As we say all the time, venture capital is rarely a straightforward career path.
Some candidates have extensive investment banking or consulting experience. Others are former startup founders. In many cases, applicants are neither. Maybe they worked as an adviser to several startups for many years, or maybe they developed an expertise in a certain market that allows them to see a particular industry in a unique way.
The point we are making is that there are many, many approaches to breaking into venture capital.
One path, however, that appears to be gaining traction among funds and aspiring venture capitalists is the role of a venture scout.
Venture scouts are typically considered interns or work completely outside the fund. They act as a bridge, connecting a fund to promising companies in their network in hopes of making a deal happen.
Similarly to a career path in venture, the scout role can vary depending on the fund, and it is not always clear as to how one lands this role – they are not always posted to the public.
To get a better idea about the venture scout role, we caught up with Jai Malik, who has already worked as a venture scout twice in his short career. In one instance, Malik worked as a scout for a corporate venture arm, and in another he worked for a fund that invests in companies with $2.5 million to $15 million in annual pre-tax earnings.
Now, Malik is a venture fellow at the Alumni Ventures Group and also an analyst at Rocana Venture Partners, so he has a good idea about not only the process of getting a venture scout role, but also how it has helped his career progress.
The first question you probably have is how to obtain a venture scout role. It’s a good question because there are different avenues. Some funds open these up to the public and post them as jobs on their websites and AngelList.
Malik obtained his first scout position at the corporate venture arm through an extremely competitive open application process.
According to Malik, the scout post garnered 5,000 job applications. That list got whittled down to 50 and then Malik had to go through three interviews, before being one of the 10 chosen for the scout position.
“In the interviews, they asked me a lot of things I didn’t know about at the time like about cap tables and market sizing, and a lot of times I said, ‘honestly I don’t know,’” said Malik. “But I think the most important thing they saw was that I was open to learning whatever it took to get the job done. I think that’s pretty standard with other positions. How well you can show that you are committed to what you want to achieve.
Malik said all 10 of the people chosen for the role came from diverse backgrounds – some had MBAs, some were in the process of getting their MBAs and others were pre-MBA, but had extensive startup experience and demonstrated an extraordinary desire to break into VC.
Malik’s other scouting position came through networking.
He had just moved to Missouri and realized he lived down the street from an interesting fund. He connected with one of the managing directors and had a good conversation about VC and the state of private markets
Malik then asked if he could be a scout and the managing director said yes.
“Be really hungry about finding new ideas and interesting people to talk to, and be generally interested in what they are doing,” he said. “If you are genuinely interested, I am sure you will find opportunities to be a scout. The more genuine you are the better it comes across in an interview.”
Both scout roles came with different responsibilities and different compensation. Malik said his role at the corporate venture arm was more about intel. Scouts focused on building relationships and less on making investments.
They had to understand a company’s core technological capabilities to see how they differed from the company that owned the corporate venture arm. The whole idea was to determine if acquiring that outside company could bring about a significant strategic advantage.
These responsibilities differed with the more traditional VC fund Malik currently works at as a scout. There, it’s all about referring promising companies that will lead to investment deals.
Both companies offered some form of compensation, but structured it differently. The corporate venture arm, according to Malik, had financial incentives based on the amount of companies or work you did. They also used the role to identify people for full-time roles, so it acted a little bit as a talent pipeline. The more traditional fund offered payment for referrals that actually turned into deals.
Malik enjoyed both of his scouting opportunities because they allowed him to get his feet wet in the industry and make relationships with startups. The positions also helped him meet people with similar ambitions and see how they were thinking about breaking into VC, as well as their various skill sets.
But Malik acknowledges that being a scout is not all that it’s chalked up to be.
“They certainly didn’t help me as much as I thought they would as I was getting into venture,” he said. “I think the biggest problem with scout roles is for one, everyone is doing them now. The second thing is they don’t allow you to perform due diligence on companies and really understand markets.”
Malik recommends evaluating every scouting role carefully because some are more valuable than others. A lot of them are just referring companies and hoping one turns into a deal.
It’s much better to find a scout role that is more valued within the company hierarchy and that will help you acquire the knowledge you need to confidently execute upon investments.