Getting a job in venture capital is extremely hard. There are a lot of really smart, well qualified, eager people who want to work in VC, and very few jobs. And it’s likely to only get harder as the industry contracts.
If you look at the backgrounds of partners in VC firms, they generally either came in as a partner after being a successful entrepreneur or worked their way up in VC. There are books written on how to become a successful entrepreneur, so here I’ll just focus on the other common path – career VCs.
First, you should understand how VC firms are structured. Every firm is different, some have no junior people, some have just a few, and some have a lot.
The key distinction between junior and senior people is whether they can write checks – meaning they can independently lead a deal. If you can’t write checks, you have to get a check writer to sponsor an investment you like. Check writers get almost all the credit and blame for an investment.
The hierarchy within VC firms is basically as follows: (There has been a wave of title inflation in VC lately, so I’ll put the inflated titles in parentheses).
Partners – Owners of the firm. Get the most of the management and carry fees. Can write checks.
Principals – Usually get small piece of carry. Can write checks. (Inflated title: Partner; in which case it’s hard to tell the “real” partners from the principals).
Associates – Usually post-MBA or 4-6 years work experience. Usually get little to no carry and can’t write checks. (Inflated title: Sr. Associates or Vice President).
Analyst – Usually right out of college. They do research or cold call companies. No carry and obviously can’t write checks. (Inflated title: they just don’t list a title or say something vague like “investment professional”).
As you can see with the title inflation this is all pretty confusing. It’s meant to be. VCs want entrepreneurs to take their junior people seriously. (Which, by the way, entrepreneurs always should: even though they can’t directly write checks, they can be extremely influential)
You can break down working your way up in VC into 3 challenges:
1) Getting a job in the first place. The two most common places to break into VC as a junior person are after undergrad or business school. VCs are heavily biased toward certain top schools. On the MBA side, the industry is dominated by Harvard and Stanford. Undergrad, the VCs I know only recruit from Wharton, Harvard, Stanford and maybe a few other elite schools. (Please don’t accuse me of elitism-I’m just reporting on elitism, not promoting it). Even if you go to one of these fancy schools it’s still not easy to get a job. You need to network like crazy. I did a whole bunch of volunteer research projects for VCs when I was in business school. I came up with lists of investment ideas so when I got a few minutes with a VC, I could show them I was obsessed with this stuff. Other things that help you: computer science or other relevant technology background. Single best thing is to have started a company (even if it didn’t succeed).
2) Going from non-check writer to check writer. This might even be harder than breaking into VC. There is kind of a Catch-22 here: you can only gain credibility by having led deals, yet you can’t lead deals until you’ve gotten credibility. Some partners are nice and let high level junior people “virtually” lead deals, join boards etc so they can get credit. My advice here is to try to get your hands on a checkbook, even if it means leaving a top tier VC and going to a second tier one. Too many junior people hang around top tier firms waiting to get promoted.
3) Once you get your hands on a checkbook, then you just need to find the next Google/Facebook and invest before anyone else figures it out.
If you really want to break into VC and aren’t just now graduating from a top school, my top suggestion would be to go start a company. If you don’t have the stomach for that, the next best thing is to work in a VC-backed portfolio company, hopefully in a role where you get some VC exposure.
And, finally, if you just want to work in finance, try to get a job at a hedge fund or a big bank. Breaking into VC so hard that it’s only worth it if you really love startups.