What is Venture Capital (VC)?
Venture capital firms raise capital and invest in new businesses, usually those in early-stage or with high-growth potential, in exchange for equity, or ownership in the company. Their goal is to invest early in the adolescent phase, help the company, and then make a large profit once the company is sold or goes through an initial public offering (IPO). Most VCs are concentrated in the technology and healthcare industries, but there are others in energy, retail, education, and more.
See our full VC guide here: What is Venture Capital and How Does it Work?
What are Careers in Venture Capital?
Careers in venture capital are positions in which individuals work to raise funds, scope out potential deals, negotiate deals, and perform due diligence throughout the deals. The majority of these jobs can be divided into six main areas: sourcing, deal execution, portfolio company support, networking & brand-building, fundraising & LP relations, and internal operations & other tasks.
Typically, venture capitalists work for VC firms. Career paths generally progress through these positions:
- Analyst – research-focused and deals with lots of numbers
- Pre-MBA Associate – deal sourcing, portfolio management
- Post-MBA or Senior Associate – portfolio management, apprentice to principals and partners
- Principal or VP – partner in training
- Partner or Junior Partner – general partner in training
- Senior Partner or General Partner – decision-maker and firm representative
Venture Capital Analyst
Analysts typically come from undergraduate programs and/or several years after graduation. Those that are hired directly after acquiring their bachelor’s degree usually have several years of experience in VC, private equity, or a related field. Analysts will do a lot of number crunching, industry research, and team support, such as helping associates with due diligence and internal processes.
Analysts will learn about financial and market analysis, but will not drive deals as associates and principals do. This role is more of a training one, and most analysts will leave after several years to join a portfolio company, get an MBA, or move to a different firm as an associate. Some may get promoted internally but this is fairly uncommon.
Venture Capital Associate or Pre-MBA Associate
Pre-MBA and junior associates are typically individuals who have worked for a few years in a related industry such as investment banking, management consulting, product management, sales, or business development. At early-stage VC firms, associates do more sourcing and less deal execution; at late-stage firms, it’s the opposite. These individuals act as a front-line filter in finding the best startups, pre-qualifying them, and recommending them to principals and partners. Like analysts, pre-MBA associates usually stay for a few years before leaving for an MBA, a portfolio company, or another finance role in a related field.
Venture Capital Senior Associate or Post-MBA Associate
At most VC firms, the post-MBA/senior associate role is on the track to partner. Most people in this role have already gotten their MBA, although a few may have been directly promoted. The day-to-day responsibilities do not differ drastically from what junior associates do, but senior associates are expected to act as firm representatives and tend to have more influence on the principals and partners.
No associates sit on company boards but post-MBA associates may become board observers. Senior associates also act like apprentices to principals and partners by supporting them and demonstrating that they can find unique opportunities from which the firm may profit.
Venture Capital Principal or VP
Principals are partners in training. As the most senior investment team members of the firm, they are directly involved in deal execution and contract negotiation. Principals need to understand the technology behind the companies and industries they are investing in, as well as all aspects of the business side. Principals run deals, sit on the board, and spend more time with the existing portfolio companies, but they do not make final investment decisions.
Venture Capital General Partner or Managing Director
Most general partners at VC firms have had successful track records as entrepreneurs and executives, or they’ve been in venture capital for a long time. General partners rarely work in sourcing and deal execution and instead spend the majority of their time on fundraising, public relations, final investment decisions, human resources, and the board. Most directors also contribute significant amounts of their own capital to the fund so as to be actively, directly involved.
Skills Needed for a Career in Venture Capital
To be successful as a venture capitalist, you need to intimately understand the financial details of investments. Primarily, this means analyzing the financial health of a company through its balance sheet, statement of cash flows, and other documents. This is necessary because it helps VCs at all levels determine whether the firm should invest in the company or not.
Sourcing companies can be a difficult task and may involve long hours and cold calls. In order to find investment opportunities, venture capitalists will need to thoroughly study business proposals and spend long evenings in the office. This field is not an easy one, but the high compensation and opportunities for advancement make it attractive and competitive.
Business and Economic Understanding
In order to succeed in venture capital, it’s imperative to have both general and industry-specific financial knowledge. Every role at the firm revolves around finding high-potential companies and investing in them; therefore, it is impossible to succeed without knowing about industry risks, current market conditions, and investment portfolios. For this reason, it is very difficult to break into VC without experience in other finance industries, like investment banking or corporate finance, because these industries give individuals the technical skills they need to do well.
How to Start a Career in Venture Capital
1. Earn a Bachelor's Degree
An undergraduate degree is imperative for a career in venture capital, especially one with a concentration in business. If there is a firm that you want to work for, research its employees' academic histories to get an idea of what each studied.
2. Gain Relevant Work Experience
It’s very difficult to get a role in venture capital without relevant market experience, traditionally in a finance role such as investment banking, consulting, business development, sales, or product management. Work experience in these areas will make your resume stand out, you a more competitive applicant, and likely give you connections to VC firms. Working for a startup can also present opportunities to move into VC because you will learn how early-stage companies operate and the other side of investment deals.
3. Search for Analyst Jobs
As mentioned above, the entry-level position at VC firms is the analyst role in which individuals help associates with their responsibilities, conduct research, and make investment calculations. Analyst jobs are the easiest point of entry into the VC world, though they are very analytical and require several years of work before a chance of promotion.
For a head start, read this article: Top Venture Capital Firms
4. Work Toward a Promotion
Once you are in an analyst role, the next step is the junior associate position. Some VC firms promote directly from within but others expect you to progress horizontally, with another VC firm. Analysts should take advantage of their time in close proximity to junior associates to learn about the role and how to succeed so they will be competitive applicants for other firms.
5. Consider Higher Education
Without an MBA, the junior analyst position is typically the highest possible level at a VC firm. Furthermore, for most of the biggest firms, any higher education degree must come from a top-tier business school in order for an applicant to be seriously considered.
The two MBA programs that had the highest percentage of the graduating class that entered venture capital in 2021 were Harvard Business School and the Stanford Graduate School of Business. However, any of the M7 business schools will prepare its MBA candidates well for a competitive role in venture capital or private equity.
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