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Thesis: From an outside perspective, Venture Capital looks like a shiny object, yet when many people get into the job, it’s different than they expected. Truly understanding Venture Capital makes it easier to understand if you want a job and how to get one.

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Venture Capital Analyst

Unlike other low-level corporate roles, Venture Capital Analysts get exposed to a wide variety of responsibilities associated with every level of the business.

So, to properly understand the role and responsibility of a venture capital analyst, you have to understand the venture capital industry.

Here’s a quick crash course on VC (for more read my Introduction to Venture Capital here):

• The overall premise of Venture Capital is like any other investment strategy: make money by buying low and selling high.
• Venture Capital does this by buying equity in small, private companies that are currently in a high-growth phase.
• The average investment size is anywhere from $250,000 to $15 million, generally in companies that are in the pre-seed, seed, A, B, or C stages (early stages).

Within each Venture Capital firm, there are many roles and responsibilities. The average career track is below:

• Summer Analyst (while in college) - 3 Months
• Analyst - 2-3 years
  • Or Investment Banking Analyst - 2-3 Years
• Junior Associate - 2-3 Years
• Leave to get MBA degree (hopefully sponsored by the VC)
• Senior Associate - 2-3 Years
• Vice President/Principal - 3-5 Years
• Junior Partner - 3-5 Years
• General Partner

As you can see, there is quite a large career ladder associated with Venture Capital. So why do people get into it?

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Reason #1: They like the work

This is the best outcome, as it makes the job easy and enjoyable every day. However, this isn’t exactly why everyone gets into Venture Capital.

As a Venture Capital Analyst, your responsibilities will probably be some combination of the following: sourcing, research, due diligence, and portfolio management.

Sourcing is generally how most Venture Capital funds find the companies they invest in. Sourcing is an art, not a science. Sometimes you can find interesting companies easily, other times it may take days or weeks to find something of worth.

Research comprises almost the entire Venture Capital lifecycle of a deal. Even before you’ve found a company, generally you’re doing research on spaces you think are interesting and industry dynamics to understand the best companies in the space. After you’ve found a company, you do more research to understand whether or not it would actually be a good investment or not.

Due Diligence comprises the process after you’ve found an interesting company and are trying to validate your assumption that it would be a good company. This includes building financial models, doing customer calls, industry research, and many other components. This process can be quick or can take weeks or months.

Portfolio Management refers to supporting portfolio companies to ensure your investments have the greatest chance of success. Funds do this to different degrees, some have a more hands-off approach and others are very hands-on. This doesn’t usually take up much time as an analyst unless there are specific projects to support these companies.

Reason #2: They like the money

Venture Capitalists do tend to make a lot of money. This isn’t always the case, but in many large firms, you do make a large salary plus carry as you rise through the ranks. Carry is a percentage of the fund's returns (meaning if you have some major winners you make a lot of money).

Things I Wish I Knew Going into Venture Capital

Given you now know a little more about why people go into Venture Capital and what they do there, here’s a little bit more anecdotal information from my experiences in the industry and what I wish I could have known.

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Insight #1: You Need Prior Job Experience

If only this meme were true.

Unfortunately, if you want a job in Venture Capital, you NEED to have prior internship experience. Granted, the internship experience doesn’t always have to be in finance, but it needs to be in something very intelligent and very difficult.

Examples could include investment banking, venture capital, private equity, consulting, engineering, entrepreneurship, etc.

In Venture Capital, they expect you to be self-sufficient and hit the ground running. There generally aren’t super formal training programs, so most of the basic knowledge is expected to be already known.

Insight #2: Sourcing is Extremely Difficult

Many people can succeed at the other parts of Venture Capital, but never figure out how to effectively source.

For better or worse, many Venture Capital firms use analyst and intern programs specifically to focus on sourcing. This is beneficial to them in a couple of ways.

First, the analysts and interns can go through many more companies than the partners. Second, because it is a great filter for who can survive in the industry and who can’t. It weeds out those not fit for Venture Capital very quickly.

In addition, after sourcing for a couple of months, you’ve seen most of the easily available companies, so finding new companies you haven’t seen before is infinitely more complicated and frustrating.

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Insight #3: Venture Capitalists Don’t Work 9-5

Here’s a sample day for a Venture Capital Analyst:

7:30 - 8:00 - Clean out inbox

8:00 - 8:30 - Study today’s meetings

8:30 - 9:00 - Review funding news

9:00 - 10:00 - Call with CEO of a new company

10:00 - 11:00 - Call with CEO of a new company

11:00 - 12:00 - GP call with Company

12:00 - 1:00 - Lunch with an investor at another VC firm

1:00 - 2:00 - Catch up with CEO XYZ

2:00 - 3:00 - Catch up with CEO XYZ

3:00 - 4:00 - Diligence call with customer of company XYZ

4:00 - 5:00 - Call with CEO of a new company

5:00 - 7:00 - Go through a list of companies at a conference

7:00 - 9:00 - Financial diligence on company XYZ

9:00 - 11:00 - Financial diligence on company XYZ

11:00 - 12:00 - Clean out inbox

As you can see, you shouldn’t be planning to simply clock in and clock out in a Venture Capital role. Analysts are working all the time. Granted, as you do get higher in the ranks, you can work less and have a more set schedule, but at the beginning, you work all day, every day.

Insight #4: Getting a Job at a VC is Super Competitive

There are only 78,000 jobs in Venture Capital in the United States. That means roughly 1 in every 2000 jobs in the US is a job in Venture Capital.

Consider this, there are around 57,000 graduates majoring in finance every year.

Alternatively, here’s a data point from the private equity industry (pretty much the same industry dynamics). KKR, a massive private equity firm ($500 billion of assets under management), had 1,678 applicants in 2020 for 33 jobs. This is around a 2% acceptance rate.

For the Class of 2027, all Ivy League schools had an admissions rate of 3.5% - 6%. This means you have a better chance of getting into Harvard than you do of getting a full-time role in Venture Capital.

Granted, you can get a role at a non-competitive firm easier than this, but for the “best” Venture Capital firms, their application process is very competitive.

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Insight #5: Venture Capital Firms Prefer Target Schools

In 2018, 40% of venture capitalists were from Stanford or Harvard.

As someone from a non-target school, my chances of getting into Venture Capital are extremely small. Even if I am a better candidate, chances are they will choose someone from a target school instead.

From their point, it makes sense. They already have established networking with those universities and those universities generally have a low acceptance rate, traditionally only accepting the best of the best.

So, if you aren’t from a target university, it just means you need to work 10 times harder than someone from a target university. But, that doesn’t mean it isn’t impossible. It just means you have to be the best of the best.

How do you get a job in Venture Capital?

If you haven’t been discouraged by this point in the article and are still interested in Venture Capital, congratulations, you’re probably closer to being their target candidate.

What’s the best way to prepare to increase your chances of getting a job?

Network.

That’s the single best piece of advice I could give. No matter how good your job experience or resume might be, if the person reviewing it doesn’t associate your name to a face and an interaction, your chances are just as good as anyone else.

Sadly, that’s the case. Even if you are the best on paper, if they don’t know who you are, there’s a good chance they will choose someone they’ve spoken to over you.

There are many great resources on how to properly network, and this isn’t that, but I’ll suggest here and here.

Work.

Relevant work experience is extremely valuable during the interview and to pass the initial screening process. They’re going to want to know you’re capable of working hard, long hours doing something highly intelligent.

If you don’t have work experience, get some. Actually get like 5 or 6 different experiences. The more the better.

Read.

If you aren’t reading information about the financial markets daily, you’re falling behind. A common Venture Capital interview question is “Tell me something going on in the market right now and how it relates to Venture Capital.”

It’s an easy screen to see who knows their stuff and who doesn’t.

There are many newsletters, websites, journals, etc., that talk about Venture Capital and finance. Read enough to be able to competently talk about what’s going on.

Diversify Yourself.

As Venture Capitalists invest in a variety of industries, they look for people with a broad background of experience and knowledge. These people are generally the most capable of getting knowledgeable about a variety of topics quickly.

Find other things (in addition to finance) to diversify your background. For instance, play sports, read books, try starting your own company, learn to code, travel, volunteer, compete in case competitions, the list is endless.

If you’re not preparing months, if not years before you apply and interview, chances are you’re probably not going to succeed.

So, practice some self-innovation. Find ways you could be better, ways you could improve, new spaces you could explore, and then go do them!

Ultimately, remember your worth isn’t defined by whether or not you got a job in Venture Capital, there are thousands of other fulfilling and intellectually stimulating careers out there.

Anywho, that’s all for today.

-Drew Jackson