also be highly relevant. And you know, your velocity, your inherent value, you know, maybe even your entrancing passion and interest is aligned over the long term, right? So obviously the funds that are highly aligned with those things would be most interested in you as a person and candidate to hire.
That being said, you know, some of these verticals, unfortunately, are maybe too narrow because there aren't that many funds. So many funds are, for example, geographically bound or maybe larger industry round-focused. And so I think there's some thoughtfulness that needs to be said, which is like, yes, these are the ones that are highly relevant, but I also need to expand my search to funds that are more broader.
And my job is to say, how does this generalize to that fund? Right? Even though it's a broader mandate. So, for example, a classic one that I've seen would be folks who are very experienced in banking, right? And so they were building something in FinTech as a startup or operator founder. And then they're interested in applying to a fund that does FinTech and webtree, right? For example. So there's a common cluster. So then the conversation gonna have is, well, you know what? They would probably go up to the fund and say is like, Hey, I understand KYC, Know Your Customer. I know any money laundering requirements. I understand the banks. I understand the banks' customers. I understand the requirements. I understand the reserve ratios, I understand theregulations that are there. And I also have some way of demonstration that this is generalizable to crypto. I already, for example, have been trading in various tokens. I've, you know, had a good portfolio. So even though that was not my day job, I have some sustained interest and so I can do both FinTech and crypto, right?
So that would be the translation argument that you make to the fund to say that your skillset is not just FinTech, but also FinTech and crypto, right? So, that's something that, you know, some thoughtfulness is required. Um, and then at some level, of course, you know, if that translation is just way too much, like, you know, you're making a stretch, right?
Like, oh, you know, I have experience, for example, in Southeast Asia and the US and now I want to apply to a fund in Eastern Europe, right? Which is focusing on Eastern European stuff. And then you're like, isn't that like one jump too far? You know, you can't generalize all that stuff, right? And then, cause from a funds perspective, it's gonna be like, well, do you want to live in Eastern Europe? Do you understand Eastern Europe? Do you have a network in Eastern Europe? And so, you know, I think that generalizability, that translation works to a certain extent, but at some level, it's just like, how do you know product-market fit right in the market for, is does the market's problem line up with the product's solution?
Similarly, is there an employee dash employer fit, right? Does the problem that the employer wanna solve fit with the skillset that you have and the interest that you have actually, right? And so that alignment is kind of key. And it takes two hands to clap, right? It takes the employer to obviously interview you and make a decision about whether you're gonna be a long-term success at the fund, but also for yourself to be thoughtful about the funds that you're applying to, and you know whether it is something that you're really gonna succeed at in the long run.
Adriel Yong: (13:55)
Yeah. So, I think that's also that other question, which is around the majority of Southeast Asia and ecosystem, right? Which is why you don't have like, sector-specific funds and, you know, gaming or even consumer tech, which are, you know, you see more often in the US where the ecosystems are a lot more mature, a lot more deep in the talent and the companies that've been formed, which also raises the question of like, you know, if you have both networks and the US and Southeast Asia and it gives you the option to sort of like choose where you want to try and be a VC and join a fund which is more closely aligned with your interest. But then if you're not, then if you don't have that network, maybe you're just like Southeast Asia-focused and then you're trying to join a gaming fund in the US and how do you make that transition, right?
I guess that's somewhat tied to our third question where the listener asks, you know, whether the MBA is necessary or even recommended to help make the transition into VC. Like doing a pre-MBA internship at an early-stage VC fund, either in Singapore or back home in Northern California for this listener to gain more firsthand experience. Do you think that a VC internship is helpful? Do you think the MBA is helpful? I mean, you had the Harvard MBA experience, right? So how did that help in your VC career?
Jeremy Au: (15:16)
Yeah. I think at the end of the day, in the long run, to be a great investor, you have to, first of all, want to be an investor for the long run because of how long the time cycles are. So if you want to be a VC for two years or even four years, that's actually insufficient time, if that makes sense, for you to actually become a great investor. So I think another way of saying it is in consulting, right? It's like, everybody wants to be an associate consultant, but then there's a very different conversation of saying, do you want to be a partner? Right? At a top consulting firm? Cause those are very different jobs, so they're different value propositions and the time horizons are very different.
So I think the zoom out here, I think the first question is, do you actually want to be a VC? Right? You know, do you even want to be in an industry of venture capital? And so what I mean by that is, don't let the tail wag the dog. You shouldn't do an MBA just to have a chance doing an internship at venture capital, it's almost all the way around, right?
Which is the fast, what is the fastest way for you to get that internship at a venture capital fund to find out if you actually like venture capital? That's the most important thing to do, and if you can do it ASAP because you can shadow someone for a day or a week, or if you ask someone to do it, or you already have that in at tier two or tier three, or even a tier one VC, then just do it as fast as you can because that timing for your, you know, is going to give you the space to make a decision about whether you actually like the space and whether you wanna continue doing it for the long run, right?
So that's going to be then more logical sequence because then, you know, after you do that, then you're like, okay, I wanna double down on VC, so I'm gonna join on a VC fund, or I can do the MBA, so, so forth, right? But you know, you may actually find out that you don't want to be a VC, in which case you still wanna do your MBA to figure out what you want to do, and then you don't spend your time at MBA trying to enter VC, right? You're burning two years of available time. So I think it's almost a sequencing is almost like, you know, like, I always tell people, don't presuppose the answer that you want to be a VC partner. Right? You know what I mean? Because it's such a lifelong career, right?
Once you're in VC, there are just stacks and compounds for a long time versus if you want to be a founder, you can be a founder for 10 years, right? Or you can choose to be an operator and executive for two to four years, and then you can transition again to being a founder or a VC after that.
There's a bit of a sequence that is kind of like non-obvious because in most jobs, when you're applying to consulting or banking or accounting, there's an understanding you transition every two or four years, right? But I think there's a bit of a sequence that's really non-obvious for venture capital cause of the time cycles involved with the investment.
So what that means is, first of all, the most important thing to do is if you have not done any time within a venture capital fund, the priority is to get that as fast as possible, regardless of MBA or whatever it is. Just do it no matter the geography or whatever it is. Just do it so that you understand where you wanna do venture capital for the long term.
If not, very simple, go find another job that you actually like and you can either do MBA or a giant company you like, right? But it turns out that you do like venture capital, then, of course, you have a second set conversation, which is, is the MBA helpful for that, right? I think this is quite debatable. I'll tell you what the pro case is. I think doing a Harvard MBA or tier one MBA is helpful because it does help open up doors and a lot of the kind of like big VC funds actually kind of look at these credentials actually, as a form of entry, right? Or a common way to correlate to pre-screen talent that fits their profile.
So, it does help open doors to some funds. And I think obviously if you're working at a tier one MBA, you again get access to great networks, great domain expertise, and great training around, for example, venture capital entrepreneurship that will kind of snowball over time. So it's not just a one-time ticket, but actually a compounding advantage over time.
That being said, first of all, it is a quarter million dollars of investment and cost plus the forgone opportunity cost of one to two years of time where you could have been investing and so, so forth. So, that's one way to look at it. And at the end day, if you know that you wanna be a VC, then what could you spend, I don't know, 300 grand or 400 grand to do, right?
Maybe you could build a world-class podcast, for example, on venture capital and startups. Maybe you can, for example, do a Kauffman Fellowship instead, which is an MBA, but a hundred percent of this focus on venture capital, right? They don't even do, forget about all the other stuff, right?
Because you're gonna specialize in venture capital, or you're gonna spend it on yourself, your training, or your own other opportunities, or feed your family. There are so many things you could use that opportunity cost for, right? If you're very clear, they wanna do venture capital and a lot of funds. And I'll say many funds that are great actually do not index at all on every MBA. So I know I did mention that some funds do index on using it as a way to screen for talent, but there are many great funds that are high performers that do not screen for this or do not require this at all. So what they're gonna be looking for is people who are scrappy, entrepreneurial, demonstrated investment judgment, right?
So, I could make an argument that if you knew for certain that you wanted to be a VC for sure after your internship and you have the opportunity cost-effectively, 400 grand. I could make an argument that making 40 investments of 10 grand each might actually put you in a better track record of history and opportunity, right?
To demonstrate the VCs that you actually can pick well, source deals, and add value, right? And I think having a portfolio of 40 angel investments will probably be a better trading ground. That's a hundred percent relevant for the VC job than doing a generalist MBA. So in other words, in summary, is, definitely do the VC internship as soon as possible to figure out if you want to continue exploring VC as a career.
If you know you wanna be a VC, then do the MBA for its own intrinsic advantages of how it compounds over time, or if you know that you wanna be the best VC and you wanna do it as soon as possible, just take the foregone cost and just, you know, build an angel portfolio that shows that you can actually do it really well, right?
And you probably get much further along with many other funds and make you way more attractive, honestly, in the medium term.
Adriel Yong: (22:23)
So, I think with that, we wrap up our first segment for the listener Q&A.