No items found.
MAY 19th, 2022
It’s time for new M&A ideas to bloom, register for the M&A Science Spring Summit on May 19th!
Register Now!

Venture Capital Career Path: How to Get Into VC

Kison Patel
CEO and Founder of DealRoom
Kison Patel

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

CEO and Founder of DealRoom

As legend has it, in the space of fifty years, the venture capital industry has moved from being a few pioneers in information technology working out of their garages in Southern California, to being a global industry.

A new unicorn - a VC-based company with a valuation in excess of $1 billion - is seemingly minted every week. The VC industry has spawned a series of popular television shows.

Its most famous investors are now household names in the investor community.

It should come as little surprise then, that venture capital jobs are in high demand. The issue is that there aren’t many of them out there.

Research conducted by Deloitte on human capital in the VC industry showed VC firms have a median of six employees and an average of 14 in 2020, meaning jobs are in tight supply.

In this article, we at DealRoom look at some of the roles in this industry and how potential applicants should position themselves to obtain them. 

What do VC firms do?

Venture capital firms invest in early stage, high-growth companies. Usually these companies have not yet been commercialized and turn to venture capital funding for funds to invest in marketing, hiring, and technology.

VC structure

For making the equity investment in these high risk companies, VC firms are able to demand better terms than they would expect at more established firms.

For example, it’s not unusual for VC firms to hold up to 30% of young companies, enabling them to cash out when the company goes public or is acquired by a different company.

Venture capital roles

The organizational  structure of most VC firms in venture capital mimics those of other parts of the investment industry.

At the bottom, there are the analysts  or associates, who do most of the so-called lower value work, further up the food chain, there’s the principal, before we hit the partners at the very top.

Below, DealRoom provides an explanation of each:

Analyst: As with any analyst position across the investment spectrum, the VC analyst’s role involves financial modeling, helping in due diligence, and providing insights when called upon.

They’ll usually be on emails, filtering through opportunities that come through the company’s website, and delicately refusing the companies that aren’t a fit with the VC firm’s strategy or ambitions.

The work that the analyst does informs the work that the rest of the team does. When a bright-eyed startup founder sends a pitch deck that makes bold claims about an industry, the role of the analyst will be to fact-check, and confirm or deny the industry’s prospects. There is very little, if any, client facing involved with this role.

Associate: Associates oversee the work that analysts do, as well as having extra responsibility within the company. They typically spend most of their time analyzing attractive companies, interviewing startup founders about their company and its prospects, and bringing relevant prospects to the attention of principals and partners.

The associate thus plays an essential role. They should possess a range of commercial and financial skills that enable them to separate the excellent opportunities from the overly ambitious (a motif that runs through the VC industry).

Think, for example, of the VC associate who was willing to listen to the Airbnb pitch, while dozens of others dismissed it as something that could never work.

Principal: Principals are senior members of the venture capital firm’s investment team. Much like principals at private equity firms, they are central in the VC firm’s fundraising efforts, as well as making decisions around strategy and investments.

They often take on mentorship roles for companies after investment.

Partner: The partners of a VC firm are its owners, usually industry stalwarts that have gone through a number of fundraising processes, started (and exited) several of their own businesses, know the industry inside out and have the battle scars to prove it.

Most importantly, they also control how the capital at their VC is invested.

As always, their ability to communicate is important. The partner will typically spend a lot of time talking to outside investors, talking (i.e. promoting the fund) at startup roadshows and workshops, and spend time with the owners of companies who are nearing their IPOs.

As most investments in startups are led by one VC firm who brings in several others, their contact book is also of the utmost importance.

Skills required for working in venture capital

There’s little doubt that VC roles bring a very specific set of challenges quite unlike those required in other areas of finance. If anything, the skills required to make it in venture capital are broader than practically any other area of finance. These include:

  • A successful track record: If you can prove to the VC firm that you were an early investor in successful ventures, it shows that you can combine several of the traits that they’re looking for and will instantly make you an interesting candidate for them.
  • Excellent financial modeling skills: The financial modeling required at VC firms is very specific and not something that’s taught in most corporate finance textbooks (i.e. many startups have no track record, no real cash flows, and a new product or service, making a cost of capital practically impossible to establish). The best candidates will know their way around this finance.
  • Tech savvy: The better your technology - and coding - knowledge, the better, enabling you to get into the technical details of potentially interesting startups. Do you know your Java from your JavaScript? How does R stack up against Python? You don’t have to be fluent in any of these languages, but you do have to know in which situations which language works best.
  • A strong contacts list: Very often VC firms will enter investments not as the lead investor, but as one of several supporting investors. To be invited to these deals, it helps to know other players in the industry, particularly if they hold you in high esteem.

How to get a job in venture capital

Let’s start with the bad news: VC firms rarely hire junior talent. There are no training programs to speak of (that would go against the ethos of the industry, which prides itself on being agile).

Of the few that do exist, the odds of landing a place on the program are miniscule - better to focus your efforts elsewhere to ensure that your job seeking is more productive.

The good news?

You don’t have to have graduated cum laude from a Wharton MBA class to land a position in the VC industry. 

So, given the rather unstructured route into VC that most analysts and associates face, the following bullet points should be seen as a rough guide that will enhance your chances of landing a role..

  • Understand the ecosystem: With the competition for roles being so fierce, it’s important to know the lay of the land. You can differentiate yourself from the competition by knowing the space you’re looking to get into in detail. Which area does your VC firm of choice specialize in? Suppose it’s fintech. What part of fintech? What are the latest advances in this area? How is the blockchain affecting it? What are the latest payment technologies? 
  • Personal Inbound Marketing: Another thing that separates angel, seed, and VC investors from investors at private equity firms and investment banks, is the amount of self-promotion they do. Sites like Medium and TechCrunch are awash with articles written by VC company management talking about a trend, a company, or a new piece of technology. This raises your profile, shows your knowledge, and should open some doors - assuming your writing is of good enough quality to pass the muster. Check Samplius essay examples and just excellent pieces of writing to master your skill. By doing so, writing experts will be able to help you by the deadline. Sometimes, it’s just easier to buy essays online than stress about it and eat poorly!
  • Build a network: This reads like the standard HR advice of ‘have a firm handshake’ and ‘make sure there are no spelling mistakes on your resume’ but it’s far more important in the VC space than anywhere else. Combining your knowledge of an ecosystem here with a good contact book is far more powerful in the world of venture capital than it is in investment banking or private equity. Talk to these people on LinkedIn, at startup conferences, at workshops. Make sure you’re someone who’s top of mind when new positions arise.
  • Work for a VC-backed Company : This is a suggestion that comes up time and again in advice on how to land VC roles is to work for VC-backed companies and engage with the VC firms this way. Frankly, this is a higher-risk strategy for those that want to enter VC, as you’ll likely spend more time working on the operational issues of the company itself, and there’s no real guarantee that you’ll engage with its VC backers. That said, enough people in the VC industry have entered through this route, so it’s worth a mention.
  • Gain Investment Experience Elsewhere : It’s probably easier to find your way into a VC company through a boutique investment bank than it would be to get into Goldman Sachs or Morgan Stanley using the same route. The skills are applicable to venture capital, and you can later hone some of the ones you’re lacking (knowledge of the technology ecosystem, different structure of financial modeling, etc.).

Venture capital salaries

Not unlike the private equity and investment banking industries, the venture capital industry has different tiers of salary.

Those working at the top-tier companies - say, the likes of Andressen Horowitz, Sequoia, or Accel Partners - can expect to earn more than those working at less well-known venture capital funds.

The scale of these businesses is exhibited by their AUM (assets under management), with a notional dividing line between large and small companies being $500 million

Above an AUM of $500 million, the typical salaries are:

  • Parner -  $350K per year
  • Principal - $250k per year
  • Associate - $150k per year

Below an AUM of $500 million, the typical salaries are:

  • Parner -  $250K per year
  • Principal - $180k per year
  • Associate - $120k per year

Conclusion

The numbers of people that get hired by VC firms may mean that it’s an even harder industry to get into than investment banking or private equity.

That said, this is an industry driven by a passion for technology and new ideas.

Anybody that can show these qualities in ample doses, networks with the right people, and keeps abreast of developments in the industry, gives themselves an excellent opportunity of landing a role with a venture capital firm. 

M&A Science

As legend has it, in the space of fifty years, the venture capital industry has moved from being a few pioneers in information technology working out of their garages in Southern California, to being a global industry.

A new unicorn - a VC-based company with a valuation in excess of $1 billion - is seemingly minted every week. The VC industry has spawned a series of popular television shows.

Its most famous investors are now household names in the investor community.

It should come as little surprise then, that venture capital jobs are in high demand. The issue is that there aren’t many of them out there.

Research conducted by Deloitte on human capital in the VC industry showed VC firms have a median of six employees and an average of 14 in 2020, meaning jobs are in tight supply.

In this article, we at DealRoom look at some of the roles in this industry and how potential applicants should position themselves to obtain them. 

What do VC firms do?

Venture capital firms invest in early stage, high-growth companies. Usually these companies have not yet been commercialized and turn to venture capital funding for funds to invest in marketing, hiring, and technology.

VC structure

For making the equity investment in these high risk companies, VC firms are able to demand better terms than they would expect at more established firms.

For example, it’s not unusual for VC firms to hold up to 30% of young companies, enabling them to cash out when the company goes public or is acquired by a different company.

Venture capital roles

The organizational  structure of most VC firms in venture capital mimics those of other parts of the investment industry.

At the bottom, there are the analysts  or associates, who do most of the so-called lower value work, further up the food chain, there’s the principal, before we hit the partners at the very top.

Below, DealRoom provides an explanation of each:

Analyst: As with any analyst position across the investment spectrum, the VC analyst’s role involves financial modeling, helping in due diligence, and providing insights when called upon.

They’ll usually be on emails, filtering through opportunities that come through the company’s website, and delicately refusing the companies that aren’t a fit with the VC firm’s strategy or ambitions.

The work that the analyst does informs the work that the rest of the team does. When a bright-eyed startup founder sends a pitch deck that makes bold claims about an industry, the role of the analyst will be to fact-check, and confirm or deny the industry’s prospects. There is very little, if any, client facing involved with this role.

Associate: Associates oversee the work that analysts do, as well as having extra responsibility within the company. They typically spend most of their time analyzing attractive companies, interviewing startup founders about their company and its prospects, and bringing relevant prospects to the attention of principals and partners.

The associate thus plays an essential role. They should possess a range of commercial and financial skills that enable them to separate the excellent opportunities from the overly ambitious (a motif that runs through the VC industry).

Think, for example, of the VC associate who was willing to listen to the Airbnb pitch, while dozens of others dismissed it as something that could never work.

Principal: Principals are senior members of the venture capital firm’s investment team. Much like principals at private equity firms, they are central in the VC firm’s fundraising efforts, as well as making decisions around strategy and investments.

They often take on mentorship roles for companies after investment.

Partner: The partners of a VC firm are its owners, usually industry stalwarts that have gone through a number of fundraising processes, started (and exited) several of their own businesses, know the industry inside out and have the battle scars to prove it.

Most importantly, they also control how the capital at their VC is invested.

As always, their ability to communicate is important. The partner will typically spend a lot of time talking to outside investors, talking (i.e. promoting the fund) at startup roadshows and workshops, and spend time with the owners of companies who are nearing their IPOs.

As most investments in startups are led by one VC firm who brings in several others, their contact book is also of the utmost importance.

Skills required for working in venture capital

There’s little doubt that VC roles bring a very specific set of challenges quite unlike those required in other areas of finance. If anything, the skills required to make it in venture capital are broader than practically any other area of finance. These include:

  • A successful track record: If you can prove to the VC firm that you were an early investor in successful ventures, it shows that you can combine several of the traits that they’re looking for and will instantly make you an interesting candidate for them.
  • Excellent financial modeling skills: The financial modeling required at VC firms is very specific and not something that’s taught in most corporate finance textbooks (i.e. many startups have no track record, no real cash flows, and a new product or service, making a cost of capital practically impossible to establish). The best candidates will know their way around this finance.
  • Tech savvy: The better your technology - and coding - knowledge, the better, enabling you to get into the technical details of potentially interesting startups. Do you know your Java from your JavaScript? How does R stack up against Python? You don’t have to be fluent in any of these languages, but you do have to know in which situations which language works best.
  • A strong contacts list: Very often VC firms will enter investments not as the lead investor, but as one of several supporting investors. To be invited to these deals, it helps to know other players in the industry, particularly if they hold you in high esteem.

How to get a job in venture capital

Let’s start with the bad news: VC firms rarely hire junior talent. There are no training programs to speak of (that would go against the ethos of the industry, which prides itself on being agile).

Of the few that do exist, the odds of landing a place on the program are miniscule - better to focus your efforts elsewhere to ensure that your job seeking is more productive.

The good news?

You don’t have to have graduated cum laude from a Wharton MBA class to land a position in the VC industry. 

So, given the rather unstructured route into VC that most analysts and associates face, the following bullet points should be seen as a rough guide that will enhance your chances of landing a role..

  • Understand the ecosystem: With the competition for roles being so fierce, it’s important to know the lay of the land. You can differentiate yourself from the competition by knowing the space you’re looking to get into in detail. Which area does your VC firm of choice specialize in? Suppose it’s fintech. What part of fintech? What are the latest advances in this area? How is the blockchain affecting it? What are the latest payment technologies? 
  • Personal Inbound Marketing: Another thing that separates angel, seed, and VC investors from investors at private equity firms and investment banks, is the amount of self-promotion they do. Sites like Medium and TechCrunch are awash with articles written by VC company management talking about a trend, a company, or a new piece of technology. This raises your profile, shows your knowledge, and should open some doors - assuming your writing is of good enough quality to pass the muster. Check Samplius essay examples and just excellent pieces of writing to master your skill. By doing so, writing experts will be able to help you by the deadline. Sometimes, it’s just easier to buy essays online than stress about it and eat poorly!
  • Build a network: This reads like the standard HR advice of ‘have a firm handshake’ and ‘make sure there are no spelling mistakes on your resume’ but it’s far more important in the VC space than anywhere else. Combining your knowledge of an ecosystem here with a good contact book is far more powerful in the world of venture capital than it is in investment banking or private equity. Talk to these people on LinkedIn, at startup conferences, at workshops. Make sure you’re someone who’s top of mind when new positions arise.
  • Work for a VC-backed Company : This is a suggestion that comes up time and again in advice on how to land VC roles is to work for VC-backed companies and engage with the VC firms this way. Frankly, this is a higher-risk strategy for those that want to enter VC, as you’ll likely spend more time working on the operational issues of the company itself, and there’s no real guarantee that you’ll engage with its VC backers. That said, enough people in the VC industry have entered through this route, so it’s worth a mention.
  • Gain Investment Experience Elsewhere : It’s probably easier to find your way into a VC company through a boutique investment bank than it would be to get into Goldman Sachs or Morgan Stanley using the same route. The skills are applicable to venture capital, and you can later hone some of the ones you’re lacking (knowledge of the technology ecosystem, different structure of financial modeling, etc.).

Venture capital salaries

Not unlike the private equity and investment banking industries, the venture capital industry has different tiers of salary.

Those working at the top-tier companies - say, the likes of Andressen Horowitz, Sequoia, or Accel Partners - can expect to earn more than those working at less well-known venture capital funds.

The scale of these businesses is exhibited by their AUM (assets under management), with a notional dividing line between large and small companies being $500 million

Above an AUM of $500 million, the typical salaries are:

  • Parner -  $350K per year
  • Principal - $250k per year
  • Associate - $150k per year

Below an AUM of $500 million, the typical salaries are:

  • Parner -  $250K per year
  • Principal - $180k per year
  • Associate - $120k per year

Conclusion

The numbers of people that get hired by VC firms may mean that it’s an even harder industry to get into than investment banking or private equity.

That said, this is an industry driven by a passion for technology and new ideas.

Anybody that can show these qualities in ample doses, networks with the right people, and keeps abreast of developments in the industry, gives themselves an excellent opportunity of landing a role with a venture capital firm. 

M&A Science

Join 2,000+ Forward-Thinking M&A Practitioners

Sign up to be on the M&A Science email list and receive notifications on the latest publications

Subscribe for free
Join 2,000+ forward-thinking M&A practitioners

Get weekly updates about M&A Science upcoming webinars, podcasts and events!

7
Subscribe for free
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.