How do you pick your VC sector?

1 Why specialize in a sector?

Venture capital is a competitive and complex field that necessitates deep knowledge and expertise. Specializing in a sector can provide several advantages, such as building a reputation and network in your chosen domain, developing a unique perspective on market trends and opportunities, creating a differentiated value proposition for your fund and portfolio, leveraging existing relationships to source and support deals, and reducing the risk of investing in unfamiliar or crowded areas.

2 How to identify your sector fit?

When it comes to selecting your VC sector, there is no one-size-fits-all formula. However, you can use some criteria and questions to guide your research and analysis. Consider your personal interests and passions, as well as the professional skills and experience you have. Analyze the market dynamics and potential of the sector, as well as any gaps or challenges that could be addressed. Additionally, look into the competitive and regulatory landscape of the sector, as well as any best practices or benchmarks that you can use to measure success and impact.

3 How to validate your sector hypothesis?

When you have a shortlist of potential sectors to focus on, you need to test and validate your hypothesis. This can be done by conducting market research and due diligence on the sector size, growth, trends, drivers, and barriers. Additionally, gathering feedback and insights from founders, customers, experts, and other stakeholders in the sector is important. You should also scan the deal flow and activity in the sector to identify opportunities and threats. Furthermore, comparing your sector thesis with other VC funds and investors in the sector can help you assess your differentiation and positioning. Lastly, evaluating your track record and performance in the sector can help measure your returns and learnings.

4 How to refine your sector strategy?

Once you have validated your sector hypothesis, you need to refine your sector strategy. This includes defining your scope and focus, aligning your sector strategy with your fund strategy, developing your sector expertise and network, and communicating your sector value proposition and brand. You should consider whether you want to invest in a broad or narrow sector, cover sub-sectors or verticals within the sector, deepen your knowledge and relationships in the sector, establish thought leadership and influence in the sector, articulate your sector vision and mission, and showcase your portfolio and impact.

5 How to adapt to your sector changes?

The venture capital industry is constantly evolving and changing, so you need to be agile and flexible in order to adapt. You can do this by monitoring sector trends and signals, experimenting with new sector opportunities, and learning from your sector feedback and outcomes. Research, analysis, validation, refinement, and adaptation are all necessary steps for finding your sector fit and thriving as a venture capitalist. Staying on top of sector developments and innovations, exploring new sector segments or models, collecting and analyzing data and feedback, improving decisions and actions - these are all important factors to consider when picking your VC sector.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?