How to Secure a Job in Venture Capital

My team and I have been actively looking for 2-3 members to join us at Artha Venture Fund. The excitement around the opportunity to identify high potential business models in India and slew of new funds (including ours) that have been announced in the last 12 months, have created a lot of job opportunities in VC firms. Also, there is something inherently sexy about venture capital. For the fraction of capital that we manage (in relation to the entire world of capital management), we carry a disproportionate amount of media attention and importance.

Therefore, it isn’t surprising that our job openings received hundreds of responses. Our HR head, Jimmy has had his hands so full, that I was forced to call him in on an off-day (when there is relatively less buzz in the office), to sift through the stack of resumes. While Jimmy and I agreed on shortlisting about 10% of the resumes, I was surprised at how little thought the applicants had put in before sending in their applications. I realized that most of the applicants wanted to become venture capitalists without truly understanding the necessities, expectations and restrictions of the job.

Instead of replying to each person with a questionnaire to evaluate their understanding of the job, I read Seth Levine’s posts from 2005 (How to become a venture capitalist), 2008 (How to get a job in venture capital (revisited)) and 2019 (How to Get a Job in Venture Capital); and added my thoughts to create this list.

1. Understand how VCs make money

We make money by charging management fees on the total amount of capital we manage and a carry on the profit we make from the fund’s corpus (some funds charge a carry per deal basis, but I do not agree to that method).

The management fee is paid to the fund’s partners to cover their salaries, rent, travel, etc. Since the management fee is fixed unlike a Mutual Fund (a post on this later), a VC does not encourage (or appreciate) annual increases in salary. As Seth accurately puts it, the partners will (as Seth puts it) hire you if you cost less than the opportunity cost for the partners having to put in their own time. VCs are much more accommodating when it comes to carry and you should expect a large portion of your compensation to come from it.

The simple math for a carry on a VC fund that returns 25% IRR on a $50 million fund over 8 years with a 20% carry would be almost $50 million infused into the carry pool. Most funds distribute 50% of that to the team (in our case it is over 60%) but even a 2% share would make you a millionaire!

It was surprising how little research the people sending in their resumes had done on our fund. This is despite the fact that we have an expansive website, over 100 media mentions in the last 12 months, a daily blog (almost every day) written by yours truly and our CFO, Vinod has the most connections on LinkedIn after Reid Hoffman. If you are clueless about us (or any other fund for that matter), it does not bode well for your job’s prospects since a large part it involves conducting tertiary research!

2. Research the VC before applying

Note: It is mighty important you look at the size of the fund and multiply it by 2% to understand the total pool of resources a fund has to pay out its expenses. If you feel that you need anything beyond 10% of that pool, you will have a tough time getting the job. 

3. Be in it for the long haul

If you tend to switch jobs every 2-3 years for “better prospects” you should not join a VC firm. It takes at least 2-3 years (in my experience) to understand the investment philosophy of a VC firm and if you switch jobs right as you are getting the hang of it, you are committing hara-kiri with your career as well as your pay check, as you will (and should) lose most of their carry.

Your career path, should you choose to persevere would be:

  • 2 years to move from an analyst to associate
  • 2-3 years to move from associate to junior partner/principal and
  • 2-5 years to become a partner

4. Do not expect quick answers but persevere

VCs can easily fit 42 hours of work into a 24-hour day (if it were available) and you are essentially a “cost centre” for us so getting in is very (very!) difficult. In one of his posts, Seth talks about how it took 3 months for a “hot referral” from a fellow VC to even get a first meeting with him. Therefore, do not send in your resume and sit tight for an answer. Keep reminding us that you are someone we should meet (and why) and that will change our view of you into a profit centre instead of a cost centre.

5. Find a way to break-in

Breaking into a VC can be difficult, so you should take whatever opportunity you get and start. You may even need to start as an intern or join one of the companies that the VC is investing in to get started. You may even handle something completely irrelevant to the final position you are seeking but get in there, into the meetings where VC’s evaluate new investment opportunities and portfolio companies. It will be worth the effort IF the goal is to become a partner in a VC fund.

6. Get connected in the ecosystem

To get into a VC fund, you must be noticed and talked about either amongst founders or investors. Find out about the start-up events taking place in your city and try to network at those events. Once you find the VC fund you want to get into, connect with their top brass by giving them good startups that they could look into (make sure you know what they invest in as well) or find a way to help one of their investee companies.

This takes some effort but when your name gets referred through the ecosystem, it carries a lot of weight.

7. Become an angel investor

The best way to display your understanding of venture capital is to become a venture capitalist! It is quite easy to find and invest in companies today, so deploy a little bit of capital, carefully though. This is not the sure shot way of getting a job but if your investments can be held up to intense scrutiny from the partner who might interview you, it would set you above the rest.

8. Get the relevant experience

I am not an MBA from any fancy school. I got my MBA from doing 5 years of door to door sales and 9 years of being an entrepreneur. Therefore, I am staunchly against getting an “empty” MBA i.e. without relevant work experience prior to joining the MBA as well as doing the MBA just because it was the next most logical thing to do. But it does help to open a few doors if you have a fancy MBA school tag. I know there are several funds that almost exclusively hire people that went to an IIM or top 10 schools.

However, what’s really important is that you have on-the-job experience prior to joining a VC fund. So, get an internship at a VC fund or join an investment bank where they will teach you how to create financial models, investment memorandums, etc. Experience in negotiating term sheets, shareholder agreements, etc. is a big plus.

9. Join a startup

Coming from an entrepreneurial background, I have a lot of respect for people who have worked for 2-3 years in a start-up i.e. a company that started from scratch and built itself into something. If you have experience of chaos turning into something, you will have the attention of many a VC (including an early stage fund like us).

As Seth mentions in his blog, if you have management experience from working with a start-up, you could directly walk into an associate’s role. And if you are a founder of even a moderately successful start-up, you could easily get the role of a principal or junior partner with a fund.  

10. Build a social profile

Nowadays, it is common for a VC to go through your social profiles, blogs and articles (if any) to get a better sense of the person you are, and if you are someone they’d want on their team. Therefore, it is important for you to have a blog where you put down your thoughts on the trends in the VC space (or even blog about your problems with finding a job in this space!), comment on the blogs of other VCs and follow them on Twitter and LinkedIn. These efforts will pay off in a big way when you are being researched by your target VC.

It is important for us to understand how you think just like it is important to know what you have done.

11. Make a VC job your Plan B

I differ with Seth here. He recommends having a Plan B while you are on your quest for a VC job. While I believe that despite all these tips, it would be advisable to avoid taking a VC job. It is a tough, tough, tough (I can’t emphasize enough) industry to break into, therefore, you should keep a VC job as your plan B. You can always be a part of the ecosystem without becoming a VC, so why endure the headache? It isn’t a job for everyone, only a few get successful at it.

I became a venture capitalist by accident. But am looking at my foray into fund management as an entrepreneurial opportunity to create multiple funds with several fund managers that can manage money with responsibility and excitement. That’s why I am in this role.

What is your reason?

29/2018

Advertisements

3 thoughts on “How to Secure a Job in Venture Capital

  1. This is a good way to understand inside aspects of a VC firm… someday you must also talk about why some VCs dont invest in some stages, why they prefer certain cheque sizes to be deployed in startups, what happens at the end of the fund’s life

  2. It’s always good to read thoughts from top-brass of every industry.
    I’d want to add few extra points in addition to what you have put across.
    1:- It’s not about VC – it’s all about where you can track the opportunity hidden across in any business. Some might offer an IRR of 20-25% but at the same time the risk involved could be on exit potential of same as most of the IRR for any venture depends upon the exit. Correctly mentioned by you, that you did your MBA while spending most of the days in marketing; that way you got an idea of how your end product should look like to market the same at the time of exit.
    2:- It’s not always about identifying the opportunity rather clicking on floated opportunities with a time managed thought process so that the time, money and effort involved in due course of time takes the opportunity to end product at every significant time leg.
    3:- Most of the VCs often come across some ideas that looks attractive and seems, to good to be true and few of them comes with operations and execution in place, though backed with higher negotiation power. Both might offer a good return profile but one is on riskier side and another is on moderate side though offerring very little room for VCs. A paradigm focus on other end where funding is the only issue where you can lookout for smart and really dedicated entrepreneurs makes a win win for a VC.
    4:- Lots of thoughts and unending discussion with entrepreneurs across globe could give us a new lesson Everytime about running a venture capital firm.
    Cheers!

    1. Some excellent points for me to consider for when I write my followon post. Thank you reading the blog and taking the time to provide detailed feedback!

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.