How hard is it to break into venture capital?
Jobs in Venture Capital are notoriously hard to land. They don't come by often, and they are seldom advertised—except in large VC firms, mainly for entry-level positions.
Finally, given that most venture teams are small, and there is always a larger number of candidates than roles available, it is not surprising that venture is one of the harder segments to break into.
It's easy enough to find a venture capitalist, but there are many steps you need to take before, during, and after applying for venture capital to close a VC deal and get the money in the bank.
It is a challenging career path, but it can also be one of the most rewarding, both financially and intellectually. So, if you are passionate about entrepreneurship, innovation, and investing, a career in venture capital might be just the right fit for you.
25-30% of VC-backed startups still fail
Experts from The National Venture Capital Association estimate that 25% to 30% of startups backed by VC funding go on to fail.
- Learn the business. Okay, maybe this may not jump off the page of your resume. ...
- Join a startup. Venture capital is the business of investing in startups. ...
- Try Your Hand at Investing. ...
- Start networking. ...
- Try to lock in an internship.
The average venture capital firm receives more than 1,000 proposals per year. Approximately 30% of startups with venture backing end up failing. Around 75% of all fintech startups crash within two decades.
In general, VC associates can expect an annual salary of $60,000 to $133,000. 1 With a bonus, which is typically a percentage of salary, the overall compensation can be much higher. In addition, firms will compensate associates for sourcing or finding deals.
Although an MBA degree is not mandatory for individuals interested in private equity or venture capital tracks, it can prove advantageous, especially for those pursuing a post-MBA career in private equity. With an MBA degree, one can avoid constantly proving their social skills and foundational knowledge.
Aspiring venture capitalists play a significant role in the growth and success of innovative startups, making this an ideal career choice for those who are interested in combining financial acumen with an ability to identify potential winners in early-stage companies.
What is the path to a VC partner?
How Do You Become a Venture Capital Partner? Unlike senior roles in the other industries, it's less common to “work your way up” to a VC Partner role. The most common path is to join after a moderately successful startup exit or reaching a fairly senior level at a tech or biotech company.
You might only be in the office for 50-60 hours per week, but you still do a lot of work outside the office, so venture capital is far from a 9-5 job. This work outside the office may be more fun than the nonsense you put up with in IB, but it means you're “always on” – so you better love startups.
Who Are the Sharks? The venture capitalists, or sharks, who appear on the show are known for their larger-than-life personalities and intense approach to business. Each shark has earned their own reputation over the years, with some being more sympathetic and others being particularly critical.
100/10/1 Rule - Investor screens 100 projects, finance 10 of them, and be lucky & able to enough to find the 1 successful one. Sudden Death Risk - Where the founder stops/loses capability to work on the idea. Investors usually choose the incubator strategy to avoid this risk.
There are two main risks when it comes to taking on venture capital: 1) The risk of not getting the investment; and 2) The risk of not being able to pay back the investment. The first risk is that your startup won't be able to raise the money it needs from investors.
In total, $394 billion flowed into VC deals across the globe in 2022; a 36% decline from 2021.
Venture capital careers are positions in which individuals work to raise funds and invest in startup businesses. These individuals can also negotiate deals for startup companies and investors and help companies grow.
If you're interested in a career in venture capital, the first step is to gain experience in the field. This could include internships or entry-level positions at venture capital firms, working in a related field such as investment banking or private equity, or increasingly working at a startup.
I've seen it go both ways but realistically it's more common for people to go from consulting to VCs.
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.
What do venture capitalists do when they fail?
If the startup fails, they will not only lose their original investment but also any potential returns that they might have earned had the startup been successful. If the venture capitalists are unable to recoup their investment, they will be forced to write off their losses as bad debt.
VCs finance very few home runs. Even the top VCs fail on about 80% - 90% if their ventures, according to one of the most successful VCs in the U.S. The top 2% earn high returns because they finance home runs.
Pre-seed / seed stage VCs
VCs that invest in initial stages companies are likely to pay their employees much lower than other VCs. Analysts at a pre-seed and seed-stage VC earn a base comp between $60,000 and $120,000 and a bonus ranging from a daily cup of coffee to $15,000.
Investor and TV personality Mark Cuban is probably best known as one of the eccentric venture capitalists, or “sharks,” on the popular ABC television show “Shark Tank.” But outside of the Tank, Cuban is also a successful entrepreneur in his own right.
The pay is just significantly different when they move up to associate levels. PE associates can earn up to $400K, compared to $250K at VC. Larger fund size and more money involved are what makes private equity pay higher than venture capital.