Caps and cap tables: my intro to VC

Hello, my name is Will and I am this week’s guest contributor to the Form Playbook. I am about to set off to University next month, studying Politics and Arabic at the University of Manchester. For the past three weeks, I have had the privilege of joining the Form team as an intern. Here are some of my takeaways from three weeks of diving into every aspect of what it is to be a VC!

The Jockey or the Horse?

On one of my first days, one of the Partners Patrick mentioned the “Jockey and the Horse” dilemma. Is VC about investing in the People (the Jockey) or the Horse (the Idea)? It’s a question at the heart of early stage investing which I haven’t discovered the answer to! However, in my short time as an intern, I have gained insights into how as a VC, it is a blend of both the idea and the team that factor into the decision-making process. Both are vital to startup evaluation and can’t be neglected.

The Billion Pound Question

Donald Rumsfeld would’ve relished doing an audit of the VC industry. There are known knowns, known unknowns and many unknown unknowns. It can feel very much like being given lottery odds when looking at a startup. Will it succeed? The odds might say not a chance. But the more I delved into the industry, it became apparent that every decision is made with a slice of chance. No one can truly say that a unicorn would become a unicorn at the start. But the job of a VC is to build a compelling case based on what evidence is available to them. Balancing the uncertainties to find the outlier which has the most promise to take centre stage.

Confidence and conviction

So is it possible to get to complete conviction in a deal? Investors are deciding based on the little information that it is possible to gather. Having been tasked with researching many start-ups, I always worried about the moment I’d have to give my view. Did I believe in this company? Possibly, but you never truly know.

I’m not the most innately confident person, but VC is about overcoming that hesitation and building conviction - something the Form team really helped me understand. Being given room to make mistakes and continue to thrive was a key part of this. And, I hope that as the industry continues to develop, it will continue to support and guide those who are just starting out.

If uncertainty is one thing, it leads me to another other pressing issue I found within the VC space. The language used is truly bizarre!

The Terminology Problem

Reminiscent of Ryan Gosling’s magnificent voice-over in the Big Short, fund metrics are worded so impeccably oddly, it does make you feel like a complete outsider. TVPI? DPI? MOIC? As metrics that define fund performance, they provide quite the daunting feeling when first encountered.

However, navigating the financial mechanics of funds has been the lesson I’ve had the most pleasure of learning. Brilliantly explained by another Partner, Leo it quickly became my personal project to further understand these metrics. Trying to remember which acronym accounts for fees and which one looks just at the growth in investment value - not as easy as I had hoped. But, it has been very rewarding to have to build a bit of resilience in getting to grips with the terminology problem - hopefully it should help with learning Arabic!

Final conclusions

Thank you Mayowa, Leo and Patrick - I have loved every second of it. You’ve been so welcoming and it’s been the best three weeks I could have envisaged. I have developed more skills than I would have dreamed of, and I’ll forever be grateful for your kindness.

And to come out with a potential career plan has been very refreshing - considering I didn't have the foggiest about what my career journey might look like after completing University! Not as refreshing as the Black Sheep Matcha Teas, though (thank you Mayowa for introducing us, it’s been a treat!). It’s been an amazing three weeks and will certainly stay on my mind for a long time.