In a recent post on his popular blog (read here), Mark Suster underlined the importance of the work of associates in venture capital firms and recommended backed entrepreneurs to reconsider their relationships with VCs.
With this in mind, I spoke with Tom Maxim, Entrepreneur-in-Residence at -based Fenox Venture Capital. Here is his take on the roles of associates in Silicon Valley based firms.
FinSMEs: Hello Tom, nice to meet you. What’s your background?
Tom: Originally, I am from New York. I received my Bachelors of Science degree in Management from the State University of New York at Binghamton, where I still hold an active role, advising student-run startups within their incubation. I received my operational experience working at KeKu, a startup in NYC similar to Skype. We grew the user base to about 500,000 users in 5 months after product launch with a really awesome reward based referral program similar to DropBox.
I left KeKu to become an associate at Fenox Venture Capital where I have been sourcing and evaluating Seed, Series A, and Pre-IPO companies. I also helped the firm invest in companies like Lark, ShareThis and DJZ.
Currently, I am an EIR (Entrepreneur-in-Residence) at Fenox Venture Capital leveraging my prior startup experience to grow some of Fenox’s internal projects. I also help lead the growth, expansion, operation and advisory of portfolio startups.
FinSMEs: What do you do at Fenox VC? Which are your responsibilities?
Tom: My day-to-day responsibilities include anything from strategic business consulting to meeting with startup CEOs to sourcing new deals.
Most recently, we have been fundraising for our third fund and I have been leading the strategy and execution team for this.
FinSMEs: I recently read a post by Mark Suster who highlighted the importance of associates in vc firms. He said:
I would again draw on a sales metaphor. While the department head might control the budget and the ultimate go / no-go decision on your product, there is often a more junior person working for her that does a lot of the analysis, makes recommendations and in other ways subtly influences the outcomes. In sales parlance we often call this person the influencer.
Associates are no different. I have directly seen deals that got more partner time & attention when associates slammed their fists on the table and equally lose support when associates present damning facts or experiences.
In summary, VC partnerships are like any organization. Your job is to have as broad of political support as possible to get help, introductions and positive decisions when you need them.
Do you agree with this vision? Why?
Tom: I definitely agree with the main point of the article that associates are 100% crucial to the firm. I think the one mistake a startup can make in terms of VC’s is to disregard associates as nonfactors and only be willing to speak to a partner.
The CEO or partners are so busy that they can’t possibly make all the decisions or be informed about all the startups completely. At Fenox VC, we look into about 8,000 companies per year, and without associates, we would not be able to make informed decisions on investments. If you look at any organization, the CEO always has someone they listen to or tap into for advice. From my experience, this person has always been a younger and more junior employee like an associate. This is the person you want to reach out to not only because they are easier to get in contact with but also because they are the gatekeepers to the “official decision maker.
That being said most startups are great and do not care about titles. They live in a world without titles where the CEO does anything from fundraising to taking out the trash. But if you are a startup that insists on a meeting with a partner, consider that you may shoot yourself in the foot. VCs typically have few levels of hierarchy and associates have frequent facetime with the partners. So associates can often become your best salesman. Convince them and they will inevitably be selling your company with just as much passion as you have to the partner who actually trusts them.
FinSMEs: I know Fenox VC has a special approach to and keep in great considerations associates. Do you confirm it? What can you tell me?
Tom: Fenox VC has created an associate and analyst program that is truly unique. We pride ourselves in being the first VC that breaks the traditional model. We believe in full transparency and having a fairly large team. We hire undergraduate and graduate students from top universities to help us source the next generation Instagram or Twitter of the world. The analysts at our firm are the same age as Mark Zuckerberg when he created Facebook or Sergey and Larry when they co-founded Google. To us, hiring people who create these products, use these products, and are the ones who are first adopting these products made sense. We have a model where everyone participates and has an equal voice. By empowering our associates and allowing them to have a vote on each investment decision, we have about triple the manpower of any other VC to source deals and to take the companies through our thorough and systemic due diligence process.
FinSMEs: Future Plans?
Tom: We just recently opened joint venture offices in Japan, Indonesia, and Singapore. In the next one year, we want to be able to invest in 15+ companies in USA and worldwide. Recently, we are getting access to not only top notch Silicon Valley companies, but also to promising companies in Japan and South-East Asia. We are also looking into top deals from Israel and Eastern Europe. Our goal is to be able to invest into the best of the best companies worldwide, and help them grow and achieve acquisition or IPO through our global network.