Landing a position at a venture capital firm is quite a challenge.
Looking for even an entry-level position in venture capital is actually preparing for the long haul as it may be years before one is available. There is far more demand for venture capital jobs than there is supply. The competition for an entry-level position is also with people who are already playing the venture capital game at some level; they own their own business, or they have worked in several start-ups, or they have the finance part of it down pat. The small size of the industry and few open roles (less than 10,000 open positions open globally each year) ensure that most people have stumbled into the industry rather than actively pursued a career in venture capital.
However, what may provide motivation is that the venture capital industry is only for those who are able to look beyond a challenge and envision potential.
Therefore, before creating a gameplan for breaking into the venture capital industry, it is important to make sure this is absolutely what you want to do- as it requires a lot of time and effort, not to mention an exceptional professional profile. In fact, Guy Kawasaki, a well-known venture capitalist and now Canva brand evangelist, recommends taking his Venture Capital Aptitude Test to determine professional suitability.
There are two entry routes to starting positions in venture capital: the pre-MBA route, and the post-MBA route. While entry and success stories in venture capital often seem to follow an elusive recipe of luck, relationships and timing, here are the top 5 commandments for breaking into venture capital that should serve well for both routes, and for most types of venture capital firms:
A top-tier college degree is a pre-requisite
Given the high demand for jobs and the limited number of open positions, venture capital firms have to place obvious hiring filters to narrow the candidate pool. The industry has traditionally been quite an elite club, with candidates that are multiple-degree holders from Ivy League or a top 20 university. Pre-MBA candidates generally have bachelor’s degrees in subjects such as economics, finance, accounting or statistics. However, a pre-MBA candidate is 90% of the time not even on the track to progression and requires an MBA to progress past the associate position.
While MBAs with a broad range of work experience are preferred hires, they too require a top-tier MBA and access to proper recruiting channels as the top 200 venture capital firms hire from these 5 top MBA schools. Venture capitals also pursue candidates with specialist or technical knowledge of a sector of interest, such as biotechnology or environmental sustainability, so it may be time to undertake at least a degree minor in a futuristic subject with high applicability.
Work experience is essential to progression
Most firms expect a level of work experience and insight into the working of entrepreneurial ventures.
For pre-MBA candidates, work experience in banking, management consulting, business development or product development is preferred. This is because these roles provide a cohesive ‘big picture’ view of the working of a company.
In the absence of post-college work experience, undergraduates need to demonstrate consistent interest in the field through internships or school-level activities.
Undergraduates without internship experience are rarely hired in the industry. Even internships rarely lead to full time job offers, but they are key to acquiring work experience in the field and may convert to job offers at different venture capital firms. Some firms have short summer internship programmes, while others have longer 6-month internships- and these have different skill requirements based on the type of fund. However, the requisite analytical skills, along with domain-specific knowledge or an unrelated but useful technical skill can set you apart in the race for a position at a firm interested in tech-startups.
- School-Level Activities
Differentiating yourself through consistent participation and excellence in school-level programmes, venture capital clubs (such as the Harvard Biotech Club and Chicago Booth Private Equity and Venture Capital Lab) and business plan competitions (such as MIT $100K) are your best bets at getting work experience by landing real-world positions. Independent student-managed venture funds, such as the University Venture Fund at the University of Utah can provide valuable experience in raising funds, being answerable for returns, and analyzing financials.
Most post-MBA candidates already acquired the required work experience before pursuing an MBA, but financial expertise is preferred. Firms that are closer to the private equity part of the spectrum require more due diligence and deal execution work, and prefer candidates capable of analyzing financial statements and building financial models- quite like investment banking.
If not work experience in a finance-related position, a self-started venture with potential to disrupt current business models can be a strong differentiator. However, the ability to start a business does not necessarily translate as being good at investing in a business, so aim to provide a track record in recognizing value in a market.
Networking is even more important than usual
This industry is entirely built upon networking skills and value-based connections. The best way to get into the mix is through recommendations and referrals from reputed players in the industry. A lot of venture capital firms hire quietly and only through recommendations rather than advertising open positions. From informational interviews, alumni networks, and starting an online correspondence with reputed players, to friends at venture-backed startups, university avenues, it is time to get in touch and keep an ear to the ground.
Beyond requiring a strong network to get employment, having strong connections is also key to career success in the field. New ideas, developments and findings are gleaned from quality networks of researchers, financiers and other people in often completely unrelated businesses. The ability to source potential capital investment-worthy ideas and deals are part of your professional profile, and especially when walking into a large venture capital firm, an extensive network is a key asset.
Being exceptionally up-to-date is a job requirement
To be in the venture capital industry means standing out from a crowd in your zeal for sourcing exciting opportunities, and passion for being up to date on the next big thing in the industry. It is important to demonstrate fluency in venture capital and financial management talk and know what is happening in the markets- as venture capital firms seek candidates that fit the culture above all.
Start with the most important venture capitals in an industry, and study deal valuations. What is the future of the world as we know it? Will WhatsApp’s new story feature be the end of Snapchat’s USP? Even if there is no right answer, it is important to have a sound opinion. A candidate discussing 10 unheard-of companies with large potential in his cover letter is unlikely to be overlooked.
An execution-based mindset is key
It is not enough to be gripped by brilliant ideas or theoretical knowledge. A common mistake that candidates make is focusing on products and technical product features rather than market position and competition. While keeping yourself updated and leveraging cutting edge technology is vital, it is important to develop an execution-based mindset that works with a broad framework of company operations and financial evaluation of the ideas’ success in a given time period. Venture capital firms invest in start-ups, but at the end of the day, investing is a business decision- and this is driven by the market.
Here is a bonus commandment: demonstrating independent thought and conviction is the essence of being a successful venture capitalist. Significant headway can be made into breaking into the industry if you are willing to put money where your mouth is and invest small sums to demonstrate your ability to know the next big thing and generate profitable deals. When you are already a successful independent venture capitalist, your reputation will precede you, irrespective of your age. Disruption is a business art form that can be finely honed with enough professional drive.
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