Crowdsourced ideas on starting a career in Venture Capital 🚀

In this week’s issue, instead of evaluating a technology trend, I am rounding up the career guidance I received from investment professionals from VC and PE firms. I hope that if you are considering a career in the VC/PE space, this article can at least provide valuable pointers.

Below, I paraphrase the things I learned from each individual. While I asked the questions from an MBA candidate’s perspective, the overall guidance applies to any working professional.

Principal at a VC firm

• Decide what type of VC fund you want to join first. Think about what an ideal fund type looks like for you i.e.

  • Stage: seed, multi-stage, later stage?

  • Any particular investment area? E.g., health care fund, deep tech fund, infra, consumer, etc. It is essential to be aware of your background and the unique experience you can bring to the table to increase your chance of getting hired.

  • Role scope: Are you ok with joining as a junior in a large fund? Or would you instead join a small fund and have a more significant influence?

• If you are a student, contact VC-backed startups to get unpaid internships. You can apply for class credits through the internship.

• Angel invest — show VCs that you can do the job. The amount of money you deploy into a company does not matter too much, so don’t be afraid to invest $1K or $2K into early startups if the founders let you.

  • Demonstrate that you can find good companies and founders, i.e., source the deals and invest. Sourcing and building relationship with founders is a big part of a VC’s job, and if you are doing due diligence and investing in startups, you are proving that you can do the job.

• Ask founders to share more about their products. Founders love talking about what they are working on. VC industry is very small and community-driven.

Founder turned Investor at a VC firm

• While there is no single path to VC, having an MBA is a good way to get into VC. MBA, at the least, can allow you to understand financial statements, which is essential when evaluating a deal.

• You can work up from Associate to Partner, but the margin of error is very small. You have to be really, really good at your job to stay in VC for a long time.

• Alternatively, you can join a high-growth startup that you think will do well in upcoming years. Having worked at a fast-growth startup will allow you to flex your skills in growing a company, and VCs and investment firms would want to know how you contributed to the growth. This helps to tell your story better—for example, early employees at Dropbox, Palantir, etc.

• Another high-risk path, but many have pursued this: Start your own company and recruit intelligent folks. Work hard to grow the company and maintain strong relationships with your investors.

• Stay at a relatively mid-size company and get promoted to an executive level. This will allow you to build relationships with a broad technology community and give you the influence to establish yourself as an established operator. This experience can be valuable when investing in companies or guiding companies when you are on their board as an investor.

Managing Director at a Private Equity firm

• This advice is more targeted toward someone who is going to get an MBA. Suppose you have a technology, healthcare background or any other niche industry. In that case, you should directly apply to VC firms, assuming you can learn other finance skills such as creating financial modeling, forecasting, etc.

• However, if you do not have a background in the industry in which you want to do VC, the next best option is to get an Investment Banking (IB) job for two years and then transition into VC or PE.

• IB job is not for everyone, and you should consider other priorities, such as family and personal time. IB requires 14-15 hours a day, six days a week, which can disrupt family life, and your spouse might hate you for such long hours. Nonetheless, IB remains an excellent option for understanding investing and moving into VC.

• Getting into IB is highly competitive as well. Sprinkle relevant experience keywords in your resume to set yourself apart.

• IB recruiting is choppy at the moment, but the outlook can improve in the coming year. Technical IB pays well, but it is cyclical.

• Operational experience is highly valuable. So if you have worked in Business Development, Operations, or Marketing, you can portray this experience as it relates to startups and land a VC job.

Other practical learnings from these meetings

• Investing partners usually do not spearhead fundraising. Fundraising requires a different set of skills, which are intertwined with Investors Relations (IR). So, if you are on an investing partner track, you will likely not have to master fundraising skills in your starting years.

• Founding startups should not be taken lightly. High tolerance of pain is necessary to be a founder.

• You cannot come up with startup ideas. You will most likely fail if you have to think about startup ideas. A startup idea should occur naturally based on your experience or someone else’s pain point.

• If you are unsure what type of VC fund is right for you, that’s ok. Meet with as many people as you can and learn about their experiences. This will help you pave the path for yourself.

• While angel syndicates are helpful, they are not the best indicator of your ability to source deals. Better if you find angel deals through your connections.

• It’s tough to evaluate your performance as a VC. Feedback cycles are long, so you, especially others, will not know whether you are performing well for a few years.

• IB is front-loaded with cash, while VC’s long-tail return can generate great wealth.