Everyone usually has the same first question about how to get into venture capital:
“How do I break in?!! Tell me!”
To students, engineers, jaded investment bankers, and Uber/Lyft drivers, venture capital sounds like the dream job: take meetings with exciting entrepreneurs all day and then bet money on the best ones.
Wait about a decade, and then… boom! You’re wealthy.
Or, if things don’t go as planned, tell your firm’s investors “it will take more time” to get results.
What could go wrong?
And, going back to that first question, how do you break into this “dream job”?
What is Venture Capital?
Venture capital firms raise capital from Limited Partners, such as pension funds, endowments, and family offices, and then invest in early-stage, high-growth-potential companies in exchange for equity (i.e., ownership in those companies).
Then, they aim to grow these companies and eventually exit via acquisitions or initial public offerings (IPOs).
Most of these high-growth-potential companies are in technology and healthcare, but some VCs also invest in cleantech, retail, education, and other industries.
Since the risks are so high, VCs expect the majority of their investments to fail.
But if they find the next Google, Facebook, or Uber, they could earn exceptional overall returns even if 90% of their portfolio companies fail.
Here’s some data on U.S. venture returns over 10 years assembled by Correlation Ventures:
Yes, you’re reading this graph correctly: a full 65% of VC deals lose money or merely break even.
Technically, venture capital is an “investing” or “buy-side” role.
But it’s also a sales profession where you compete for capital and access to the best startups.
There’s so much capital chasing so few truly promising startups that gaining access is often the biggest challenge – which is why returns are highly concentrated among the top few VC firms.
Why Venture Capital?
Venture capital is a “get rich slowly” job where the potential upside lies decades into the future.
Annual compensation is a significant discount to private equity compensation or investment banker salaries, so if “becoming wealthy ASAP” is your main life goal, cross venture capital off your list of possible careers.
Junior-level venture capital jobs rarely lead to Partner-track positions, so you will probably not work your way up into a senior role if you join after ~2 years of banking or consulting.
Deals are simpler than in IB or PE, there’s less financial modeling and number crunching, and you spend more time on “sourcing” (finding companies) and industry research.
So, there’s only one great reason to aim for junior-level VC roles: because you are extremely passionate about startups and you want to use the role to learn, build a network, and leverage it to win other startup-related roles in the future.
Fore more on this topic, please see our article on venture capital careers.
How to Get Into Venture Capital: Who Wins Interviews and Offers?
The three main entry points into venture capital are:
- Pre-MBA: You graduated from university and then worked in investment banking, management consulting, or business development, sales, or product management at a startup for a few years.
- Post-MBA: You did something to gain a background in tech, healthcare, or finance for a few years before business school (e.g., engineering or sales at an enterprise software company), and then you went to a top business school.
- Senior Level / Operating Partner: You successfully founded and exited a startup, or you were a high-level executive (VP or C-level) at a large company that operates in an industry of interest to VCs.
We focus on the pre-MBA path here since you’re most likely in that category, but most of the tips here are relevant to the post-MBA path as well.
It’s very difficult to break into venture capital directly out of undergrad, and even if you have the background for it – i.e., you went to Stanford or Berkeley, majored in CS, and completed multiple startup and finance internships – it’s not necessarily a great idea to do it.
To be useful to a VC firm, you need some full-time, real-world experience and at least the beginnings of a professional network.
Venture capital internships during undergrad are more plausible and are often a useful way to win investment banking roles later on.
It also tends to be difficult to move directly from a pure engineering role into VC because market and customer analysis matter more than coding prowess or technical skills.
Yes, we’ve featured readers who have done it, but it’s quite rare.
Management consultants may have a bit of an advantage over bankers, but it depends on their background: advising on HR policies for insurance firms is far less relevant than advising on strategy for tech companies.
Overall, pedigree and prestige still matter quite a bit for VC roles, and firms tend to favor candidates with brand-name firms and universities on their resumes.
How to Get Into Life Science Venture Capital: The Exception That Proves the Rule
One final note: life science venture capital (biotech, pharmaceuticals, medical devices, etc.) is different from tech venture capital, and at early-stage life science VC funds, academic prowess counts for a lot.
They often recruit Ph.D.’s from top institutions who are specialists in an area of interest for the firm, and they don’t necessarily require banking or consulting experience or an MBA to get in.
However, you still need some business/finance knowledge, normally gained by starting your own business, taking courses, or completing relevant internships.
Also, they want advanced scientific knowledge: an undergraduate or Master’s degree in biology is not sufficient unless you have other, highly relevant experience, such as founding a biotech startup or working in healthcare investment banking or biotech equity research.
Late-stage life science VC funds tend to care more about finance experience, so if you’re more of a finance person with some knowledge of science, late-stage funds might be a better fit.
What Qualities Do Venture Capitalists Seek in Recruits?
Junior-level VC roles (“Associates”) differ based on the firm’s investing stage, industry focus, and strategy:
- Investing Stage: Early stage? Late stage? Closer to growth equity?
- Industry Focus: Technology? Life sciences? Cleantech? A specific sector within one of those? Something else?
- Strategy: Does the firm spend more time on portfolio company operations, finding new investments, doing industry research, or something else? Does it find new investments via outbound marketing, referrals, or a more data-driven approach?
VCs prefer to recruit presentable, highly articulate professionals with a passion for startups over number crunchers with limited interest in startups.
This is especially the case at early-stage firms, which focus on sourcing, building networks, and setting up meetings to win deals and raise capital.
At late-stage firms, deal execution and due diligence become more important, but even there, the analysis is fairly simple compared with the average IB/PE deal.
Venture capitalists want professionals who hold strong views on different industries and companies and who can justify their views based on market and customer analysis, not the product/technical details (maybe not as true in life sciences).
If you’re more of a finance person or number cruncher, then you should focus on late-stage firms or growth equity firms.
How to Get Into Venture Capital: The Full Recruiting Process
There are not that many junior-level VC jobs, and the available jobs tend to be concentrated in specific regions, such as the coasts of the U.S.
It’s difficult to win these roles because:
- Similar to other buy-side roles, VCs do not “need” an army of junior employees to churn endless documents to close deals.
- VC firms are flat partnerships with fixed budgets based on assets under management, so each new hire directly reduces the earnings of the Partners. Closing deals does not result in more revenue or a higher budget in the near term.
- Demand far exceeds supply because everyone thinks venture capital “sounds cool,” without necessarily understanding the job in detail.
As a result of these factors, the venture capital recruiting process is unstructured and similar to the off-cycle private equity recruiting process.
Some of the bigger firms, like Sequoia, New Enterprise Associates, and Accel, may use headhunters, and the list of names is familiar: in the U.S., CPI, Oxbridge, and Glocap tend to have a steady stream of roles.
In Europe, KEA Consultants and PE Recruitment (PER) offer many VC roles.
Unlike in private equity recruitment, these headhunters will not necessarily contact you proactively years before the job start date.
You’ll have to be more proactive with getting referrals, contacting them, and asking specifically about venture capital – or, you can do the networking yourself and go around headhunters.
You should start by narrowing down the types of funds you want to work at, searching for professionals on LinkedIn, and then emailing them to ask for advice on getting into VC.
You can follow the example email templates on this site or in articles such as the one on middle-market private equity recruiting.
As always, asking for advice about getting into the industry tends to be more effective than asking directly for a job.
The recruiting process can drag on for months if the firm has no urgent hiring needs, or it can be over quickly – in a month or less – if they need to replace someone right away.
You’ll start with phone interviews, but you should expect to meet everyone at the firm, or everyone in the group at the large firms, multiple times before winning an offer.
Interviews are casual and conversational, and VC interviewers put a laser focus on “fit.”
Case studies and short modeling tests are possible, but they’re far less likely than in private equity interviews (where they’re guaranteed to come up).
Venture Capital Interview Questions and Answers
Venture capital interviewers ask questions that are similar to ones you’d receive in corporate development, investment banking, or private equity interviews…
…but the focus and distribution of the questions are far different.
Unlike in investment banking interviews, you won’t be quizzed for 30 minutes on WACC or Equity Value vs. Enterprise Value or the tax treatment of defined-benefit pension obligations.
Technical questions could still come up, but VCs care far more about your market views and investment ideas and your fit with their team.
So, in rough order of importance, here are the question categories you can expect:
- “Fit” and Background Questions – Your resume, why venture capital, why this firm, your strengths and weaknesses, etc.
- Market and Investment Questions – Which startup would you invest in? Which market is attractive? Which markets should we avoid?
- Firm-Specific and Process Questions – What do you think about our portfolio? Which companies would you have invested in or not invested in? How would you analyze a potential investment and make a decision?
- Deal, Client, and Fundraising Experience Questions – How did you add value in the IB deals you’ve worked on? If you worked at a startup, how did you win more customers or partners in a sales or BD role?
- Technical Questions – You could get standard questions about accounting and valuation, as well as VC-specific questions about cap tables, key metrics in your industry, and how to value startups and size markets.
- Formal Case Studies and Modeling Tests – These are less likely, but you could get a short investment recommendation or a market/company analysis.
We cover sample venture capital interview questions in this separate article and provide examples and model answers as well. Please refer to this article for the specific questions and answers.
After the Interview(s): What to Expect
If you hear back within a day or two, it’s almost always good news.
If not, follow up every week or two until you get some answer, even if it’s “Sorry, we’re delayed and we don’t know yet.”
If the VC firm is not under pressure to replace someone who suddenly left, it can be a very long process to finish interviews and get an answer.
How to Get Into Venture Capital: Is It Right for You?
Before jumping into the recruiting process, you need to spend time asking yourself whether or not you truly want to be in VC.
If you go into interviews without much conviction, it will be very apparent that it’s your “Plan B” after private equity and hedge funds didn’t work out.
You don’t need to memorize hundreds of pages of technical questions or be an Excel/VBA wizard or be a programming demigod to get into VC….
…but you do need an extreme passion for startups, which you can’t “learn” by reading interview guides.
How to Get Into Venture Capital: For Further Learning
If you want to learn more about venture capital and stay apprised of industry trends, I recommend:
- The Venture Capital Case Study: What to Expect and How to Survive
- Venture Capital Interview Questions: What to Expect and How to Prepare
- Brad Feld’s books on Venture Capital (especially Venture Deals)
- Dan Primack’s articles on Axios
- StrictlyVC – Daily VC-related newsletters
- PitchBook’s VC News
- Benedict Evans’ blog
- Fred Wilson’s blog
- S3 Cap Table Template
- Playing “Fake VC” or the “Portfolio Approach” to Getting a Job in Venture Capital by Matt Turck
