Venture Investor: How Do You Get There And What Do You Do?
There are multiple paths to becoming a venture capitalist, but what does it entail? BIP Ventures General Partner shares how to break into VC.
Everything a company puts in front of a client should exude its brand and value proposition. And it should be presented in a manner that feels native to the recipient – especially if that recipient is a client.
While you might not expect system architecture to play a role in that staunch corporate belief, it is critical to building lasting, trust-based relationships with clients and partners. A technology team member who collaborates across the organization to understand and support broad objectives, a system architect is responsible for designing and overseeing the high-level structure and organization of complex systems or projects. And within Venture Capital (VC), this individual is a linchpin. They design and produce the technological infrastructure that supports successful investments and maximizes returns. While the sophisticated work and data complexity happens 'behind the scenes,' it is effective only if simplified enough to be user-friendly, clear, and consistent.
BIP Capital was founded on a promise of investor transparency. Since 2006, Mark Buffington and everyone on the BIP Wealth, Capital, and Ventures teams have shared in the active commitment to providing the data, know-how, wisdom, tools, and support that give our clients a reason to trust in the partnership they have with us.
We often say we are a fiduciary to investors. Accomplishing the first half of that brand promise demands that we are absolutely sure our clients understand what they are entrusting us to do on their behalf. They must know, without any doubt, that we are a partner working to be a steward of their assets. It's our job to grow their assets. It's also our job to ensure they can access and understand performance data that confirms we're doing what we promise to produce outcomes on their behalf.
Particularly in a highly regulated industry, providing a high level of transparency can be challenging. We recognize and meet compliance demands through absolute honesty and clarity with data reporting and benchmarking. Similarly, while we acknowledge industry performance benchmarks, we focus more on what our investors need to know. We do not cherry-pick the best data – rather, we compare our data directly to the industry. Doing so is an opportunity to call attention to the fact that we tell the truth with all the data we have. And it is a way to open the client up to learn about VC more generally.
We meet investors where they are, even if they need help understanding VC or participating in a BIP Ventures fund. We then provide the applications, reports, conversations, and other content to equip them to build up to an understanding with us. The VC industry has many instances where experts – who have earned deep expertise – inadvertently talk over the heads of investors and founders. Simplifying complex economic concepts is incredibly difficult and requires real intentionality.
Through decades of working hard to simplify the complex, we've discovered that the more straightforward and educational we are, the more trust grows. That's why our technology team is nine people deep and focused on building the tools, systems, and data our investors, advisors, and founders need to understand their role and benefit.
We design technology systems, products, and outputs with the belief that no one should have to work hard to understand the information we are presenting. The moment they face the challenge of comprehension is the moment they begin to disconnect.
Even the most complex problems can be broken down into simple pieces. Whether that's communication, data, a user interface, or a financial report, it's our job to simplify the complex. Information and insights should be immediately digestible. And that means data and its context must be as streamlined, frictionless, and 'native' as possible. If it isn't, the recipient will have to work too hard to digest it.
But understanding isn't enough. The data must be absolutely and verifiably accurate. We're responsible for ensuring that the data and information a client gets from us is correct. The GIGO model (garbage in, garbage out) applies here - if you feed a model with bad data, the software will produce bad data. The client doesn't have purview into our data sources or a simple way to check what we deliver. They trust us to have built productive models and that we feed them with quality information.
As a VC team, designing for the client means we build capable models, pull in accurate data, read it correctly, and then present it in a format that is obvious and simple to take in and use. For the individual investor, simplicity and consistency engender comfort. For the advisor, they engender confidence that they have the resources necessary to support their investor clients well.
Generally speaking, public market data providers are better than private capital firms at presenting a flow of data. When public trading groups (e.g., TD Ameritrade) deliver data, it's accurate more often than not and easy for investors to self-serve. The private market deals with more illiquid transaction data, which doesn't flow as readily into systems. Advisors who are beginning to promote and integrate this asset class into their financial plans and risk modeling often face new challenges. Their role in interpreting data, classifications, non-standard assets, and other details for each fund becomes increasingly prominent. And yet, they can only build insights on the data they have. Success for everyone involved is contingent on how well someone has keyed in the data – any inconsistencies or errors will tarnish recommendations.
By architecting systems and models that pull in and parse data without the need for human involvement, we are better able to give clients and advisors confidence and consistency.
The quality of the data and insight that advisors and investors use reflects work that begins long before anyone ever sees it.
System architects must prioritize taking enough time on the front end to (almost obsessively) break down information and data into its simplest forms. Doing so enables the business to build and rebuild on a solid foundation, minimize technical debt, and be agile in implementing new features and functionality. It also allows users to move through technology interfaces and insights with minimal friction to generate fundamental understanding.
While this may sound like common sense, BIP Ventures stands out because of our investment in a team of system architects and technologists. The VC industry is known for overcomplicating details and layering 'legalese' into communications so only the most sophisticated investors can understand what's being presented. Instead of that being the goal, we build flexible platforms that allow us to aggregate data quickly, create timely reports, and deliver information in the ways it needs to be shown so investors can make decisions faster and more confidently.
The outcomes of these efforts enable us to do things like:
We strive to give advisors and their clients every piece of valuable data, unfiltered, to help them understand the returns, validate them, and use the knowledge to provide better client support. Investors gain clarity as we draw out the data, educate them on how to use and understand it and help them to verify it so they can be more confident and informed as they invest with us.
Going back to the beginning, this is the role that systems engineering plays in executing our brand promise and value propositions.
At one point early in the life of the firm, we were struggling to get clients into funds. The financials weren't the problem. The investment quality wasn't the problem. We dug into the onboarding and legal processes. It showed that the steps we were requiring were the issue. We returned to our core values of stewardship, collaboration, and education. We began to remove the frictions using system architecture and design thinking. The changes transformed the experience, and today, even a client who is brand new to working with us understands the information presented. They can verify it, and they know what to do with it.
A partnership is more than an agreement about delivering on a commitment and building trust. It's also active listening. For any tech-enabled company, client feedback is the lifeblood. Clients will only give feedback if they trust you and believe you are listening. You show you are listening by finding ways to turn their ideas into solutions (assuming they align with the company's values). Seeing feedback transformed into improved experiences is delightful. It creates a sense of client ownership.
VC investing is a team sport. Exceptional outcomes only happen through a community of investors and founders, each trusting us and one another to participate and contribute. We want our clients to push us, ask great questions, and tell us how to improve and what's meaningful to them. As do, they support our design thinking and iteration process. It creates a healthy feedback loop that we use to design and build FOR our clients.
The living partnership we maintain with the people who use our technology and data parallels the almost limitless extent to which our investor teams work to support the wealth-building needs of our clients. In our individual roles, we all strive to do the same thing – make the partnership with us continuously informative and useful. Not too many industries or organizations can say that.