A Day in the Life of a Venture Capital Intern

A couple weeks ago, Salmaan posted his “Day in the Life of a Private Wealth Management Intern” article to give you a bit of an insight into the world of Private Wealth Managament, and more specifically, what it’s like for a young financier to intern in that part of the industry.  Salmaan reached out to me with the opportunity to write a guest post about my own internship experience to give you a taste of what it’s like on the buy-side.  So, I’d like to voice my gratitude to Salmaan and Safeer for letting me feature on UI.  Without further ado:

This summer, I’m working as a summer analyst for Bay City Capital in San Francisco.  They are a venture capital firm focused on life sciences and biotechnology.  They invest in a wide variety of companies in a wide variety of development stages.  While I am first and foremost a business student and prospective investment banker, I have always maintained a strong interest in healthcare and the biosciences, so Bay City was a perfect fit for me.

The firm is collectively run by the partners, all of whom come from diverse backgrounds.  There are business-oriented partners who carry an MBA, as well as partners with MD’s and PhD’s whose scientific backgrounds make them an asset to the company.  This may be a bit unusual, as some firms have very homogeneous management groups; however, it has been fundamental in making Bay City one of the premier life sciences VC’s.

San Francisco Financial District

Battery Street

I get in at around 8:30 every morning after a long commute from the South Bay.  This is because unlike trading shops or PWM groups, the company does not live by market hours.  One of the members I shadow is the firm’s main analyst, a recent bulge-bracket investment banking graduate who is consequently well-versed in valuation and advanced investment analysis.  He handles all of the quantitative analysis on potential and realized investments.  He creates detailed and incredibly complex working models that, in layman’s terms, weigh the pros and cons of investments given a variety of assumptions.

I can spend my day in a variety of ways, depending what I have on my plate.  Because I shadow the firm’s only analyst, the majority of what I do and learn has to do with whatever he’s working on.  For example, he has given me several investment memos to look over and analyze.  These are essentially the final formal due-diligence forms that go out to the entire firm before making an investment.  They include things such as future value drivers for the company, potential hazards, terms of the investment, the structure of the investment (debt / equity), etc.  From these, I have learned a lot about the venture capital investment process, and about the innumerable combinations of debt & equity agreements that companies and their investors engage in (and their respective advantages & disadvantages).

He has also shown me some models he has built for current portfolio companies.  While they are quite complicated, I have gleaned how assumptions regarding product revenues and financial performance are made, and more importantly, how they affect forecasting an investment’s payoff or loss.  I have learned to read 10-K statements and 10-Q statements; consequently, I have gained a fairly advanced understanding of income statements, balance sheets, and cash flow statements.  These critical skills helped in learning how to conduct DCF valuation, a key feature in the models and an extremely useful and germane tool for any investment banker.

I’ve been working on a research project for one of the firm’s portfolio companies as well.  That has involved doing extensive macroeconomic research on emerging markets and the developing countries’ respective healthcare industries.  The research implies tracking past GDP growth, forecasting GDP growth 5+ years into the future, estimating healthcare industry size, estimating pharmaceutical industry size, forecasting growth in these areas, and so on.  Yet, investing in emerging markets can be tricky, and it is consequently not always as black and white as the numbers can make it out to be.  I have also been tasked with researching developing countries’ sociopolitical stability and gauging the various noneconomic factors that could prove hazardous or otherwise hinder investment.

On top of the above, I have also edited portfolio updates for the firm’s investors and built a working model that includes all of the firm’s investments to date and calculates IRR’s (Internal Rate of Return) given certain inputs.

When I’m not working on a project or doing a little bit of required reading, I’m attending presentations from prospective portfolio companies.  Those are always interesting—it’s cool to see how the companies pitch themselves, and doubly cool if you’re interested in the avant-garde healthcare technology.

Lunch is catered to the office, everyday from a different restaurant in San Francisco.  On days when I take the train, I leave the office around 4:45 to get to the 5:33 Caltrain.  Sometimes I carpool with a partner I shadow, in which case we typically take off anywhere from 4-4:30.

 

TL;DR / Takeaways:

The experience has given me a lot of general knowledge in how buy-side investment works, particularly pertaining to debt investments, equity investments, IPO, and M&A.  I’ve learned a lot of crucial concepts, including accounting principals, investing terminology, risk management strategies, and model building and formatting.  From Day 1 on the job until now, my Excel skills have gone from nonexistent to superhuman—definitely a huge plus for any hopeful investment banker.  The hours aren’t as strenuous as you may find in other financial services shops, but the days are by no means unproductive.  I think it’s fair to say that no matter what you ultimately intend to do in finance, a VC internship has a lot to offer.

Comments

  1. Kaspar Mueller:

    Hey Max, thanks for the post, it was a great overview of your internship. I’m a rising junior at Macalester College in St. Paul, MN, and I’m interested in the VC world as well. I am wondering if there are any insights you could share about how you discovered this VC firm and how you got your foot in the door for the internship. Any ideas about finding a good small firm to do an internship at would be greatly appreciated.

    Thanks,

    Kaspar

    Reply

  2. Sean Penso:

    Great article Max! Thanks for the insight

    Reply

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