I have already written extensively on success stories and career options such as investment banking, hedge fund, private equity, fund management, equity research, etc.
One segment that I haven’t written a lot on so far has been an extremely interesting segment of venture capitalist job description.
I am sure you will enjoy this article the same way you have enjoyed all my other articles.
Let me start by explaining what exactly venture capital is.
Venture capital (VC) is a quantum of financial capital given to new but high-potential start-up companies.
The venture capital funds make money by having equity stakes in the companies that they invest in, that typically own unique expertise or business model in fast-growing industries, such as biotechnology, information technology and mobile technology.
A typical venture capital investment happens after the initial round of funding (usually called the seed capital).
You can say that a venture capital firm is a type of private equity firm but it invests funds at a much initial stage of the business as compared to a private equity investment.
In addition to seed funding and other angel investing options, venture capital is usually beneficial for start-up companies that have a short operating history and are too small to raise capital in the public markets on their own.
They are the companies who have not reached a stage where they are able to get loans from banks or issue a debt offering.
In return for the high risk that venture capitalists take by investing in start-up companies, venture capitalists typically get substantial control over company decisions, in addition to a significant portion of the company's equity ownership.
Start-up companies which have the potential to grow fast and have unique business ideas need funds to grow.
Wealthy and rich investors with spare funds, like to invest their capital in such businesses which have long-term growth perspective. Venture capitalists are also called as angel investors.
If you ask me, such investments are quite risky as they are illiquid, but are capable of giving extremely high returns if invested in the correct opportunity.
The returns to the venture capitalists depend on how the company they have invested in grows.
Venture capitalists typically have the great power to influence key decisions of the firms they are investing in as it is their funds which are at stake.
Now comes the main point: What's the job description of a venture capitalist?
Well, the first thing that you will encounter as a venture capitalist is a lot of meetings.
Most days are subjugated by various small and long meetings with various new entrepreneurs, budding industrialists, banks and portfolio companies.
You will also find yourself networking at various conferences and other financial and finding seminars.
You will also have to spend a lot of time on research and due diligence for live deals, but most of your time will be spent meeting people and improving your network.
As an entry-level associate, you will have to meet with various companies initially and try to find out which ones present exciting opportunities and which ones could become good investments.
Once you pre-qualify the companies, you would bring it to the notice of the partners or the directors and then the seniors would become more interested and would actually start meeting with the companies as well.
So basically you would find interesting opportunities, choose the best ones, and take them to the senior partners or venture capitalists who would then take the actual investment decisions.
For early-stage start-up companies (pre-revenue generation days) you wouldn't really do much of financial modeling.
But for later-stage companies which have a prevalent revenue and profit, you could do the usual financial modeling and valuation drills.
But then this won’t be as intense as what you would do as a banking analyst as you won’t be spending time making everything faultless and correct for each non-recurring charge.
Well if you ask me progressing to the next level depends on the venture capital firm that you’re working with and how their partnership works.
But you have to make sure that you keep on finding good opportunities and create solid returns for the firm in order to advance.
You don’t need to find an opportunity like a Twitter or an Instagram to get to the partner-level – believe me that only happens once a lifetime! It’s more important to get consistent good opportunities rather than one-off success.
There are three key ways you can earn money: base salary, year-end bonus and carry (money you invest alongside the firm when they invest in a company).
Your basic salary in venture capital will be higher than what you would make as an investment banking analyst or a private equity analyst.
Bonuses are lower at early-stage firms because there’s not as much money to go around but at late-stage venture capital, bonuses are higher and are closer to what you’d earn by working with private equity or pension funds.
Most times you’ll get a small bonus but you won’t become a millionaire with these investments.
To profit from carrying, you need to be working at the firm for a long time and should have invested in dozens of portfolio companies.
Believe me venture capital is like being a “mini-entrepreneur” because you will have to take decisions without following specific orders.
A lot of risks will be involved in the work that you do.
You will make money on some opportunities while you will lose money on many transactions that you invest in.
So you will have to be patient and careful but at the same time, you will be required to take calculated risks.
Your entire career will depend upon how much risk you are able to take and how well you manage this risk! In short, your track record and performance matters.
I hope that this article has given you a good idea about life in the venture capital lane.
I have tried to be very detailed and precise to give you a fair idea as to what a venture capitalist does and how you can grow within that segment.
Do let me know if you have any questions on this subject and I’ll be more than happy to address your queries.
Do let me know if you want me to write on any other similar subjects and I’ll try my level best to make sure I address and cover those topics.
I had written an article on ‘What do you do as a venture capitalist?’
A lot of you had read that article and appreciated the insights that I had provided. But I also got some emails from readers who asked me how they could get into venture capital.
Most of these readers were either working with private equity firms or were working with investment banking boutique firms.
They were enamoured by the very attractive landscape of silicon valleys capital funds and wanted to enter that field.
But they were not sure how to go about it.
So I thought I would write another article on the world of venture capital, where I will try to explain how an analyst working with private equity firms or with investment firms can get into venture capital.
I will try to break up this article into the following segments so that I am able to give you a good insight into the world of venture capital and how to land a job with a venture capital firm.
The key is to understand first of all if the venture firms look for any particular type of candidates.
For example, do venture capital firms value banking experience more than experience in strategic consulting or business plans?
If you ask me, I think there are three key access points into a VC firm as career requirements and work experience.
Either you've been involved in some kind of banking activities, or any type of consulting or core business development or even product management before and now you think that you want to use what you’ve learned over the years to invest in other organizations.
After doing any of the above-mentioned activities, suppose you have attended a formal business school to improve your knowledge and get an MBA degree.
You have been working successfully with a large reputed organization at a senior or mid-level role and are very dynamic. Through a strong network, you get a referral for working with a venture capital firm.
Now out of these three above mentioned access points, the third option according to me is the trickiest to bank on when getting into a firm as you really have to be very successful in the real world with a very strong network.
If you consider the first entry point, typically venture capital firms prefer to hire angel investment bankers with good and extensive experience in successful deals or any candidate with broad product management or key business development experience with large companies as they typically possess a lot of insights into how organizations generally operate.
At the post MBA entry-level, you will see that candidates having a broader range of backgrounds will find it easier to get in. But you have to make sure that you attend a top MBA college and have admittance to the proper recruiting channels there.
VC firms typically tend to be quite conventional and they usually get thousands of resumes, so they typically give a lot of importance to which organizations you have worked with, which school you have attended and what kind of grades you have achieved across your schooling journey.
One thing that you will keep on hearing is that you need a very strong network to break into the venture capital industry, as they want employees who can tap their existing networks to find good opportunities.
But if you ask me, I don’t think it’s that important to have a very strong network to get into a venture firm at least at the junior level. But if you are gunning for a senior-level job or targeting a very big VC firm like Sequoia, then you would be expected to walk-in with a good and extensive network.
In fact, I was talking to a friend of mine lately and he told me a very interesting fact that VC firms are expected to decline in the traditional markets such as the US and Europe and are expected to grow in new emerging markets such as India, China, Brazil, and Canada. So do not restrict your search to only the matured markets but also try to look out for opportunities in smaller but emerging markets.
Most of the time people think that networking is very important in the venture capital industry as the organizations in this field are quite small and they have limited funds to spend on recruiting compared to PE firms or banks.
But I think that a lot of it depends on which type of venture capital firms you want to target.
The big and popular VC firms definitely engage specialist headhunting companies, as do many late-stage VC firms. The smaller the capital firm the less likely they are to engage services of headhunting companies.
Some of the key headhunting companies specializing in venture fund recruitment are SG Partners, CPI Partners Inc, the Oxbridge group and Glocap Search.
What these executive search firms look for in a candidate is not too much diverse from what executive search firms in banking or private equity would look for. They typically look for candidates who have good communication skills, have the good deal experience, and show the likelihood of source deals themselves.
You have to understand that the requirement though it seems similar, is quite unique for venture capital jobs as compared to private equity or investment banking.
So you have to be careful when you write your resume for a venture capital job.
It is fine to list down the deals you worked for. But more important according to me is how you managed to work with top-level executives such as CXO level people and the business development work you managed for them.
A venture capital firm is not looking for people with just number crunching abilities but they want people with presentable personalities who are able to work freely with top-level executives.
When it comes to interviews, interviews with venture capitalists are typically quite informal as compared to interviews with other financial institutes.
So do not expect a lot of case studies, modeling tests, etc in your venture capital interviews.
Don’t be surprised if your interview is over breakfast or a lunch session in a fancy restaurant!
Most of the interview will be centred on a casual conversation and will not be as technical and structured as private equity or an investment banking interview.
But venture capitalists are typically obsessed with the cultural fit as they don’t want candidates who are in it only for the riches.
They look out for people who are genuinely zealous about exploring and finding exciting opportunities.
If you ask me I would say that the key thing is having a clear and strong opinion on a given situation or on an industry. Don’t beat around the bush. Give specific answers and appear confident.
Most candidates are lured by the big-ticket salaries of venture capital jobs. But remember the venture capitalists are extremely smart people and will find you out immediately. What they are looking for is total commitment and dedication.
Below is a table where you have average salaries for different financial fields and you can see that venture capital is the most lucrative profession.
Median Salary and Bonuses for top undergraduate business schools in the USA
Well we have seen the key access points and what headhunter firms look for, but what about venture capitalists themselves? What uniqueness do they look for in candidate they want to hire?
If you ask me it really depends on which type of venture capital firm you are planning to apply to - early stage, late stage, what is the focus of the venture fund and so on.
Each VC firm focuses on diverse things and searches for unique traits in candidates.
Firms typically gauge how personable you are in front of a CXO level person, how eloquent you are, and how certain you are in delivering presentations.
In fact, you might be asked to deliver an unrehearsed presentation to them during your interview itself.
Below is a list of the top 30 venture capital firms in the world that you can target when you are searching for that most coveted venture capitalist job.
I hope you have gone through the article in detail and understood how to get into venture capital.
If you have any suggestions or questions, do feel free to touch base with me and I’ll be happy to clear your doubts.
I would like to wish you all the best in your quest to becoming a successful venture capital professional.