by Brian DeChesare Comments (7)

From Coding and Consulting into Venture Capital: The Dream Goal of Every Engineer?

Engineer to Venture Capital

What is every engineer’s secret dream?

Easy: To become a venture capitalist.

Or, more broadly, “to move to the business side” and stop coding.

The only problem is that it’s a pipe dream unless they start out in investment banking or complete a top-tier MBA degree first.

At least, that’s what I thought until a reader who broke into venture capital from a consulting and engineering background contacted me.

I had to learn more, so I asked him to share his full story:

Mission: Impossible – From Engineering/Consulting into VC

Q: Can you give us the run-down of your story?

A: Sure. I completed a business major at a semi-target university, and I did several internships at startups and tech companies in both marketing and coding roles.

I took a few computer science-related courses in university, but I mostly taught myself via a combination of online courses and coding boot camps.

I joined a tech startup after graduation in an engineering role, as it was far easier to get a technical job than a marketing/strategy/business development one.

I enjoyed some of the work there, but I missed a lot of the client interaction from my previous marketing internships.

It was incredibly difficult to switch to the business side at that same company, so I went in a different direction and moved to a “business consulting”-type role at a different firm instead (Think: Something like an accounting/valuation firm or a think tank that advises small organizations).

That was closer to what I wanted, but like most people with engineering and business backgrounds, I always had venture capital in mind as my end goal.

I had been volunteering at a local non-profit that offered free programming classes to underprivileged students, and I mentioned my interest in VC to another instructor there.

He told me about a local VC firm that was new to the area and was looking to expand its team and hire someone with a background in both tech and business.

I got the referral from him, contacted the firm directly, went through interviews, and won an offer there.

Q: How realistic is this story? I don’t want every engineer reading this to say, “Aha! I can also get into venture capital!”

A: It’s difficult, but not impossible, to make this move.

A lot of it depends on the region you’re in: In New York, plenty of VCs have banking or consulting experience, but in Silicon Valley, engineering and operational experience are more common.

Also, it depends on the VC firm’s strategy: Your chances are higher at an early-stage firm than they are at a late-stage or growth equity firm.

Finally, I made this move successfully because the firm was expanding quickly in a new region. It would have been much harder to do this at a large, established fund.

Q: OK. And how do you find VC firms that might be open to hiring engineers or people with mixed technical/business backgrounds?

A: I did it mostly through referrals, including from co-workers at previous startups and tech companies, instructors in some of my classes, and others who taught programming part-time.

But there are some online sources as well: For example, StrictlyVC sends out a daily email with 1-2 job listings in different cities.

For the best chance at these roles, you need to get a warm introduction to someone on the team.

That’s also a good test for being a VC: If you can’t network your way into this introduction, it’s probably not the right field for you.

Q: Are there certain types of firms that are more open to non-traditional candidates?

A: You might have a better chance at smaller, newer firms based outside of Silicon Valley.

Just be aware that these places also hire very slowly and carefully.

They’re averse to hiring because each new person reduces the management fee pool; if the team consists of only 5-10 people, each new hire means 10-20% less in compensation.

Q: OK. Moving back to your story, what was the recruiting process like?

A: Long! It took over three months to win the offer. By contrast, I sometimes went through engineering interviews and received an offer in three days.

My VC interviews were based entirely on cultural fit, and I improved my chances in a few ways before the process even began:

  • I had done a ridiculous amount of research on the firm, from their portfolio companies down to obscure programs and initiatives they shut down years ago, and I came in with detailed thoughts on everything.
  • The firm had published several books and free references on startups and VC investing, and I read all of them and prepared a few suggestions for additional chapters and examples that might be helpful.

I still met with everyone at the fund multiple times, but these points stacked the odds in my favor.

Q: Yeah, a surprising number of interviewees don’t even do basic research on companies.

What did they ask you about when interviews began?

A: The questions were fairly standard: Tell us about a market you’re interested in, tell us about a promising company, and so on.

They also asked me to analyze two companies they might invest in and recommend the best one.

I put a lot of time and effort into that and wrote a long document describing my findings.

My analysis was a bit amateur because I focused more on the technologies than the markets and customers, but they were impressed by the effort.

They also had me complete a role-playing exercise where they pretended to be startup founders, and I had to meet with them and ask the key questions VCs would ask.

They based their story on one of their actual portfolio companies, and I already knew a fair amount about it from my research.

The #1 mistake is asking too many questions about the technology and not enough about the market or customers, so I focused on the problems customers were facing, the total market size, and so on.

On the Job as an Engineer-Turned-Consultant-Turned VC

Q: Great, thanks for that account. What has the job been like so far?

A: It’s very unstructured.

I do a lot of what my boss does: Meet with companies, help portfolio companies with different projects, communicate with LPs, and organize fundraising events.

There’s little modeling work because the companies we work with are so young.

I might build cap tables to determine the ownership percentages of different investors, and I might create “flow of funds” schedules to determine how much each group receives in an exit.

But that’s a small portion of the job; I spend most of my time in meetings.

Q: That sounds exactly like an early-stage fund.

Do you ever use your technical background on the job?

A: Less than I expected. In most startups, the technical risk is low.

The Founders are often engineers and know how to build a great product; the challenge is determining whether or not customers want to buy it and then selling it to them.

And there’s no point in evaluating the technical risk before we assess the market, product, and customer risk.

My background is useful because it lets me source deals more effectively: I can go to events, chat with engineers, and speak with them in a way that former bankers could not.

This point is important at early-stage funds because we often make decisions in weeks rather than months or years.

I must be able to connect with someone in 30-60 minutes, which is where my background helps.

Looking Back on the Process, and How to Become a Fake VC

Q: Thanks for explaining that one.

Are you planning to stay in venture capital for the long term?

A: I plan to stay in this role for a few years, but eventually I want to start my own company or join a startup as an early/founding employee.

It’s quite difficult to move up the ladder at a traditional venture capital firm, especially if you join as a pre-MBA hire; some firms even make their programs “Two years and out.”

Q: What would you tell someone else who wants to get into venture capital from a non-traditional background?

A: Pretend to be a VC!

I can’t take full credit for this idea – see Matt Turck’s blog post on playing “fake VC” to get a job in the industry.

Pretend that you have $1 million to invest as an angel or $10 million as a micro-VC fund, and go through the process of defining your strategies and target companies.

Build a returns model for your fund, get to know Founders, go to events, and build a database of all your contacts.

Download the standard term sheets from Y Combinator and 500 Startups and learn the lingo like that.

Then, when you interview with a VC, present your work and explain how you would continue to pursue it at their firm.

Almost no one does this, but it’s a great way to stand out and win interviews and offers.

Q: But would you recommend that strategy to most engineers who want to move into finance?

A: Honestly, no.

If your goal is “finance,” you should get into investment banking and gain access to a wide range of exit opportunities: VC, growth equity, and corporate development at a tech company.

Banking helps with later-stage VC firms where you complete financial models, work on larger deals, and analyze exits. These later-stage firms also have more entry-level roles.

If you want to get into an early-stage VC firm, find a high-growth company that has just raised a Series A and go work there.

It will be easier to move into different roles at a young company, so you could start out working on the product, then go into sales & marketing, and get business development experience like that.

Then, you can pitch yourself to early-stage VCs and point to your combination of tech and business experience.

This plan didn’t work for me because my first company was already too mature, but it could work at younger startups.

Q: Great. Thanks for your time, and for sharing your story.

A: My pleasure.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Hi Brian thanks a ton for these eye-opener posts!

    I am engineer in healthcarecompany in Tokyo wanting to transition into healthcare IB in London. I have got an admit from LBS and want to do a pre-MBA internship in finance.
    1. What would be the best industry to do a finance role as a pre-MBA internship- I have an option of joining a healthcare VC accelerator. Is that the best option for me ? Or should I try for Asset management, PE roles in pre-mba internship?

    Regards
    Ash

    1. PE/IB are more relevant than VC if your goal is healthcare IB, but anything in that list works. If you already have an offer at the healthcare VC accelerator, you should probably accept that rather than holding out for something slightly better and possibly ending up with nothing.

      1. Thanks Brian for the reply.
        Further adding to that

        1. For IB i guess its mostly middle market firms as big firms dont have structured internship positions i believe. ? Will still try asking regional banks but difficult to get as most regional banks require near native level Japanese (FML )

        2. For PE – wont that make the recruiter think I am more interested in buy side role and doubt my staying in IB for long time?

        3. VC story can be spun better – as not many ppl in IB london leave that to go to VC in London. Also can say needed more quant based modelling (the VC i have an offer is early stage)

        4. How about asset management roles ?

        1. 1) Pretty much any IB role in Japan will require native-level Japanese skills, so it’s not even worth trying there. Maybe go for regional boutique banks in other regions if you can do that.

          2) It depends on how you spin it. There are very solid reasons for trying PE, realizing it’s not for you, and wanting to do IB instead (search this site).

          3) Yes, VC to IB is slightly easier to spin.

          4) Asset management roles are less relevant to IB. If you can get one, fine, but I’d say they’re less relevant than a healthcare VC accelerator because at least you work on deals in VC.

      2. 1. Wouldnt a PE pre-MBA internship make it look like I am interested to leave IB to go to the buy side?
        2. How about AM roles – I know a guy in AM in MM firm – should I ask him to connect me to IBD guy or ask for internship in his AM division.
        3. VC is easier to spin – as not many people go from IBD to VC in London. Also I can say I didnt get much financial modelling work ( as its an early stage VC accelerator)

  2. Avatar
    Ankit Agrawal

    Hello,

    Is it possible to contact the interviewee? Could you give me the details of the interviewee? My career interests matches with the interviewee and would like to be in touch to get more guidance on the same topic.

    I really appreciate your help and time.

    Regards,
    Ankit

    1. I can reach out and ask, but this interview is from several years ago, and interviewees tend to become less responsive over time. If you respond to one of our newsletters or write to editor@mergersandinquisitions.com, it will be easier for me to forward your request.

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