What is Venture Capital? A Beginner's Guide to Breaking in the Industry


Venture Capital is one of the sexiest and most sought after industries in the business world and it is not easy to get into. I’ll first be going over what venture capital firms do, I’ll then discuss the day to day responsibilities, hours and lifestyle, compensation, and lastly how people generally break in.

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What You Do As A Venture Capital Investor

VC investors primarily work with entrepreneurs and help them build their businesses from the ground up in three ways:

  • The first obvious way is through funding. VC investors provide huge injections of capital that help companies hire talent and scale their operations.
  • The second is by providing insight. The best VC investors have been around for decades and have seen a lot of companies come through the pipeline and so can be great sounding boards for entrepreneurs especially during the toughest of times.
  • The third is by providing a network. The best VC firms are extremely well connected and can help entrepreneurs with things like recruiting top talent or making introductions for key business relationships.

Venture capital firms are typically divided by the stages they invest in, which include pre-seed / seed which is the earliest round of funding, then there’s early stage which includes, seed, Series A, and Series B rounds, then the growth stage which involves Series C to IPO, and then there’s stage agnostic which invests from the seed stage to IPO.

One important thing to note is that venture capital investors typically don’t receive any returns unless they sell their equity to other investors. Otherwise, VC investors need to wait until a company exits which means either an IPO or a sale to another company and that process can take as much as 7-10 years. The earlier the stage, the higher the risk that you’ll lose all your capital and so you’re compensated with a higher percentage of equity. On the flipside, the later the stage the less risk so in later stages you see higher amounts raised for less equity.

For example, here is Stripe’s fundraising rounds and as you can see, Stripe’s valuation increased dramatically across its fundraising rounds and the earliest investors will roughly speaking see more than 100X - 500X returns while later stage investors may see something like 3 to 10x returns.

The last note to make is that venture capital firms tend to focus on one specific industry like software, crypto, biotech, or consumer, though as a fund grows in size and reputation, it creates new funds that focus on various sectors

Day to Day Responsibilities

One of the most important responsibilities of a VC investor involves sourcing new potential investments, which can include sending a bunch of outbound emails, receiving warm intros, attending conferences, and hosting events to attract companies looking for investments.

Another important responsibility involves conducting due diligence on potential investments, which starts with reviewing a pitch deck and can lead to valuation, an investment memo, market research, and more depending on the stage and industry of the company. VC investors also spend a lot of time supporting portfolio companies which can mean joining boards to provide insight, introducing companies to customers or suppliers, and helping with key hires.

As you grow more senior fundraising also becomes a large responsibility and so not only are you an investor, but you also start to manage investors by providing regular portfolio updates, checking in with them every so often, and reaching out when new funds are being raised.

No day is the same. One day you might be spending entirely at a conference getting to know companies and other investors while another you might have a deal pop up that requires you to pull together an investment memo, so if you’re looking for variability in your job, VC could be a good fit for you. In addition, something interesting to note is that there’s actually way too much funding out there and not enough great companies so a lot of your job as a VC investor may involve convincing founders that they should include you in their next fundraising round

The Hours & Lifestyle

Regarding hours, around 60-80 is normal, while 80-90 hour weeks are possible particularly when you have multiple funding rounds going on. An important thing to note about the hours though is that a lot of the time spent is self-directed and so you may be spending a few hours reading a detailed research report but if you really like the space you’re investing in then that time spent kind of blends between work and leisure.

Also even as a junior VC investor, a lot of how hard you want to work is dependent on you and so your hours will depend on if you want to spend more time setting up meetings, attending more events, digging deeper into companies and etc. Your hours and lifestyle will really vary depending the firm you’re at, but across the board, you’re putting real capital at risk so the work is taken very seriously and so your work can be both enjoyable but have high stakes and so can be stressful.

As a result in the finance world, venture capital is the most entrepreneurial job you can get without actually working at a startup because a lot of your success will be determined by your effort and a lot of times you have to get creative. For example, a lot of VC investors actually gather a lot of information from social media apps like Twitter and Discord and can create relationships by sending DMs to establish relationships.

Hierarchy and Compensation


So how much money can you make? Starting off with the hierarchy, every firm is different, but you typically start with analysts, who are mostly hired from investment banking, consulting, tech, or other industry relevant backgrounds. Then there is the associate level and associates are usually promoted from the analyst level, hired from MBA programs, lateral hires, or are from the backgrounds I mentioned earlier for the analyst level. Next up are senior Vice Presidents, and Partners, who typically are promoted from their previous levels, are lateral hires, or are former successful founders.

Compensation is usually broken down into 3 categories, which are your salary, bonus, and carry, which is a percentage of the fund’s annual overall profits which varies widely year to year. Analysts can be hired straight out of college on rare occasions and so for smaller firms, the compensation can be as low as $60K and gets up to around $100K and you normally won’t receive any carry. Associates receive anywhere anywhere from $150K to $200K and receive a very small amount of carry if any but many firms don’t give carry even at the associate level. Senior associates earn around $200K to $250K and this is where most VC investors start to earn carry though just a small amount

If these comp figures have inspired you to get into venture capital, as I mentioned earlier, one of the best paths is by first breaking into investment banking.

How to Break In

For venture capital, there’s a pretty broad range but the absolute most surefire way is to be a founding member of a successful startup which lets you skip a lot of levels at most VC firms, but other common ways include investment banking, management consulting, and industry jobs that make you an expert in an industry such as product management or engineering.

Because VC investors invest in the super early stages of a company, the industry is a very high risk high reward industry and usually in VC your top few investments will make up for tens to hundreds of poor investments and this really isn’t an exaggeration.

Stay tuned for more tips to get into Finance careers!

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Ex-JPM Investment Banker making content about finance careers and markets.

Los Angeles, CA

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