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- Breaking into the venture capital space is lucrative: The lowest associates can make up to $150,000 a year.
- Recruiters, managing partners, and executive coaches recommended beefing up your skill set to make up for lacking years in the business.
- Tips include determining what work environment is best for you, matching your skills to the firm, networking, and showing your ability to manage stress.
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It’s difficult to get into the venture capital sector, but those who do can get crazy rich. According to reporter Gary Rivlin, who wrote a piece about VC compensation for Medium’s ‘Marker,’ the lowest associates at top-tier firms make $120,000 to $150,000 a year — and the most successful individuals can conceivably earn millions.
Business Insider found out exactly what top venture capital firms look for when evaluating applicants by asking five experts — including seasoned recruiters, managing partners, and executive coaches with expertise in the VC space — for their guidance.
“It’s a tough move, and the odds are against you to secure a position at a top VC firm,” said Roy Cohen, an executive coach and bestselling author of “The Wall Street Professional’s Survival Guide.” Cohen — who served as the sole in-house career counselor at Goldman Sachs for over 14 years and has many clients who have successfully crossed over into VC firms — emphasized that there are few openings and many qualified and eager candidates.
“Much of your [application] strategy is tied to your level of seniority and age, your background either in banking, consulting, or in an operating company, and your tenacity,” Cohen explained.
Cohen stated that the application process for a VC company is “simpler the lower you are in the food chain.” That being the case, the expectation is that candidates will come equipped with a degree from a top business school and, more often than not, at least two years working as an analyst for a coveted investment bank or consulting firm, said Cohen.
Other prerequisites are strong financial modeling skills and industry specialization.
“Most firms look for individuals who are narrowly focused,” he said. “Generalists are rarely hired by VCs. If you can distinguish yourself through industry depth and expertise, you bring a layer of insight that will be invaluable in understanding and navigating the investment process.”
Another point to develop is your value proposition. Cohen stressed that VC firms want to see that you have a clearly articulated and proven model to drive the investment process — and proof that it works.
“It used to be that virtually anyone with a reasonable resume could cross over to the buy side,” Cohen said. “There were plenty of potential investments and the margins were rich. But making money in VC has become far more challenging, more often than not investments will fail, and profit margins have shrunk.”
One way to prove to skeptics that you not only want a job in venture capital but can contribute immediately is to build a model portfolio.
“You need a couple of great investment ideas that will get the people you want to meet to pay attention to you,” he explained.
Melissa Cheong, a managing partner at Blackhorn Ventures, added that it’s “incredibly valuable” for VC candidates to gain some actual industry experience.
“For firms like ours that focus on earlier-stage investments, it’s wise for us to focus on candidates who’ve worked in or for an early-stage company,” she said. “Experience with the successes and failures — and developing some calluses from those failures — creates muscle memory and pattern recognition of what challenges will be encountered. That puts you in a better position to overcome the hurdles that exist in firms large or small.”
Understanding the differences between various VC firms is another piece of the puzzle.
“For larger firms focusing on late-stage investment strategies, the environment is typically more structured and formulaic,” Cheong said. “For smaller firms that focus on early-stage companies, you need to be willing to adjust to a very steep learning curve.”
The managing partner pointed out that markets that are changing fast have a very dynamic environment. Cheong said that in her target markets, rapid advances in technology, increased access to data, and expanding processing power all contribute to a highly dynamic investment landscape.
“For some, that’s intoxicating and exciting, while others prefer a more systematic approach,” she said. “Knowing your strengths and weaknesses will help inform your early decisions.”
“It takes a village to cross the finish line to secure a position with a top or second-tier VC firm,” Cohen said.
Cheong advised VC hopefuls to seek out mentorships with people they admire and trust in the industry. “Ask for informational interviews and then show that you understand their space,” Cheong said. “Your reputation means everything, and the more people you come into contact with who understand you and the value you bring, the better.”
Shrina Kurani, the vice president of business at Republic, a startup investment platform, explained the importance of networking through the lens of a VC’s priorities.
“VCs have three top priorities: They’re always fundraising for their next fund, supporting their portfolio companies (which also often involves fundraising), and finding the next hot company,” Kurani said.
While fundraising and supporting portfolio companies involve knowing institutional funds and high-net-worth individuals and having some experience building and running multiple companies, Kurani pointed out that deal sourcing is all about networking and staying top of mind — and is also more accessible for candidates to get good at.
“One piece of advice I have for aspiring VCs is: build a strong founder network,” Kurani said. “Whether it’s walking the halls of local campuses [and] meeting professors and students (like while judging competitions) or mentoring companies through incubators, accelerators, or other events, be familiar with five to 10 companies that could be investment-worthy in the space you’re interested in, and be on friendly terms with at least three of them.”
Michael Moran — owner and recruiting manager at Green Lion Search Group, a recruitment agency in Austin, Texas that’s becoming more and more popular for venture capital — agreed that having a network within the industry is invaluable.
“Having a strong network of limited partners and investors can assist a firm in raising new funds, so it stands to reason that it’s a desirable trait in a potential candidate,” Moran said. “From an interview perspective, questions about how they previously raised funds, dollar amounts raised, and current relationships can shed light on this.”
Cheong added that while recruiters definitely have their place in the VC world, there’s also a lot to be said for hiring decisions coming through networking contacts and word of mouth.
“Referrals and the opinions of peers carry weight,” Cheong said. “So, it’s important for candidates to understand that everything they do along their path may pay off or hinder their advancement.”
At the top of Moran’s recruiting wish list is finding candidates with industry experience that matches the firm’s niche.
“It is generally good to match industry experience, as VCs often provide operational support to startup companies in their portfolio,” Moran said. “Understanding how these businesses work and how to best maximize growth are vital to the success of both the VC and the startup company.”
He added that the more experience someone has working in a particular industry (and overcoming issues unique to that industry), the greater impact they can have on the success of the fund.
“Let’s say a candidate has marketing experience for companies of a similar industry,” Moran said. “They could describe, in an application or interview, the ROI of various marketing campaigns they’ve helped execute. Assuming the ROI is impressive, this helps their candidacy as it improves the odds of a profitable and successful exit for the VC.”
Cheong agreed that recruiters want people who have taken the time to do their homework and understand the company that they’re trying to work for.
“Having an information advantage in the sector you’re serving can pay big dividends,” Cheong said.
Moran suggested cultivating the ability to analyze and take actionable steps to help founders overcome their biggest operational challenges.
“Top VCs can assist a company with hiring the right people for key roles, streamlining their financials, assisting with product development, marketing, sales, and much more,” Moran said.
He offered an example of where a VC might help a startup from an operational perspective: assisting with a complete website revamp that utilizes the best design, colors, content positioning, and calls to action.
“The startup founders could have built a great digital product, but may not know how to market the product,” Moran said. “In addition, the VC may help with identifying the target market and creating advertising campaigns that have worked well for similar companies in the past, reducing trial and error.”
A strong VC candidate should not only have a strong financial background, but also operational expertise within a given industry, according to Moran.
“In a resume/interview they should be able to demonstrate a strong understanding of their core industry including: technical acumen, customer acquisition techniques, compliance, network connections for funding, and various case studies,” said Moran. “In an interview, you should be describing how you can add value to the firm versus simply listing off past job duties.”
Companies VC firms invest in tend to come with more risk than a large publicly traded company or a privately held business with an established product and customer base. Because of this reality, Moran advised candidates not to shy away from showing passion for the higher risk/higher reward that comes with being in venture capital.
“Many startups and early-stage companies possess little structure and are constantly on the brink of failure,” Moran said. “This can certainly create feelings of stress for the startup founders, employees, and the VC.”
Moran likes asking candidates questions about situations where they overcame stressful conditions and were able to perform. “A good follow up to this question is, ‘Would you do it again?'” Moran said.
When placing venture candidates in top firms, Jamie Ceglarz, the founder and managing director of executive recruiting agency Guild Talent — which works exclusively within the venture-backed tech community in Silicon Valley — looks for the ability to leverage a macro view of a sector, industry, and/or trend.
“Can you see the 30,000-foot view, and once you see it how are you thinking about it, what are you doing to learn about it, and are you able to analyze it in a meaningful way so that you can add value within the fund?” Ceglarz said. “Some people see a pile of wood and a bunch of tools and that’s all they see. Other people see wood/tools and immediately know that they have the makings of a house. Even further, others can also see that if they had this one extra tool, it would open up an opportunity for them to build a skylight.”
As a specific example, the managing director shared that his agency is currently looking for a VP of finance for a series B data company. Part of the target candidate profile for this position is someone with buy-side investment banking experience that can analyze their market and execute on strategic acquisitions within their space as a way of fast-tracking the evolution of the company’s dominance in the sector and move past the competition.
“That can only happen by being able to understand the sector at a high level, where it’s going/how its evolving, as well as where the company fits within the growth of the sector and what its value is compared to the competition,” explained Ceglarz. “A quarterback doesn’t throw a football to where the receiver is; he throws the football in front of the receiver and aims at where the receiver is going to be.”
He shared that successful venture candidates often also possess an analytical mindset, which affords them a detailed approach to understanding business models.
“The overlay to these two qualities is a natural and insatiable quest to understand the ‘why’ behind things,” Ceglarz said. “People that are inquisitive and always searching for more detail/understanding, and that have both an analytical approach and ability to see the macro picture, are able to understand where opportunities lie within a broader space.”
This powerful combination can help VC candidates know where to invest or do diligence, as well as drill into the nuance of a market or business model.
“Top-tier MBA students and folks with banking backgrounds often have this combination,” Ceglarz said. “They have a macro view of their career, hence the investment in their MBA, as well as the best-in-class training and analytical approach that is prolific with folks who start their careers in top investment banking programs.”