Venture Capital

Working in venture capital offers the unique opportunity to operate in an entrepreneurial environment while not being tied down to the success of one company or technology.  While there is a lot riding on each individual investment, you are able to take a stake in multiple new ventures, which allows for some risk mitigation.  

It can be a very rewarding career path, both financially (if you are able to choose the right investments), and personally in that you will be able to have your hand in creating and developing successful organizations.  That being said, positions within venture capital are notoriously difficult to obtain.

The first factor working against you is the simple fact that venture capital firms tend to be fairly small while demand for positions is very high; therefore there is a lot of competition should an employment opportunity present itself.  

Most firms also expect some level of previous experience that would give you some insight into what works and doesn’t work in an entrepreneurial venture (e.g., having started your own company or worked in some other “big picture” role like business development or management consulting.)  The industry is generally divided into two categories: late-stage and early-stage focused investments.  

  • Late-stage investment focused firms are looking at opportunities to invest in undervalued companies that are already established to some degree and are already producing some sort of product or service.  These firms tend to be more focused on business problems that are leading to a company underperforming and will look for candidates with financial expertise more than an expertise in a technical field.
  • Early-stage investment focused firms are looking at companies that are newly forming and may be focused on developing a new service or technology, so they will be much more receptive to candidates with a specific technical expertise.  PhDs will likely be more in demand in these early-stage focused firms since someone will need to be able to analyze and understand these new technologies in order to determine the potential market demand.   

Entry Points

Determining the proper entry point can be a bit of a difficult process in venture capital since the internal structure can vary from firm to firm.  Some firms have no junior employees (non-partners), while others will have a structure that is similar to investment banks (the analyst to associate to VP to partner paradigm).  Those with a PhD will generally be considered for the MBA-level positions, which in most cases is the associate position.  Usually a quick look at the firm’s website will reveal the type of internal structure that is in place.  

Who are the Employers?

A good idea for an initial search of who is currently looking to expand their firm may be to look at which firms are hiring at the more prestigious business schools (Harvard, Stanford, etc.).  This information is usually readily available on the business school’s website under something along the lines of “career placement” or “placement statistics”.  Chances are, if they are hiring fresh MBAs, then they may also be amenable to hiring PhDs.

  • A directory of the members of the National Venture Capital Association can be found here
  • Two other comprehensive lists of venture capital firms can be found here and here

Application Process

With most industries, it’s safe to assume that you can find current openings by going to the company website and clicking on the “Careers” section.  Venture capital firms will not make it that easy for you; usually when you find a “Careers” section on websites for venture capital firms, the listings are not for jobs with the firm itself, but rather with one of their portfolio companies.  This is definitely an industry built on networking skills and who you know really matters when it comes to finding an open position.  It’s definitely time to line up those informational interviews and look through all of those alumni listings for anyone who could be of any help.  If you know anyone involved with a venture-backed startup, it might also be a good idea to get in touch with them to see if they are able to point you in the right direction or put in a good word.  If you are still not having any luck, there is always the option to look into one of the openings at one of a firm’s portfolio companies in order to better familiarize yourself with the startup environment.

Career Progression

When you initially join a venture capital firm, you’ll likely start out in a position where most of your time will be spent sourcing deals and analyzing potential investment opportunities rather than directly writing any checks.  The initial goal for promotion is then to become the person writing the checks, who is in the position to take credit for savvy investment decisions.  It is a good track record of investing that will lead to further career progression on the road to senior partner.   

Work Hours

Hours are typically less demanding than in investment banking, but can vary depending on the stage of investments under management (whether you are focused on sourcing new investments or managing current investments).  Work weeks are likely to be shorter when you are investigating new investment opportunities and longer when you are busy executing deals.  A good estimate would be about 60 hours per week in most cases.

Compensation

Overall pay will be determined by the size of the firm, success of its investments, and the type of investments it makes (early stage vs. late stage.)  In addition to salary and bonus, components of the compensation package can also include a sourcing bonus (for finding and executing an investment opportunity) and carry (basically, carry is profit sharing from successful investments and is usually split among the senior members of the firm.)  That being said, reasonable estimations for compensation would be:

~$60-80K salary, $20-40K bonus, $5-10K sourcing bonus for analyst (pre-MBA position)
~$90-130K salary, $20-50K bonus, $10-20K sourcing bonus for associate (post-MBA position)
~$200-250K salary and up to $1M bonuses and carry for VP
~$400-600K salary and $1-2M bonuses and carry for junior level partner
~$1M salary and $3-9M bonuses and carry for senior partner  

Exit Options

The type of person who goes into venture capital usually has an entrepreneurial mindset, so it is not uncommon for a venture capitalist to flip over to the other side of the table and try their hand at being a startup founder.  Other common transitions include moves from early-stage investment firms to late-stage investment firms (and vice versa), and moving into private equity.