What similarities do sales and venture capital have in common?
The best VCs and VC firms are in sales.
The simple reason is for the most part, the only way to make serious money in VC is to invest in the very, very best companies. And the very, very best companies, even at the seed stage — almost always have options even at the seed stage. And they always have options at the Series A stage and beyond.
The best founders get to pick their investors.
So, except in the very worst of times, VCs always have to sell themselves into the best of deals. They have to win them.
Take it a little further. How do we do “sales”? In-bound, out-bound, and upsell & referrals.
VCs adopt different strategies here to play to their strengths, just like companies do.
Earlier stage firms with strong brands and differentiated value propositions can run an “in-bound” model and wait for their brand to attract the best founders. YCombinator is the most extreme example here. Even so, even YC hustles. They do college tours and much more to get the top of the funnel primed.
An in-bound strategy requires a lot of top of the funnel work.
But in-bound may not be enough, and as you get later stage, it may not work at all.
You have to do out-bound, hustle, reach out, track all the best start-ups, and try to muscle your way into the deal and close them. Biggest VC firms often have armies of analysts cold e-mailing and calling into start-ups with metrics or signals that suggest they may break out. They qualify these prospects into leads, and usually pass the leads on to a more senior member of the team.
Finally, the “upsell” analogy breaks down a bit, but the closest is referrals. Most of the top VC firms get a significant amount of their new investments from CEOs and founders they’ve already invested in, that recommend them.