As a young 20-something entrepreneur (especially in the HR tech space), I've become intimately exposed to job searching and fundraising and noticed some interesting similarities. Generally the two are mutually exclusive, but not always, and in both cases you're looking for money and the giving party is looking for a return on that investment. Here are some interesting parallels I found.
***1. Laws about where your money goes. VC's don't need to file EEOC reports about the entrepreneurs they turn down.
- Hiring: There are strict laws about hiring - about discrimination, producing reports about those you review and reject, and so on - where such laws do not exist in the same way for investing (they exist around financial returns). No one will tell you who to hire, but you need to have a defendable reason for turning away a qualified candidate and you need to prove you never discriminated by protected class information - age, race, sexual orientation, and so on.
- Investing: Investors don't need to show that they didn't discriminate in where they invested. It's a different type of situation- they might put $100K into a company whereas an employer might give an employee $100K a year - both are an investment in human capital but they're considered different. You may argue that one is income and one is an investment in a corporation and, while that is true, large investments pay salaries to teams and the investors expect to get their money back (preferably at a multiple) so in a way you could think of it as hiring a team to manage their money.
2. Looking for a return. The return sought is different but exists in both cases.
- Hiring: When hiring, employers are looking to have employees generate a certain amount of money annually (unless they're in a cost center, like HR). Employers are looking for their employees to build, sell, or somehow create value for their company in a way that meaningfully impacts their bottom line.
- Investing: When an investor backs a company they are putting in a certain amount of capital and aiming to receive a certain return after a certain amount of time. The return usually comes from a liquidity event, like the sale of the company to a larger company, an IPO, or dividends and without such outcomes the investment would not be considered successful.
3. Focus on people (ie. talent). Both hiring and investing looks heavily at people and their individual talents.
- Hiring: Talent acquisitions are understandably focused on people - branding the company to attract certain people, offering perks to keep talent, nurturing the right culture, and so on. It's called "human" resources for a reason - and this group is focused primarily on the human capital within a company. Talent is what keeps companies growing, profitable, and innovative.
- Investing: Investors usually say that they invest first and foremost in the team because the concept can change and pivot and evolve and there needs to be a solid team in place to keep moving in the right direction. Investors look for great people attacking a big problem in a large market - with a heavy amount of focus on the team. Talent is what builds great companies and leads to them getting returns for their LP's (or for Angels, themselves).
4. Turnover/failure is expected. Employers lose employees, investors lose funds.
- Hiring: A certain amount of turnover is expected within the first 18 months of hire and as millenials begin to make up more of the job market with their (our) nomadic ways ("the perpetual job seeker") that concept will certainly evolve. Turnover is essentially hiring failure. A loss of an investment in an employee and the need to replace a loss.
- Investing: Venture Capital is an extremely high risk space. Fred Wilson (of Union Square Ventures) expects that "out of 20-25 investments in his fund, 5-10 will fail, 1 will be a home run, 4-5 will produce solid returns, and the rest will be a wash". A much higher level of turnover/failure is anticipated than with hiring, but early stage investing is certainly high risk, high reward.
5. Fundraising feels like the interview process. An interestingly parallel process can be found between hiring and investing.
- Hiring: Employers generally receive applications from job seekers, consider their credentials, bring candidates in to be interviewed and evaluated, and eventually decide whether or not to make them an offer.
- Investing: Investors are solicited by entrepreneurs, evaluate the team and concept through due diligence, bring the team in to pitch in front of partners and eventually the whole investment team, and ultimately decide whether or not to invest.
***These were just a few examples of how hiring and fundraising seem similar to me. Hiring one person or even several people to work in an established company is certainly different from investing in a team to build something unique and innovative but the two concepts have some striking similarities. Let me know if you have any comments or points to add by commenting below! Phoebe Farber
