How to Leverage Management Consulting Skillsets in the VC World

early a decade ago, I left clinical medicine for the business world and haven't looked back since. After a career-changing MBA and 5 years of learning at hyper-speed as a management consultant, it was time for another change - this time I was drawn to venture capital.

I found, however, that the consulting background was often under-appreciated in the VC world.  While there is no "typical" path to VC, funds seemed less excited about consultants as first-time investors, with the banker/PE/any-type-of-investor OR operator/entrepreneur turned VC paths seeming far more common.  

Now, a year into a dream investing role at RH Capital, an early stage women's health focused fund, I truly believe that consulting lays a solid foundation for VC. 

There's the obvious

Analytical skills: At the core of the consulting toolkit are qualitative and quantitative (i.e. lots and lots of Excel modeling) analytics that translate well into the diligence process, where expert interviews and various types of modeling (financial projections, exit analysis) are commonplace.

Market and company assessments: Being able to quickly get up to speed on specific markets, companies and products is also core to consulting and VC both. This also includes competitive analysis and assessing general industry trends. 

The less obvious

Communication: Whether written, verbal, visual (i.e. slides) or in email, consultants learn quickly how to efficiently communicate. While writing is often in bullets, the structuring of thoughts translates well into long-form writing that typically underlies investment memos.

Best practices in visual representation of data and ideas - pounded into you on day 1 - is valuable too, perhaps less for evaluating deals, but definitely in showcasing the fund (e.g. for fundraising).

Structure, synthesis and having a perspective: Getting the attention of very busy senior partners and senior clients requires top down communication - the proverbial "elevator pitch" with the answer first. The ability to digest a significant amount of information, distill and structure said information into key synthesis points, and deliver them succinctly is helpful in venture too, where one is always digesting a massive amount of information on markets and companies and needing to quickly have a perspective.  

The unexpected

Client hands: "Client hands" and emotional intelligence are highly valued in consultants. In nearly every consulting training I attended, there were numerous role play exercises where the answer was always to release the agenda and show empathy.  Soft skills, it turns out, are quite applicable to VC, where one doesn't have clients, but has LPs, co-investors, entrepreneurs, portfolio companies and other ecosystem stakeholders to build relationships with.

One might also disagree with the direction a portfolio company is going in and look to exert influence or possibly have difficult conversations - just as is the case with clients.

Portfolio company support: Speaking of working with portfolio companies after a deal is executed, this is an area I under-appreciated when initially transitioning into venture. On the rare occasion that I miss "solving problems" in consulting, working with portfolio companies on targeted strategic topics such as TAM analysis and competitive positioning certainly scratches that itch.

Processes and 80/20: Finally, I took it completely for granted that the processes required for driving a consulting project (at hyper-speed) to completion would be useful in venture, even with significantly more day-to-day autonomy and fewer fires to put out. Being 80/20 comes in handy too as constant re-priorization is key - there are always more areas to diligence, more companies to explore, more questions to ask; but which ones are critical and get to the heart of the issue?

And some bonuses (depending on tenure and how you've crafted your consulting career)

Sector expertise: As a consultant, I was more focused on specific topics I was passionate about (i.e. women's health) rather than finding the fastest path to partner. Even with the latter, one is often encouraged to develop expertise in a particular area. By staying at the forefront of (and writing/speaking on) emerging industry trends, I was able to build expertise and a personal brand in the space.

Network of strategics: In building sector expertise as noted above, I met a number of large corporate players across the healthcare ecosystem. I was drawn to venture capital precisely to immerse myself in the start-up innovation ecosystem instead, but became pleasantly surprised that having a network within the corporate world is valuable too, as these players are strategic partners who might ultimately acquire and/or partner with our portfolio companies. Having relationships and insights into how the larger players think about the space is unique. 

The gaps (and some tips!):

Of course, there is also a lot to learn for recovering consultants like myself - cap tables, term sheets, how to be useful on a board - just to name a few areas. Thanks to a number of resources below and apprenticeship with others in the fund, the learning curve is manageable. My favorites:

Books: Deal Terms, Secrets of Sand Hill Road

Courses: Modeling for VC - this is THE course to get up to speed on foundational elements of cap tables, different instruments, financial modeling and more

Ecosystem resources: John Gannon Blog (particularly in the recruiting process) and of course GoingVC

Communities: For fellow female VCs out there - All Raise, Women in VC

And of course - leverage your networks! Friends from college, grad school, consulting, wherever who are now investors, entrepreneurs or strategics can lead to deal flow and insights on particular companies or industries.

Are you a recovering consultant in VC as well? Would love to hear from you! What resonates? What doesn't? What would you add?

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The author would like to thank John Xue, PhD, a fellow consultant turned VC, for his contributions.

Alice Zheng, MD, has been a women’s health enthusiast throughout her career spanning global public health, clinical medicine, consulting and now venture capital. She is currently a Principal at RH Capital, a women's health-focused venture capital fund, and was previously a women’s health practice leader and consultant at McKinsey. She holds an MBA from Harvard and MD/MPH from the University of Michigan. Alice is a frequent speaker on FemTech and women's health innovation and holds advising and mentoring roles with multiple women’s health accelerators and forums.