Venture Capital Careers: The Complete Guide
If you go by the news, movies, and TV shows, venture capital careers seem glamorous.
You meet with amazing entrepreneurs all day… dig into their businesses… and then decide who will receive a 7, 8, or 9-figure check from your firm.
Then, company executives do the work, you “monitor performance,” and you cash in when the company gets acquired or goes public.
What could go wrong?
As you’ll see, the venture capital career path in real life is more complex and challenging than its portrayal in the media.
We’ll dig into the reality of the job here, including the work itself, an average day on the job, the hierarchy and promotions, salaries and bonuses, and more:
What Do Venture Capitalists Do?
Venture capital firms raise capital from Limited Partners, such as pension funds, endowments, and family offices, and then invest in early-stage, high-growth-potential companies in exchange for equity (i.e., ownership in the companies).
Most of these high-growth-potential companies are in technology and healthcare, but some VCs also invest in cleantech, retail, education, and other industries.
Since the risks are so high, VCs expect most of their investments to fail.
But if they find the next Google, Facebook, or Uber, they could earn exceptional returns even if all their other portfolio companies fail.
Venture capitalists spend their time on this process of raising funds, finding startups to invest in, negotiating deal terms, and helping the startups grow.
You could divide the job into these six areas:
- Sourcing – Finding new startups to invest in and making the initial outreach.
- Deal Execution – Conducting due diligence on potential startup investments, analyzing their markets and financial projections, and negotiating deal terms.
- Portfolio Company Support – Helping portfolio companies with everything from recruiting to sales & marketing to engineering to fundraising and administrative and financial issues.
- Networking and Brand-Building – Attending events and conferences, publishing content online, and speaking with others in the industry, such as lawyers and bankers who work with startups.
- Fundraising and LP Relations – Helping the firm raise new funds, reporting to existing Limited Partners (LPs), and finding new investors for future funds.
- Internal Operations and Other Tasks – These include administrative tasks, such as hiring for jobs in investor relations, accounting/legal, and IT, and improving internal reporting and deal tracking.
Most venture capitalists spend the bulk of their time on the first three tasks in this list: sourcing, deal execution, and portfolio company support.
Junior VCs, such as Analysts and Associates, spend more of their time on sourcing and deal execution, while senior VCs, such as the Partners, spend more of their time on portfolio company support.
Why Venture Capital?
Venture capital is a “get rich slowly” job where the potential upside lies decades into the future.
If your main goal is becoming wealthy ASAP or advancing up the ladder as quickly as possible, you should look elsewhere.
Salaries and bonuses are a significant discount to investment banking, private equity, and hedge fund compensation, and junior-level roles rarely lead to Partner-track positions.
The technical work is much simpler than in most IB and PE roles, and you spend more time on qualitative tasks such as meetings, research, and brand-building.
There is only one great reason to aim for junior-level VC roles: because you are extremely passionate about startups and you want to use the role to learn, build a network, and leverage it to win other startup-related roles in the future.
Senior-level VC roles are a different story – there, the job is the endgame, and it’s something that you might target after significant experience at startups or in executive roles at large companies.
Venture Capital Skills and Career Requirements
The required skill set and experience depend on the level at which you enter the industry.
The main entry points are:
- Pre-MBA: You graduated from university and then worked in investment banking, management consulting, or business development, sales, or product management at a startup for a few years. In some cases, you might get in straight out of university as well.
- Post-MBA: You did something to gain a background in tech, healthcare, or finance for a few years before business school (e.g., engineering or sales at an enterprise software company), and then you went to a top business school.
- Senior Level / Partner: You successfully founded and exited a startup, or you were a high-level executive (VP or C-level) at a large company that operates in an industry of interest to VCs.
In life science venture capital, especially at early-stage funds, you can also complete a Ph.D. in a field like biology or chemistry and break into the industry because deep scientific knowledge is essential there.
VC firms want people who are passionate about startups, highly articulate, and capable of understanding the market/customer side in addition to the technical product details.
Late-stage and growth equity firms care more about deal execution and financial analysis skills, such as the ones you might gain in IB and PE roles, while early-stage firms care more about your ability to network, win meetings, and find promising startups.
At the senior level, your value is tied 100% to your Rolodex: can you tap your network to find unique, promising deals and then support portfolio companies and turn them into success stories?
For more about recruiting and interviews, see our article on how to get into venture capital.
The Venture Capital Career Path
Yes, we’ll give you that “career path” diagram that we like to use in these articles…
For example, some firms are very flat, with only Partners and administrative staff, while others have a detailed hierarchy.
Some firms combine the Analyst and Associate roles, and some split Principal and VP into separate roles, while others combine them.
And then some firms have just one level corresponding to the “Partner” title, while others have 2-3 levels (or more!).
The normal hierarchy looks like this:
- Analyst – Number Cruncher and Research Monkey.
- Pre-MBA Associate – Sourcing, Deal, and Portfolio Monkey.
- Post-MBA or Senior Associate – Apprentice to Principals and Partners.
- Principal or VP – Partner in Training.
- Partner or Junior Partner – General Partner in Training.
- Senior Partner or General Partner – Decision Maker and Firm Representative.
Here’s the path for junior-level roles, including the standard MBA track:
As with private equity, compensation in venture capital consists of base salaries, year-end bonuses, and carry (or “carried interest”).
Base salaries and bonuses come from the management fees the firm charges, such as 2% on its $500 million in assets under management, while carry is a portion of its investment profits for the year.
For example, let’s say a VC firm invested $5 million in a startup 5 years ago for 25% of the company.
This startup sells for $100 million this year, so, assuming no additional funding rounds or other dilution, the investment profits are $100 million * 25% – $5 million = $20 million.
If the VC firm earns 20% of these profits, its “carry” would be 20% * $20 million = $4 million, and most of this would go to the General Partners.
The remaining $16 million would be distributed to the Limited Partners.
Carry in venture capital careers is very “lumpy” compared with carry in private equity roles, especially since most VC firms perform poorly – so, don’t get your hopes up.
Venture Capital Analyst Job Description
Analysts are hired directly out of undergrad.
In this role, you will do a lot of number crunching, industry research, and support work, such as helping Associates with due diligence and internal processes.
You may learn some financial and market analysis, but you do not drive deals in the same way Associates and Principals do, and even if you contribute to the sourcing process, you’ll rarely be the first point of contact for companies.
The Analyst position is more of a “training” role, and most Analysts leave within a few years to join a portfolio company, complete an MBA, or move to a different firm as an Associate.
Some Analysts do get promoted internally to the Associate level, but it’s less common than the equivalent investment banking promotion.
Age Range: 22 – 25
Salary + Bonus and Carry: The normal range for total compensation might be $60K – $100K.
Don’t even think about carry; it’s not happening at this level.
Promotion Time: 2-3 years, if your firm does promotions at this level.
Venture Capital Associate or Pre-MBA Associate Job Description
Next up is the pre-MBA Associate role, which you win after working in a related industry, such as investment banking, management consulting, product management, sales, or business development, for a few years.
At early-stage VC firms, Associates do more sourcing and less deal execution, and at later-stage firms, it’s the reverse.
Associates act as the front-line filter to find the best startups, pre-qualify them, and recommend them to the Principals and Partners.
Pre-MBA Associates normally stay for a few years and then leave for an MBA, a portfolio company, or another business or finance role at a technology or healthcare company.
An average day for a tech VC Associate might look like this:
- Morning: Read up on news and market developments, contact a few companies that look interesting, and review a draft agreement for a Series A round your firm is negotiating.
- Lunch: Meet with a lawyer friend who wants to win more of your firm’s business, and discuss startups his law firm has worked with recently.
- Early Afternoon: Conduct meetings with a few startups that are potential investments, and dig into their market and financial projections.
- Late Afternoon: Respond to a portfolio company that’s in “crisis mode” by introducing them to a marketing agency that can improve their sales funnel and conversion rates and make some of their campaigns profitable.
- Evening: Run to an event for AI and machine-learning startups, where you network, introduce your firm, and find promising companies.
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.
Age Range: 24 – 28
Salary + Bonus and Carry: Total compensation at this level is likely in the $150K to $200K range.
Carry is extremely unlikely unless you’re joining a brand-new VC firm, in which case your base salary + bonus will also be lower.
Promotion Time: N/A because you normally don’t get promoted past this level – you need an MBA or significantly more work experience to keep moving up in VC.
If your firm actually promotes pre-MBA Associates, it might take 3-4 years to reach the Senior Associate level.
Venture Capital Senior Associate or Post-MBA Associate Job Description
At most VC firms, the post-MBA Associate or “Senior Associate” role is a Partner-track position.
As the name implies, you win the role after completing a top MBA (ideally at Harvard or Stanford), or, in some rare cases, from a direct promotion.
In life science VC, Senior Associates sometimes have advanced degrees (M.D., Ph.D., etc.) and come in with deep scientific knowledge but not as much business/finance experience.
The day-to-day job does not differ that much from what pre-MBA Associates do, but post-MBA Associates act as “firm representatives” in more situations and have more influence with the Principals and Partners.
While neither pre-MBA nor post-MBA Associates sit on company Boards, post-MBA Associates are more likely to be “Board observers.”
Post-MBA Associates act as apprentices to the Principals and Partners, support them, and demonstrate that they can find unique opportunities that the firm might profit from.
Post-MBA Associates who don’t get promoted have to leave and find an industry job, such as product management or finance at a portfolio company.
Age Range: 28 – 30
Salary + Bonus and Carry: Total compensation here is likely in the $200K to $250K range.
You might get some carry at this level, but it will be small next to what the Principals and Partners earn, and it will be useful only if you stay at the firm for the long term.
Promotion Time: 2-3 years
Venture Capital Principal or VP Job Description
Principals or VPs are “Partners in Training.”
They are usually the most senior investment team members that are directly involved with deal execution and contract negotiation, and they need to know both the technology/science behind the company and the business case very well.
Principals “run deals,” but they still cannot make final investment decisions.
Unlike Associates, they sit on Boards and spend more time working with existing portfolio companies.
In most cases, post-MBA Associates are promoted directly into this role, but in some cases, industry professionals with significant experience in product management, sales, or business development can get in.
With an MBA, 3-5 years of industry experience might be enough; without an MBA, it might be more like 7-10 years.
To advance, Principals must show that they can add enough value for the Partners to justify giving up some of their profits.
“Add enough value” means bringing in unique deals that wouldn’t have crossed the Partners’ radar otherwise, or saving troubled portfolio companies and turning them into successes.
Age Range: 30 – 35
Salary + Bonus and Carry: Likely total compensation is in the $250K to $400K range.
You will earn carry at this level, but it will be far less than what the Partners earn.
Promotion Time: 3-5 years
Venture Capital Partner or Junior Partner Job Description
Many VC firms distinguish between junior-level Partners and senior-level ones.
The names get confusing, so we’re going to use “Junior Partner” for the junior version and “General Partner” for the senior version.
Junior Partners are often promoted internally from Principals, but sometimes industry executives and successful entrepreneurs are brought in at this level as well.
Junior Partners are in between Principals and General Partners (GPs) in terms of responsibilities and compensation.
They’re less involved with deal execution than Principals, but not quite as hands-off as the GPs.
And they’re more involved with Boards, portfolio companies, and LPs, but not quite as much as the GPs.
Junior Partners can sometimes kill deals, but, unlike GPs, they do not have final say over which investments get approved.
Age Range: 33 – 40
Salary + Bonus and Carry: Total compensation is likely in the $400K to $600K range.
You will earn carry, but most of it will still go to the GPs.
Promotion Time: 3-5 years
Venture Capital General Partner or Managing Director Job Description
General Partners have had successful track records as entrepreneurs or executives, or they’ve been in a venture capital career for a long time and have been promoted to this level.
They don’t need to find the next Google or Facebook to get here; a record of “solid base hits,” rather than grand slams or home runs, could suffice.
GPs rarely get involved in sourcing or deal execution, but instead focus on the following tasks:
- Fundraising – They raise funds, wine and dine the LPs, and convince them to invest more.
- Public Relations – They act as firm representatives by speaking at conferences and with news sources.
- Final Investment Decisions – GPs have the final say on all investments. They do not get into the weeds of due diligence, but they perform the final “gut check.”
- Board Seats – GPs also serve on Boards, but sometimes they’re less active than the Junior Partners or Principals.
- Human Resources – GPs also have the final say on hiring and firing decisions and internal promotions.
General Partners also contribute significant amounts of their own capital to the fund so that they have “skin in the game.”
That means that much of the upside in this role comes from carry, which isn’t necessarily a great bet.
Age Range: 36+ (Unlike bankers, VCs rarely retire because it’s a less stressful job)
Salary + Bonus and Carry: Total compensation is likely in the $500K to $2 million range, depending on firm size, performance, and other factors.
Carry could potentially multiply that compensation, or it could result in a total of $0 depending on the year and the firm’s performance.
Since GPs must contribute a significant amount of their net worth to the fund, the compensation is less impressive and riskier than it might appear.
Promotion Time: N/A – you’ve reached the top.
Venture Capital Pros and Cons
Summing up everything above, here’s how you can think about the pros and cons of venture capital careers:
Benefits / Advantages:
- You do interesting work and get to meet smart, motivated entrepreneurs and investors instead of revising pitch books or fixing font sizes.
- VC jobs offer much better work/life balance than IB, PE, or HF jobs, and there are fewer last-minute fire drills for deals.
- You earn high salaries and bonuses at all levels, relative to most “normal jobs.”
- Unlike traditional finance fields, you do something useful for the world in venture capital because you fund companies that could transform industries or literally save peoples’ lives.
- The industry is unlikely to be disrupted because it’s based on human relationships, and it takes years or decades to assess investment performance.
Drawbacks / Disadvantages:
- It is very difficult to advance to the Partner level, or to even get on the path to doing that; venture capital is often better as the last job in your career rather than the first.
- You spend a lot of time saying “no” to startups and working with struggling portfolio companies, and it might take 7-10+ years to assess your performance.
- Work/life balance is better than in IB, but work/life separation is worse – you’re always in “networking mode,” and friends and acquaintances will start approaching you with pitches and company introductions once they hear you’re in VC.
- While exit opportunities do exist, they’re more limited than the ones offered by investment banking or private equity because VC mostly leads to more VC or operational roles in certain industries.
- Finally, you earn significantly less than you would in IB, PE, and HF roles – unless you reach the GP level and you’re at a top firm that consistently outperforms.
So, are venture capital careers right for you?
I asked myself this question a long time ago when I was in investment banking and considering different career options.
On paper, I had the perfect background for VC: computer science at a top university, investment banking, and some experience running a small business.
But I landed on “no” for some of the reasons described above. Most importantly, it seemed like a better career option for 15-20 years into the future rather than a direct IB exit opportunity.
Also, VC didn’t play to my skill set – content production and online marketing – except in indirect ways.
But if you’re a better match than I was, or you’re a lot more senior, the wheel could easily land on “yes” for you.
Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews
Read below or Add a comment