||Invest in a diverse portfolio across industries
||Focus on some certain industries, namely information technology (mostly in the software sector), biotech, cleantech or fintech.
|# of investments
||10 or fewer investments per fund
||20-40+ investments per fund
||Expect that all of investments have positive returns
||If only 1 or 2 companies among VC’s portfolio can successfully go public or be acquired, VC can achieve its expected returns
|Source of investment
||Use both equity and debt to invest. (LBO – Leveraged Buyout).
||Use equity to invest
||More complex and expensive due to involving multiple 3rd parties specialists, such as lawyers, management consultants or auditors
||Simple, even sometimes the investment is made just because the firm believes in the founders’ ideas.
|Stage of Investment
||Growing and Mature startups
|EBITDA of investees
||EBITDA > 0
||PEs do control investing and gain controlling interest (the act of holding a majority of a company’s voting stock) in their portfolios
||VCs do minor investing, in which the firm owns a small percentage of stake and will not involve much in the decision making process. VCs’ main objective is to grow a startup.
||Have operating partners to work directly with portfolio companies to improve operations, drive profitability and grow initiatives.
||Support to hire talents and build team
|Process & Timeline
||Highly-structured process and clear timeline
||Recruitment is a need-based process. Hence, there is no standard process and timeline
||Higher than that of VC due to bigger fund sizes
||Lower than that of PE due to smaller fund size and the number of investments.
||Skew towards former Investment Bankers.
||Diverse background: Consultants, Entrepreneurs, etc, can get into VC if they have relevant experience, for example: knowledge about the industry the firm focuses on
|Traits of a potential candidate
||High requirement of financial modeling and technical analysis.
(1) Startup lovers.
(2) Financial modeling is still a must but not as heavy as PE’s requirement.
(3) Networking/ Interpersonal skill is preferred as there are more qualitative work in VCs
Identifying the backbone of each firm type will help a potential candidate to highlight his or her experience throughout the recruitment process. For example: industry and market knowledge should be both highlighted to get into a VC firm while financial modeling will be weighed higher in a Private Equity recruitment.
To have more details about Venture Capital vs Private Equity, you can visit our comprehensive comparison article.
If you are also interested in PE career track, here is our series about Private Equity career and how to get into this industry
1.5 Top global Venture Capital firms
2. What do Venture Capitalists do?
2.1 Venture Capital jobs zoom-in
VC jobs are not significantly different from PE’s ones. The main works are similar between those two, but with different focus: PE Analyst & Associate spend a lot of time on complicated financial modelling and deal execution, while VC people spend more time on qualitative research and networking.
- Deal Sourcing and Screening: Market research to look for the next investment targets and set up initial meetings.
- Deal Execution: Perform due diligence on potential start-up investment and discuss further about investing strategies, partnerships, managing and so on
- Portfolio Management: Assist and support companies within the portfolio with committed resources so that VCs can protect and increase the value of their investment.
- Networking and Brand Building: Attend networking events and conferences, and talk to different stakeholders such as potential investors, lawyers and start-ups.
- FundRaising and LP Relations: Raise new funds for the firms and report current portfolio’s performance to Limited Partners.
- Managerial tasks: Other internal tasks in a firm, such as managing human resources, training and coaching, etc
2.2 Venture Capital career path
Basically, there are 5 main levels, including:
- Associate: there are two levels: Pre-MBA Associate and Post-MBA associate
- Principal: in some firm, there is Vice Principal title as well
- Partner or Junior Partner
- Senior Partner or General Partner
Depending on the scale of a firm, there can be more middle positions, such as Vice President (Principal-to-be). As Junior Partners take less responsibility and receive less carry than do General Partners, we clearly identify those two as separated positions while combining Vice Principal and Principal.
Venture Capital Analyst and especially Venture Capital Associate are open to newcomers of this industry. It does not imply that an outsider cannot get a job in VC at a higher level. The opportunity is just not too often and is only for people with specific knowledge and skill sets that the firm is looking for.
||Salary & Bonus
||Carry (% of 20% fund profits) (*)
||Duration to be promoted
||Perform deal sourcing
||$80K – $150K
||Perform both Deal sourcing and Deal Execution; the ratio depends on working experience in VC
||$150K – $200K
||Rarely, except for new VC firms
||2-3 years, then go for a prestige MBA program
||Perform more Deal Execution, less Deal sourcing but possibly Be the firm representatives in meetings
||$200K – $250K
||+/- 5% (shared between Associate and VP/Principals)
||Execute deals, and Manage Portfolio
||$250K – $400K
||+/- 5% (shared between Associate and VP/Principals)
|Partners or Junior Partners
||Raise fund, Network, and Manage LPs; basically it is a transition position between Principal and General PartnerRaise fund, Network, and Manage LPs; basically it is a transition position between Principal and General Partner
||$400K – $600K
|Senior Partners/General Partners
||Raise fund, Network, Manage LPs and Make final investment decisions. Only the GP can decide which company to invest into.
||$600K – $2M
Source: Firm Research, Glassdoor
(*) The rest 10% will go to Strategic Advisors and Deal-by-deal exceptions.
Venture Capitalist salary is quite attractive compared to other normal jobs while people in VC enjoy much better work life balance than ones in Investment Banking, Private Equity and Hedge Funds.
3. How to Get into Venture Capital?
To break into VCs, any candidate has to define a strategy, which is the candidate’s background, and how to execute that strategy via resume, networking and interview.
3.1 Preferred background to join Venture Capital?
There are 3 main entry points to get into VC: as a student, as a Pre-MBA professional and as an MBA graduate. Of course, VCs can recruit professionals with years of experience in start-ups, but the chance is low. Those recruitments are to source individuals who understand markets and can hands on managing companies in the portfolio. Our focus will be on the most popular opportunities to be in a VC firm.
You can find a holistic view of different background in IB, PE and VC via our WallStreet Career planning tools
Generally speaking, VCs prefer and are also more suitable for professionals, who have 2-3 years of working experience. Rather than recruiting junior analysts to run sophisticated models, those firms direct their energy to qualitative research, networking, and building the firm’s brands among investors and startups. Therefore, they also look for talents who have those skills on top of the fundamental financial knowledge.
VCs are also more open to candidates with background in consulting, product management, business development or startup. Taking people from the industry is the fastest way to gain market insights and upgrade VCs’ support to companies in their portfolios.
3.2 Recruitment process
A VC firm does not need plenty of juniors to do financial analysis; therefore, they do not have a standard recruitment timeline and process. If you are familiar with PE recruitment, VC one is quite the same as a PE’s off-cycle recruitment. Some firms hire a headhunter to fill in the vacancies, but it will be a need-based process and there is no talent pipeline or anything close to it. Having said that, you have to be proactive to land a job in this industry. Networking events and LinkedIn seem to be the two best channels.
Also, there is not any fixed duration for the whole process. If the firm has an urgent need, it can take several weeks to finish all steps; but if the firm is busy with other activities, the process can be dragged out for months.
A candidate will have to pass the resume round, phone interview and F2F interview to get a job in VC.
There are some ground rules that you should follow here
- You should choose 2-4 achievements under each position. Do not put only 1 achievement as it will raise the concern that you did not achieve much. There is one exception here: IB Analysts who have just started their jobs in the last 2-3 months.
- Change any relevant word into “deal”, if possible. People who scored 1-3 in the table above often slip this rule but this principal can help them have a more PE-driven resume.
- In each achievement, remember to put the size of that deal, type of that deal, and your action/involvement.
- The order of deal size, deal type and your involvement should be consistent across bullet points. We often recommend this order [Your action/responsibility][Deal size][Dealtype]. Consistency will help the hiring team catch up all the information quickly.
- Start your point with an action verb to get the attention and clearly express what you did
The interview round is not only a chance for the firm to get to know you more, but for you to learn about the firm as well. Thanks to a series of interviews, recruiters can decide how suitable you are at the firm, so showing up unprepared is like wearing a suit without a tie.
The interview process will include multiple rounds. Normally, the first round will be conducted with a phone screen, the final a series of F2F interviews, in which you nearly meet people across levels in the firm.
3.4.1 What does a VC firm evaluate?
Interview questions in a VC firm can be categorized as below:
- Fit/background questions
- Firm related questions
- Technical questions
- Case study/Modeling tests
3.4.2 How to prepare and ace an interview
#1. For fit/behavior questions, this is the part where you tell your stories with interviewers. Thanks to these questions, recruiters will learn how your previous academic and work experience fits into the private equity and also strategies of the firm you apply for.
The questions in the first place always surround:
- Introduce a little bit about yourself / Walk me through your resume
- Some of your strengths, weaknesses
- Your achievements and failures
- Future plan and why Venture Capital but not Private Equity?
What you should prepare here are crafting your own stories (reflecting your achievements, past experience, transferable skills and leaderships), and backing up small personal stories to answer questions related to strengths and weaknesses.
If you have some disadvantages in your profile such as low GPA, non-target background, fewer outstanding accomplishments, fewer finance internships, and etc., you have to prepare stronger responses to make up for these “real weaknesses”.
#2. For technical questions, what you will be interviewed always sticks with accounting, finance, valuations, and practical deals.
- Accounting: Financial statements (types of financial statements, links between different types of financial statements), revenues, operating costs, EBITDA, debt & equity, etc.
- Finance: Equity Investments (stocks), Fixed Income Investments (government bonds, corporate bonds, commodities, currencies) , Derivative Investments (options, futures, forwards, swap), etc.
- Valuation: Valuation metrics and multiples, (Discounted Cash Flow, LBO modelling, etc.), knowledge about mergers and acquisitions, etc.
Although VC is less technical-heavy than PE, you should also prepare for technical questions that can come along in the interview
#3. Other non- technical questions: Beyond technical comprehension, Venture Capital also wants to test your knowledge about the market and companies, especially start-ups. Your work is to keep abreast of news about markets, imminent IPO, investing trends, etc on a daily basis. They can also ask your opinion about the firm’s portfolio and what you will do accordingly. The questions largely depend on your experience on your profile. That means if you present your active involvement in transactions/deals, you might get many questions about it.
Venture Capital can be considered a sub-branch of Private Equity, in which funds focus more on early-stage start-ups. Although the salary and bonus in VC cannot be compared to those of Private Equity folks, the work-life balance is better and total compensation package is still better than average jobs. However, VC is for start-up lovers who are passionate to invest in new ideas and new business models because the returns will not come back too soon and you have to invest in hundreds of ideas, or even thousands, to have the next Facebook or Google.