Jason Heltzer
Nov 4, 2013 · 4 min read
Photo by Jonathan Petersson on Unsplash

I took a class in business school that fundamentally changed the way I think about a lot of things. The core premise of the class (Managerial Decision Making class taught by Thaler) is that we are subject to a lot of biases by virtue of being humans.

One of these biases is overconfidence. He surveyed the class asking how many thought they would get an above average grade in the class. It was about 75%. He also asked how many thought they would be in the top decile. About 20%. Obviously neither of these situations is possible. This bias holds true outside an MBA classroom (clearly a biased sample). Consider asking people if they are an above average driver.

The Stats

So no matter how good you think you are, we have to remember to consider the cold, hard, objective odds of success. So here are the dispassionate stats for the United States (from Pitchbook and the NVCA) on the venture capital community:

  • 841 firms
  • 11,979 professionals, of which ~5,000 are Principal level and above
  • 14 professionals per firm

For sake of comparison, Accenture has 40,000 US employees. That’s just one company in a larger industry. The point is that the VC industry is tiny.

Supply of Jobs

When you consider entry level positions within firms the number of jobs is smaller. If 5,000 are Principal level and above, that means that 7,000 are junior. That includes both entry level (analyst, associate or senior associate) and mid-career titles like director or vice president. Most firms are intentionally bottom heavy, so let’s say there are 4,000 entry level positions within firms.

Now most of those jobs are occupied. So how many are open or looking to be filled? Analyst/associate jobs tend to be pre-MBA and tend to be limited in duration, often two to three years. So those positions turn over frequently. That’s good news. But it is usually only the very large firms that have pre-MBA talent, so it’s a subset of firms you have to approach. Post-MBA positions in VC firms tend to turn over infrequently. The work/life balance tends to be better than consulting or investment banking and the economics can be very attractive if the fund does well. Those positions usually come with equity in the carried interest, which tends to vest over 5–10 years. So people who get into the industry tend not to leave. Naturally there is some churn however, as not everyone can be a partner. So not all hope is lost — those jobs do open up from time to time.

The other part of the supply of open VC positions is by new funds starting. The best way to get ahead of this is by monitoring fundraising of funds. It’s ideal to know when a fund is preparing fundraising because that is the point the leadership of the firm will start to consider how it is going to grow. Outlining team growth and the additions to the team are going to be in their pitch to investors. It’s difficult to know when a fund begins fundraising and often takes a lot of networking and an ear to the ground to discover this. If public fundraising catches on and if FF Ventures is right, it will be a lot easier to detect. To get a feel for the direction of new funds, you should monitor the quarterly fundraising data that the NVCA puts out. The more money going into the asset class, the more people will be required to deploy it. If the asset class is contracting (more money invested into companies than is being raised into funds), that means experienced people will be on the street also looking for the contracting number jobs.

Of course with innovations like Angellist Syndicates, it’s possible for anyone to become a venture capitalist. We may see a generation of entrepreneurial venture capitalists who start their own funds on Angellist after building their own track record. The jury is still out but the point is that this may be a game changer in terms of creating more supply of venture jobs.

Demand for Jobs

Venture is a tough and rough-and-tumble business. But the economics can be very attractive and if you have the constitution for volatility and ability to adapt to a deal-oriented environment. I think there is also a glamour associated with the business, even though I would argue as my partner Jim does: there is a lot of sausage making to the business that isn’t so pretty of fun. So anecdotally, I think there is a lot of demand. I don’t have great statistics on how many people want to go into the VC business, but I do know that at Chicago Booth, about 350 first years show up to the industry presentation on venture capital and private equity in their first week. Not every one of them will pursue a VC/PE job, but that’s about 70% of the class. Even if half of them were “just browsing”, I would characterize this as pretty high demand. Ultimately 5% of the class will wind up getting a VC or PE job out of school. Some of those individuals will wind up in the industry at a point further in their career. But that’s just an MBA class and there is a lot of demand from experienced professionals as well.

Bottom Line

So the summary here is that there is little supply and a great deal of demand. That means the price is high (figuratively) and the quantity is low. As you consider your career arc, this may mean that VC is a destination later in your career. And it also means you have to have a plan B. But do not be discouraged. Luck is a big factor. And there are ways that if you are determined, thoughtful and clever, there are ways to dramatically increase your odds. More on these topics in future posts.

Venture Evolved

Jason is a venture capitalist, business school professor and former software engineer. Jason is a Partner at Origin Ventures and he has been in the venture business since 2001. He also teaches the venture capital and private equity lab class at Chicago Booth.

Jason Heltzer

Written by

Dad, venture capitalist at @OriginVentures, @chicagobooth professor, Chicagoan. I was a nerd before it was cool to be a nerd.

Venture Evolved

Jason is a venture capitalist, business school professor and former software engineer. Jason is a Partner at Origin Ventures and he has been in the venture business since 2001. He also teaches the venture capital and private equity lab class at Chicago Booth.

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