The Best Way To Get Into Venture Capital?

An overview of the options from Venture University, the “Y Combinator for VC”

Ask Venture Capitalists for advice on how to break into VC, and you’ll most likely get knocked back with unhelpful statements like “You have to go through a window, not a door”, or “You can’t plan it, you really just fall into it.”

But what about those who genuinely dream of becoming a VC? Who thrive on the thought of scouring through a vast number of investment opportunities to find a great company, and helping it to become the next unicorn?

First off, it’s crucial to understand that the odds are rough. There are around the same amount of annual VC jobs as there are U.S. professional athlete positions. Some firms actually report receiving over 1,000+ resumes for one junior investment position (~1% accepted), meaning you statistically have a 5x better chance of getting into Harvard (with ~5% accepted) than you do getting a job in VC.

However, if you’re still not put off by how notoriously difficult it is to get into VC, there are some things you need to consider in your quest for launching your career as a VC investor. Unlike other job roles (like becoming a doctor or lawyer) there is no clear path or ‘boxes to tick,’ so to speak, to get into VC.

One thing that is clear is that it’s easier to stay in VC once you have VC experience and a network within the industry, but how do you get your foot in the door? There are certain things that VCs will be looking for, along with some myths to dispel. Let’s take a look at how you can best set yourself up to be considered for a role in VC.

Graduated from an Ivy League, worked at a top firm, or successful founder experience? Helpful, maybe — but not necessary

While there’s no ‘one way’ to get into VC, there are certain traits that are very common. Somewhat unsurprisingly, 40 percent of VCs went to Harvard or Stanford. Many of them also come from positions at top investment banks and consulting firms like Goldman Sachs and McKinsey.

So, while this route does little for aiding diversity in VC, it essentially ensures that VC funds are getting their hands on people that are both very intellectually capable, prepared to hustle, and put in the hours to get to the top. Top VCs are well aware of what it takes to get through an Ivy League school and then land — and keep — a job at one of these firms. They need that kind of dedication and intelligence on their teams, so it makes sense that this path impresses them.

But while this route filters for smart and hard working individuals, it actually doesn’t give VCs any indication as to whether or not the candidate has the vital skills to do venture capital. Are you great at sourcing and evaluating opportunities? Can you effectively sell capital (convince a top startup to accept your investment)? Can you create value for the companies you’re investing in? A Harvard MBA and an investment banking job at JP Morgan doesn’t necessarily give you what you need to be successful in VC.

Another relatively common path into VC is coming with experience as a founder or operating experience at a startup. Whether the company was successful or not, there are certainly some lessons that can be learned from working in startups that can then be applied to VC, including having insight into the necessary traits of good investment opportunities, similar to a “it takes one to know one” approach.

In fact, the amount of ex-founders getting into VC has contributed to a surge in the number of micro-VCs over the past five to seven years. However, the concern here is that many of these first time fund managers that are raising capital for their funds have little to no investment experience. In turn, this means that micro-VCs consistently underperform compared to their traditional VC counterparts, and the lack of follow-on capital in smaller funds doesn’t help with fund returns either. This proves demonstrably that while being an ex-founder may hold some benefits, it doesn’t by any stretch mean that you’re qualified to make informed investment decisions, or will be able to outperform other VC investors.

Also, while Founder VCs can say, “I’ve been where you are”, seeming more founder-friendly, the opposite can be true too. They may feel that they could do the job better, faster, and cheaper than the CEOs they are backing, and try to replace the CEOs of their portfolio companies.

Nothing beats actual investment experience, as investing itself is a skill, and Career VCs have been incredibly successful (just take a look at Fred Wilson or John Doerr) — as they’ve seen a broader range of markets and business models and can be more understanding when working with founders they back.

Land a scout role or internship, or create one if the fund isn’t currently hiring

So, it’s clear that VCs are after solid experience in the industry above all else. One of the most common ways to get your foot (partly) in the door of a VC fund is to apply to a scout program or internship. As a scout, you’ll generally be sourcing deals and trying to find great investment opportunities for the fund. As an intern, you may spend sometime sourcing deals, but mainly you’ll be doing a lot of back of the office tasks (one step above the admin, if one even exists), scheduling meetings, collecting quarterly financials and update bullets of portfolio companies, drafting quarterly portfolio updates for LPs, managing the website and social media, and supporting the portfolio companies that need help. As an intern, the odds of you sourcing a deal that that will actually get invested in is quite low, and the ability to learn how to do VC is not provided in a structured or focused approach, and is mainly provided through osmosis by spending the time with the partners and associates at the office talking.

While being a scout or intern doesn’t offer any serious influence over a fund’s investment decisions, it can certainly help with getting experience in sourcing potentially successful companies and building that all-important warm VC network.

You can also reach out and offer your services to VC funds that don’t even have a scout or intern role posted, such as doing a market landscape analysis, sharing a thesis you have about the future of a market, or doing due diligence on companies they are looking at. By pitching the scout role to VCs, you show initiative and drive. The challenge is you most likely don’t know how to source quality deals or do deep due diligence, but you want to get practice, and you really don’t know yet what a great deal looks like or where to find it, but you hope you can learn by trying to find investment opportunities and pitching them to the partners at a fund.

Many scout and intern programs (especially ones that are self-made) are very unstructured, with no regular formal meetings scheduled with the partners or team members. It’s as if you represent the VC fund, but you don’t technically work there. This can also cause apprehension with startups you approach, due to your lack of ‘trigger-pull’ in making investments as a scout or intern with some top startups avoiding scouts and interns altogether.

Provide value to the VC fund

Probably the best way to impress a VC fund if you don’t have solid investment experience behind you is to develop your own thesis around a market and offer it as expertise to VCs you meet. Do some serious research into a field that you think is going to be disruptive, and send through curated recommendations of companies that you’d like to make introductions to.

You can also channel these value-building efforts into a VC’s portfolio companies to show what you can do for them firsthand. For example, the team at Lerer Hippeau suggests you share insights on one of their portfolio company’s business that they may not know.

Summarizing the fight to get into VC perfectly, Nick Tomaino, an associate at North Atlantic Capital, explains that “This is not the type of industry that you can break into by sending a bunch of resumes out and hoping something sticks:” you need to bring value to the table and make real connections.

Gain real VC experience at Venture University

There’s no doubt that VC is a highly competitive industry that heavily weights genuine and relevant prior experience above all else. You want to be able to prove you can provide value to a VC fund. However, it seems like a catch 22, as you need the VC experience to get the VC job, so how do you get the relevant VC experience in the first place? Venture University was created to solve this exact problem, and was designed to curate and develop the top VC talent for the industry, so VC funds could more effectively hire people into their organizations.

Venture University is a 3–12 month trade school program that equips individuals with the essential knowledge and skills to start working in venture capital. Cohort members go through an intense academic program via a VC/PE Masterclass and then participate in a VC/PE Investment Apprenticeship Program working at VU’s fund VU Venture Partners.

The benefit of Venture University compared to a scout program or an internship, is you get highly quality investment experience by going through the entire investment process of sourcing deals, doing deep due diligence, making investment evaluations and recommendations, and then making 3–6 investments.

Venture University is also less expensive and less time-consuming than going to a top Ivy League school, completing an MBA program, or working painful hours at investment banks or consulting firms. Individuals are able to build a powerful network within the VC and startup industry, make real VC investments and co-invest with top tier investors, work alongside and learn from top performing General Partners, and share in the upside from the investments made via a profit sharing agreement.

The proof is in the numbers and prior Venture University cohorts have had an 80%+ success rate in cohort members landing full-time VC roles and VC related jobs (i.e. accelerators, startup studios, corporate development / corporate VC, and high growth startups).

Individuals that graduate from VU also perform much better in VC/PE interviews, as the conversation isn’t about why you think you want to do VC/PE, but instead about why you know you want to do VC/PE because you’ve done it already, are great at it, and love it.

You can discuss the reasons why you passed on investing in some companies (you may have even passed on portfolio companies of the fund you’re interviewing with!) and why you chose to invest in other companies (explaining the investment thesis, market size analysis, evaluation of the team, the traction, etc.). You can also prove your value add from your experience in sourcing and vetting high quality deals, supporting prior portfolio companies, and leveraging your powerful network, including your proprietary network VU alumni investors, now working at other VC/PE funds, accelerators, and startups.

One of the reasons Venture University has been so successful at becoming a path for individuals to break into the VC ecosystem is that it is a highly competitive program to get into with a ~0.5% acceptance rate, with 20–30 individuals accepted each quarter into the program. The individuals that join VU are diverse in age (early 20’s to mid-50’s) and backgrounds (with~25% of cohort members being women,~10% being Black, and ~10% being Hispanic). Career goals for the individuals are also diverse with ~60% looking to break into VC/PE as Analysts, Associates, Principals, and Partners, ~20% are first time fund managers, and ~20% are angels and family offices looking to professionalize their direct investment strategies.

Conclusion

Getting into VC was never going to be straightforward, and with the talent pool becoming increasingly diverse, it’s only going to get harder. VC funds are first and foremost concerned with how applicants can demonstrate that they have the necessary skills and experience to excel in venture capital, so this should be your top priority. Be proactive, do your research, and prioritize real investing experience and network building so you can show VCs exactly how you can add value to the fund and its portfolio companies. Only then will you be set up with the best chance for success.