Venture capital (VC) jobs are notoriously difficult to come by. These coveted positions don’t come up often, and they are rarely advertised – except for entry-level roles at larger VC firms. Many aspiring VCs struggle to understand the industry well enough to apply at the right type of firm or one that aligns with their skillset. Even landing an interview for a VC job can be a challenge, and candidates frequently stumble during the technical portion, such as the VC case study. So, what makes it so hard to get a job at a VC firm?
Key Takeaways
- Venture capital jobs are highly coveted and in limited supply.
- Aspiring VCs often lack a clear understanding of the industry and how to position themselves for these roles.
- Securing an interview is difficult, and the technical aspects of the process, like case studies, can be challenging.
- Breaking into the VC industry requires a strategic approach and persistence.
- Networking and demonstrating relevant experience are key to standing out in the competitive VC job market.
The Exclusivity of Venture Capital Jobs
The first myth to debunk is that there’s a VC job waiting for you in every corner, and you just have to pitch an Investor to get one. Although the last five years saw an unprecedented level of dollars raised by VC firms and invested in startups, Venture Capital remains an exclusive asset class in terms of exclusivity of venture capital jobs. The Crunchbase-based analysis I mentioned in the webinar (at 4’30) clearly shows that, although there are thousands of VC firms, the top 100 make a large portion of the investments.
Limited Openings in VC Firms
In reality, most Venture Capital firms are top-heavy structures with a couple of partners and few junior resources—mostly interns. The solo GP (for General Partner, i.e., the Investor) trend has further polarized the industry’s structure, and while some of them are hiring, many are happy to remain nifty and thrifty.
Top-Heavy Firm Structures with Few Junior Roles
The main reason for such partner-heavy structures is the remuneration mechanism en vogue in Venture Capital. Fund managers typically perceive 2% of their fund’s size in annual management fees, which helps them pay for salaries, rent, and other expenses. Except in megafunds, GPs derive the bulk of their wealth—when they make any money at all—from something called carried interest: a profit-sharing scheme on the value they create when they liquidate their startup portfolio.
The Remuneration Structure in Venture Capital
This limited number of venture capital job openings and the venture capital firm structures focused on partners often lead to a highly competitive and exclusive environment. Aspiring venture capitalists must navigate the nuances of venture capital compensation to position themselves effectively for the limited opportunities available.
Understanding Roles in Venture Capital
Just like any other interview, it’s critical to have a good understanding of your future tasks to convince recruiters—in this case, the firm’s partners—that you’re ready to hit the ground running. You’ll most likely fall into one of three categories depending on your seniority and the VC firm’s structure:
Responsibilities of an Analyst
Entry-level positions as a venture capital analyst are typically suited for professionals with less than two years of experience. They play a crucial role in identifying promising startups, conducting in-depth market research, and supporting the investment decision-making process.
Duties of a Junior Partner
Venture capital firms rarely use as many intermediate levels as investment banks or consultancies, where the path from analyst to partner (or managing director) goes through several steps including associate, vice-president, and principal. Junior partners typically have around 5-7 years of relevant experience. It is not common for VC firms to recruit at that level.
Expectations from a Partner
Outsiders who make it to partner generally possess the expertise the VC firm needs to raise a specific fund. Experienced professionals with fifteen to twenty years of work experience who are totally new to Venture Capital are often brought in to co-lead a fund with one of the firm’s long-term partners.
The Ideal Background for VC Jobs
When it comes to the ideal path to a Venture Capital job, a common answer is an entrepreneurial background. Industry luminaries like John Doerr and Vinod Khosla have frequently emphasized the value of founder experience. However, a closer look at the data suggests that an entrepreneurial route is far from a guarantee for breaking into the VC world.
The Entrepreneurial Route
After reviewing the 2019 Midas List, which ranks the top 100 Venture Capitalists globally, I found that only 25% of the laureates had previously been entrepreneurs. A striking 37% had no prior operational experience at all, hailing instead from finance, consulting, and other professional backgrounds. These findings align with a 2016 analysis of 1,500 Venture Capitalists, which showed that 59% did not have any operating experience, and only 28% held engineering degrees.
Success Rates of Founder-VCs vs Non-Founders
The study further categorized the entrepreneurial group into successful and non-successful Founders. Success was defined as a company having either been taken public or having returned at least the initial investment. Interestingly, VCs who were previously successful Founders recorded a success rate of 30% on their investments, 6.5% higher than their non-entrepreneurial counterparts. However, non-successful Founders-turned-VCs achieved a 19% success rate, about a third lower than successful Founder-VCs and four percentage points lower than VCs without any entrepreneurial experience.
Relevance of Entrepreneurial Experience by Investment Stage
These findings suggest that while entrepreneurial experience can be beneficial, it is not a prerequisite for success in Venture Capital. The relevance of such experience may also vary depending on the investment stage. VCs with successful founder backgrounds may have an edge in early-stage investing, where their deep understanding of the startup journey and ability to empathize with founders can be invaluable. However, for later-stage or growth investments, domain expertise and financial acumen may take precedence over direct entrepreneurial experience.
Is it hard to get a job at a VC firm?
Speaking at today’s London School of Economics’ Alternative Investments Conference, a number of senior venture capitalists discussed the challenges of getting a job at a VC firm. Shmuel Chafets, general partner at Target Global, says his advice to students on joining VC out of university “would probably be don’t.” The path to a venture capital job is usually a “long and winding road.”
However, there could be some benefits to this. Chafets describes 2024 as a “lost year” for the industry, as it is “still processing” the events of the past few years, with geopolitical developments to come this year further complicating matters. This gives those set on joining VC a bit of a grace period to accrue experience beforehand. Though the difficulty of getting a job at a VC firm remains high, this temporary lull may provide an opportunity for aspiring venture capitalists to strengthen their qualifications.
As Chafets notes, “there are plenty of paths in, but they’re not all equal.” Navigating the venture capital job market requires strategic planning and a deep understanding of the skills and experience sought by VC firms. Aspiring professionals must be willing to put in the time and effort to make themselves an attractive candidate in this highly competitive field.
Alternative Paths to Venture Capital
While the traditional routes into venture capital, such as investment banking or consulting, may be the most well-trodden, they are far from the only options available. In fact, as venture capitalists themselves have pointed out, some of the most successful VCs have taken less conventional paths to get there.
Public Sector Experience
Unexpectedly, VCs seem to have a particular fondness for individuals with public sector backgrounds. Shmuel Chafets, a general partner at Target Global, noted that a public sector background can give you a better understanding of the real-world problems that portfolio companies often aim to address, providing “more exposure than you’d get in a decade working for a bank.” Mish Mashkautsan, a general partner at VC firm LocalGlobe, echoed this sentiment, stating that he was “very grateful on multiple fronts” for his decade spent working in the Israeli government.
Executive Assistant Roles
Another alternative path that VCs have highlighted is taking on an executive assistant role at a startup or venture capital firm. According to Niroumand, these positions allow you to “see a lot” that you otherwise wouldn’t in an entry-level startup job, and give you a taste of the “high intensity” work that founders face on a daily basis.
Industry-Specific Backgrounds
While having a background in finance or consulting may be the traditional route, VCs are increasingly looking for individuals with industry-specific expertise. Mish Mashkautsan of LocalGlobe noted that “template paths” like banking or consulting are “uninspiring” as routes into VC, and instead suggested that “the best thing you can do is take a bet on yourself” and pursue a career path that aligns with your passions and unique skillset.
Key Skills for VC Jobs
While many individuals transition into venture capital from backgrounds in banking or consulting, what truly sets apart successful VC candidates is their ability to engage effectively with founders. When starting out in venture capital, you will spend a significant amount of time sourcing companies for your fund to invest in. This requires being a personable individual who enjoys conversing with people, rather than solely crunching numbers.
As a venture capitalist, you will be speaking to a high volume of entrepreneurs about their ideas and scouring the market to identify the next promising opportunity. In addition to your networking and sourcing capabilities, you must also be able to recognize and invest in the right founders. According to Niroumand, “The best founders are the ones who pull resources. If you have to push the resources on them, that’s mistake number one.”
| Key Skills for VC Jobs | Description |
|---|---|
| Ability to Engage with Founders | Venture capitalists must excel at conversing with entrepreneurs and understanding their business ideas. |
| Identifying Promising Founders | The ability to recognize founders with high growth potential and the ability to execute is crucial. |
| Networking and Sourcing Capabilities | Strong networking skills and the capacity to identify valuable investment opportunities are essential for venture capitalists. |
By honing these key skills, aspiring venture capitalists can position themselves for success in this highly competitive industry. Developing the ability to engage with founders, identify promising talent, and leverage powerful networking capabilities are vital for thriving in a VC career.
Entry-Level Opportunities in VC
Venture Capital jobs are scarce, and the competition for them is fierce—which is why you need to build a mousetrap to get one. Your objective as an Aspiring VC is to be top of mind at your dream VC firm when a job finally opens. Naturally, it is possible to apply to job openings posted on various platforms. As I know first-hand from my students at HEC Paris and alumni of the VC Career Accelerator, the odds of success are very low. I recently shared a VC job post that had received over 450 applications. This is the least effective way to break into Venture Capital.
Cold Outreach Strategies
To increase your chances of landing an entry-level opportunities in VC, consider implementing strategic cold outreach tactics. Reach out to VC professionals, especially those at firms you’re interested in, and introduce yourself. Highlight your relevant skills, experience, and passion for the industry. This personalized approach can help you stand out from the crowd and get on the radar of decision-makers.
Diversity Initiatives and Programs
Many VC firms are actively working to improve diversity initiatives and programs within their organizations. Explore these opportunities, as they can provide valuable entry points for individuals from underrepresented backgrounds. These initiatives often include mentorship programs, internships, and specialized recruiting efforts to foster a more inclusive Venture Capital ecosystem.
Timing Your VC Job Search
When it comes to timing your VC job search, timing can be crucial. Shmuel Chafets, general partner at Target Global, offers a sobering perspective, especially for recent graduates seeking their first VC roles. He suggests that his “advice to students on joining VC out of university ‘would probably be don’t.’” The path to a career in venture capital is often described as a “long and winding road,” requiring significant experience and preparation.
However, Chafets sees a potential silver lining in the current market conditions. He characterizes 2024 as a “lost year,” as the VC industry continues to “process” the events of the past few years and navigate the complexities of geopolitical developments. This temporary lull, he believes, may provide a “grace period” for those aspiring to join the VC world, allowing them to accumulate the necessary experience and build a stronger foundation before embarking on their VC job search.
| Perspective | Insight |
|---|---|
| Shmuel Chafets, Target Global | “Advice to students on joining VC out of university ‘would probably be don’t.’” |
| Shmuel Chafets, Target Global | Describes 2024 as a “lost year” as the VC industry processes past events and navigates geopolitical developments. |
| Shmuel Chafets, Target Global | This “grace period” can allow aspiring VCs to accrue the necessary experience before embarking on their VC job search. |
The key takeaway is that for those determined to pursue a career in venture capital, the current market dynamics may provide a unique opportunity to strategically time their VC job search, allowing them to build a stronger foundation and increase their chances of success in this highly competitive industry.
Standing Out in VC Interviews
As the venture capital industry continues to attract talented individuals from diverse backgrounds, standing out in the interview process has become increasingly important. While banking or consulting experience may not be as highly valued as one might expect, VCs are seeking candidates who are willing to take risks and pursue their passions.
Demonstrating Relevant Experience
Contrary to popular belief, the traditional “template paths” like banking or consulting may not be the most compelling routes into venture capital. Mish Mashkautsan, a general partner at VC firm LocalGlobe, emphasizes that these “uninspiring” backgrounds matter much less to VCs than one might think. Instead, he suggests that the “best thing you can do is take a bet on yourself” and showcase your unique experiences and perspectives.
Showcasing Your Thesis
If you have a well-developed thesis about the next big thing in the market, VCs will be eager to hear it. As Ladi Greenstreet, head of strategic investments at Natwest, advises, “Write it down, collect the evidence and prove that the thesis is real.” Even if your prediction isn’t entirely accurate, your ability to craft a compelling, evidence-based narrative could be the key to securing a venture capital job.
Preparing for VC Case Studies
In addition to behavioral and fit questions, VC interviews often include case studies designed to assess a candidate’s analytical and problem-solving skills. Preparing thoroughly for these case studies, using frameworks like the STAR-(L/P) method, can help you stand out and demonstrate your ability to think like a venture capitalist.
By standing out in VC interviews, showcasing your unique experiences, and crafting a compelling thesis, you can increase your chances of breaking into this highly competitive industry and launching a successful career in venture capital.
Building Your VC Career Path
Embarking on a career path in venture capital can be an exciting and rewarding journey, but it also requires strategic planning and perseverance. Given the competitive nature of the industry and the limited number of job openings, aspiring venture capitalists must be proactive in developing the right skills and experience to stand out in this exclusive field.
One key factor to consider when building your VC career path is the value placed on entrepreneurial experience. While a background in entrepreneurship is not a prerequisite for success, data suggests that venture capitalists with prior successful entrepreneurial experience tend to outperform their non-entrepreneurial counterparts. A study of over 12,000 U.S. venture capitalists found that those with successful entrepreneurial backgrounds achieved a 30% success rate on their investments, compared to a 6.5% higher success rate than non-entrepreneurial VCs.
However, it’s important to note that the venture capital industry encompasses a diverse range of backgrounds, with only 25% of the top 100 VCs worldwide in 2019 having an entrepreneurial background. This highlights the value that venture capital firms also place on other skill sets, such as financial analysis, industry expertise, and the ability to effectively engage with and support startup founders.
As you navigate your VC career path, consider the specific needs and preferences of the firms you’re targeting. Early-stage venture capital firms, for instance, may place a higher emphasis on entrepreneurial experience, as they seek individuals who can empathize with and guide founders through the challenges of building a startup. In contrast, later-stage firms may prioritize deeper industry knowledge and financial acumen.
Regardless of your background, developing a strong network, honing your investment thesis and analytical skills, and demonstrating a passion for supporting innovative companies can be vital to building your VC career path. By positioning yourself as a well-rounded, strategic thinker with a proven track record of success, you can increase your chances of securing a coveted venture capital role and thriving in this dynamic, ever-evolving industry.
Conclusion
Breaking into the competitive world of venture capital (VC) is no easy feat, as the industry remains highly exclusive with limited job openings. However, by understanding the unique dynamics and requirements of VC firms, aspiring professionals can increase their chances of landing their dream role. Whether it’s honing your ability to engage with founders, developing a well-researched investment thesis, or leveraging alternative career paths, a strategic and persistent approach is key to navigating the winding road to a VC job.
While the path may not be straightforward, the rewards of a successful VC career can be immense. By staying informed, building relevant experience, and demonstrating your passion for the field, you can position yourself as a compelling candidate in the eyes of the VC community. As the industry continues to evolve, the ability to adapt and think outside the box will be increasingly valuable for those seeking to break into this dynamic and impactful sector.
In conclusion, getting a job at a VC firm is undoubtedly challenging, but with the right strategy, persistence, and a keen understanding of the industry’s nuances, the goal is attainable. By navigating the unique obstacles and seizing the available opportunities, aspiring VCs can unlock a rewarding and influential career path that allows them to shape the future of innovative industries and technologies.