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Getting A VC Job
How do you get a job in VC?
It's the second most common thing people ask me (after how do I get a VC to invest in my business?).
The truth is the odds of both are about the same. Very long.
And as hard as I try, I really can't help most of the smart, capable young people who come to my office asking me that question. The demand for VC jobs is way in excess of the supply and probably always will be.
So I was pleased to see the blog post from Seth Levine of Mobius Venture Capital on this subject.
Seth has some good thoughts on the subject. The best is the way he explains the economics of an entry level position in the VC business.
As a non-partner you are fundamentally a cost center. The partners are quite literally taking money out of their own pockets and giving it to you. Rationally, they will only do this for one of two reasons – either you are significantly impacting their lives in a positive way that makes the trade-off worthwhile for them (you cost less than the marginal life benefit they get from having you around) and/or you will help create more carry (i.e., they can manage more deals with you around and therefore deploy more capital; you have a skill set that will positively affects the portfolio, etc.). If you fail to do these things you are just eating up management fees.
Seth's got this right. VC firms are owned and operated by the partners. They are small businesses where the profits flow to the partners. Hiring decisions are very rational in this kind of environment.
May 21, 2005 in Venture Capital and Technology | Permalink
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Comments
As a recovering private equity guy, I can say that this is a very common question. I even got asked it this weekend. Too many people have romanticized what it is to be a VC, and don't realize a) how hard it is to be a good one, and b) how many *really* talented young folks there are coming out of the major banks and business schools to fill the very few slots that there are.
The funny thing is that, and I am afraid I am going to get on your bad side Fred, I believe that there is too much "talent" in the VC business as it is. The level of competition in the VC world right now makes earning that carry very, very hard. The signal to noise ratio on deals is way out of whack. There is a serious shortage of management talent, which is another reason why it's so hard to get a company funded. That said, there's plenty of money out there, it's finding it that's the hard part. Most would-be entrepreneurs don't know where to look except for the "named" VCs. However, at this point, given the choice between going back to a VC shop or starting my own company, I think I'm taking the latter. Tech and VC, the two things I know best from my professional career thus far, are tough places to make a buck these days.
Curious to hear the reader thoughts, but also from Fred if you don't mind.
Posted by: B Watson | May 23, 2005 12:03:00 AM
hmm... if the odds of 1) getting funded and 2) getting a associate job at the VC firm are the same, I wonder what the expected value over a career would be. . . I think its much harder to get funded than to get a job at a VC fund. But much harder to become a partner at a VC fund than to get funded. BUT! much harder to make a few million as an entreprenuer than as a VC Partner. . . confused? me too...
Posted by: will | May 23, 2005 2:45:00 AM
Will - I wanted to address your comments for two reasons. One, I am a Wharton guy, and I have an affinity for helping out other Wharton guys. Two, I find what you are positing interesing. Over the last two years, I have basically spent my time turning around one of my portfolio companies. Mission accomplished, but my wife and I decided that going back to NYC was not an option, so we stay here in Texas, and I left my private equity fund (was a principal, not a partner). That said, after a career in tech and three years in private equity, I have decided that there are too many other industries where there is a talent shortage. Smart guys can get funded and even make outsized profits in industries that have not historically drawn the talent. Very few people from my MBA class went into energy. That remains true today. Lots of money to be made there, and not a ton of financial sophistication. I guess my point is that if you are looking to make millions, go find a poorly managed company in an industry less competitive than tech or vc and raise some money to buy it. Fred will tell you that you can't throw a stone in NYC without hitting a middle market LBO guy. Don't follow the herd...blaze a trail.
Posted by: B Watson | May 23, 2005 8:56:20 AM
As one of those young (and hopefully smart and capable) people trying to break into VC, I can say that any romantic ideas about the industry are quickly dispelled.
Everyone in the industry I've talked to has reiterated the point that it will take a lot of hard work, and at least a little bit of luck, to get a shot. And I don't know if the economics are the hardest part to overcome, since I've even been looking for unpaid internships, and they aren't easy to get either.
One good thing about the difficulty is that it weeds out a lot of the competition. I know that several friends who were "interested" in VC had a couple of conversations, and realized it would be a LOT easier to get into managment consulting and make a pile of money there instead. The ones who keep trying are the ones who really have a passion for it.
And if nothing else, the networking and positioning skills you build while trying to land a job in VC make it almost trivial to find an opportunity in most other fields.
Posted by: Keshava | May 23, 2005 12:30:38 PM
Keshava - you hit the nail on the head. You have to find the work that you will be passionate about. Show me a man who took a job to make a pile of money, and I will show you a balding investment banker who hates his life. :)
Posted by: B Watson | May 23, 2005 12:47:13 PM
B Watson -
Passion is definitely a pre-requisite, but for a lot of people I know, the question is "Passion about what?"
This is a question I myself struggled with until recently, because I thought a passion for new enterprises and new technologies was what it took to make a good VC. I had a hard time figuring out why someone with those same passions wouldn't go be an entrepreneur instead. But even though I had thought about trying my hand at a company again, that didn't get me as excited as the thought of entering VC.
Recently though, I came to a realization. Althought I enjoy technology, and I thrive on the excitement and challenges surrounding start-ups, my true passion lies in the development of relationships. If those relationships revolve around technology and intellectual challenges - so much the better. I think that's why the VC industry seems to appeal to me more, it seems to be more about the people, teams, and relationships than just about the newest technology.
Hopefully, this is the passion that's needed. If not, please let me know so I don't end up wasting a lot of effort!
Posted by: Keshava | May 23, 2005 3:19:00 PM
Hello,
First time here but I've recently been looking for VC and Private Equity job resources using Google. This specialist Venture Capital Jobs site (www.vc-jobs.com) may be of use to you.
Cheers
Posted by: Gary | Jan 30, 2007 6:17:10 AM
Thanks Gary - I have just our analytics and it seems that we have had a few people come through thanks to your link.
A simple message from the companies who are partnering with us on the site is that they are keen for "recovering" strat consultants with 2-3 years experience as well as those with financial expertise. I have just finished an MBA and it seems that half of the class was aiming to get in to PE or VC whilst half of the rest was chasing equity funding.
If you're wondering how to get to the first rung on the VC/PE ladder and you're still pretty young, go to McKinsey or one of the top strat consultancies. Then move to do an MBA at a good school (INSEAD is the best). From there, network like hell and know what you're getting yourself in to.
Until then, get an idea of the jobs on offer.
www.vc-jobs.com - it was under construction until now and should be launched in a few weeks but there are jobs up there at the moment.
Jon
Posted by: Jon | Aug 8, 2007 12:19:49 PM
