By: Isabelle Phelps, Investing Associate
In this series, “Get a job in VC,” we’ll cover how to break into the venture capital industry, including the right way to approach the search, paths into venture and platform roles, resources for your job hunt, and more.
In our last post in this series, we answered the question of how to approach the VC job search. Now, we’re tackling another question we often hear: what, if any, is the “right” route into the venture industry.
The truth is there’s no one, uniform path that will guarantee a role at a venture capital firm. That’s true for both jobs in investing as well as roles on the platform side (which we’ll cover later in this series).
If you’ve done your research and determined that you’d like to work as an investor at a venture capital firm, you’ll know that you’ll spend your days meeting with founders, doing due diligence, supporting portfolio companies, and researching market opportunities. And, most importantly, you’ll be responsible for writing checks to founders and managing the deployment of capital from the fund.
That said, many assume a finance background or an MBA is necessary for a job in venture capital. While that experience is definitely helpful, it’s not required. In fact, diverse work experiences and skill sets can bring a unique perspective to the table when identifying and evaluating investment opportunities.
Paths into investor roles
Early-stage investors come out of many different backgrounds with varying areas of expertise. Those who are the most successful develop a specific skill set or perspective on a business model, technology, or market that allows them to identify patterns over time.
For one, having a good sense of the growing pains inherent in early-stage companies and what a founder or business model needs to be successful is a great asset for an investor. That’s why past roles in operations and business management, such as jobs as a chief of staff or as a product manager, can be helpful in building experience evaluating teams and businesses.
Jobs that build industry or technical expertise, such as journalism, engineering, corporate development, public equities and research, can provide a VC with valuable insight into a market or technology roadmap. And that experience helps build networks with other early-stage entrepreneurs and within the larger tech community, providing sources for potential new deals, portfolio support, and diligence. Early-stage investors can do over twenty deals a year, and if the firm is category agnostic, the more exposure the team has to different markets the better.
Prior to joining Lerer Hippeau, I worked in business strategy, operations, and marketing strategy at eBay Enterprise and Yahoo. I started working closely with early-stage companies while in business school at MIT Sloan as an investing partner at Dorm Room Fund. And, after spending a summer as a summer associate at Lerer Hippeau, I joined full-time after completing my business school degree. My early operational experience gave me insight into how businesses scale, empathy for founders, and context behind the numbers.
As my own background shows, there are widely varying paths that lead into venture. And that’s true, too, in terms of the amount of professional experience you need to land a role. While it varies firm-to-firm, many hire analysts out of college or either full-time or two-year associate positions. It’s also not uncommon for professionals decades into their career to pivot into VC.
Later stage investing
At the later stage, the role changes. With more financial and operational data available to accurately model a company’s outlook, there’s more quantitative analysis. And a background in finance or data analysis can be helpful for modeling a company’s financials and more accurately valuing the business.
There’s also more negotiation through the deal process, and more oversight that’s required as the business scales. With less asymmetry of information and a little less risk in the business, later-stage deals become more competitive, so having a background negotiating, selling, winning and closing deals can be an advantage. Given the information available, the valuation of a business and deal terms also become more complex.
Prior roles in consulting, private equity, banking, or finance or operations roles at big tech companies tend to be helpful backgrounds for late-stage investors. These VCs only do a handful of deals per year, so they spend a lot of time with a company’s numbers and team before writing a check.
Having experience stewarding large businesses that require greater operational efficiency and a focus on long-term growth can set you apart as a potential partner and advisor. Similarly, understanding both public and private markets for potential exit opportunities — and having a network within those areas — is another highly valuable asset.
How to catch a firm’s attention
There isn’t a standard recruiting process in venture, and there aren’t recruiters for early-stage funds like there are in other tech-focused industries. Venture capital is about experience and being able to identify patterns, and, ultimately, the best way to get into the industry is to generate that experience and pattern recognition.
An investing role is broken down into three general parts: sourcing, diligence and portfolio support. Although as an investor you’ll need to do everything, it can be difficult to learn how to do everything well at once. Identify which you believe is your particular strength and demonstrate it. Here are some ideas for how to make a good impression when pursuing an investing role at a firm:
- Potential Strategy: Subscribe to newsletters and podcasts to stay up-to-date on new companies in various industries and send investment ideas to relevant firms (use standard etiquette, i.e. double opt-in when making an introduction). Constantly consume business and tech news to spot emerging trends across sectors and refine your own filter.
Diligence and investment thesis:
- Potential Strategy: Send through a deck on a relevant investment or market opportunity with some companies you can make introductions to (use resources like Crunchbase, Pitchbook and Medium to do your homework ahead of time).
- Potential Strategy: Share insights on a portfolio company’s business that an investor may not know otherwise, do consulting work for a portfolio company and show your ability to add value for companies first-hand (this is especially helpful if the startup has just raised capital at the stage you’d like to invest in).
While your previous experience may set you up to excel at one of these areas in particular, most investors approach these as a funnel: younger investors focus on sourcing to increase their network, then they get more exposure to diligence and “pick” investments, and, finally, through helping companies as a board member or advisor.
When to reach out to a firm
There isn’t a set recruiting cycle or hiring calendar for venture. Although a few firms have a more formal recruiting process at schools, most firms hire as the need arises. The best signal that a fund may be hiring is if they raise a new fund. You can reach out when you expect them to be fundraising and make sure you’re top-of-mind in case they’re looking to grow their team. And, although hiring used to be done entirely through referrals, more funds have started posting open roles publicly. (We’ll share more on specific resources later in this series).
That said, like many aspects of the role, the process is built on relationships. It will take time to find the right opportunity, but use the conversations along the way to build your network. If not now, those relationships could open up a position down the road. Multiple touch-points within a firm, over time, can help ensure you’re top-of-mind when opportunities do open. And regardless, having good relationships with other investors will help you once you’re in the industry.
During my own search, it took someone telling me early on that I was qualified for this job to give me the permission I thought I needed to pursue a role as an investor. None of you need that permission. But, for those of you who may believe you do, I hope this series has demonstrated the many different paths into the industry. Don’t count yourself out.
In the next post in our series “Get a job in VC,” we’ll explore the many paths into platform. Stayed tuned for more.
Past posts in our “Get a job in VC” series: