Private Equity Tutorials
- Venture Capital
How to Break into Venture Capital?
Venture capital firms provide much-needed capital to businesses based on a detailed assessment of its potential as a worthy investment. Usually, they provide funding to early-stage businesses or startups, however, they may also choose to invest in late-stage businesses depending on a number of factors.
In the past decade, business dynamics have changed a great deal and market competition has intensified for new businesses. This is why venture capital firms are hogging the limelight as startups are vying with each other to find long-term investors. Naturally, this has also spurred a greater demand for skilled and competent venture capital professionals who enjoy some of the best career prospects in the financial industry.
You will find below our helpful guide on how to get into venture capital.
Top 7 Steps to Get into Venture Capital
Contrary to popular perception, finding an entry to VC as a successful professional in another field can be one of the most difficult points of entry. One of the primary reasons is that you have to be really successful in another field, and if you are, then it can be a bit risky as well to move into another field, no matter how bright the prospects.
#1 – Excellent Communication Skills
Venture capital firms are not looking for individuals who excel only at financial analysis or are really good with numbers. Instead, they would prefer someone who does not merely stand out for his or her skills, but have more of a personality with the potential to make an impact with almost anyone. They should be comfortable working with top-level executives and have excellent presentation skills.
VCs prefer to hire people with good communication skills, an ability to source investments on one’s own and prior deal experience, which might prove to be helpful.
#2 – MBA is a Plus
It is possible to get into Venture capital without an MBA if you have the relevant experience in business development, product management or banking among other areas. However, earning an MBA degree from a top institute can open up good opportunities in the field, even if you come from a non-traditional background.
For MBAs, usually, they have the benefit of a better network which can be a key factor in locating useful opportunities in VC. In general, those coming from a diversity of backgrounds tend to adopt the MBA route for the advantages it affords. However, it would be almost critical to have completed the MBA degree from one of the top institutes which would add substantial value to their profile as a prospective VC professional.
#3 – Entrepreneurship Experience
Individuals who have been successful entrepreneurs in past can also find some of the best opportunities in venture capital since their experience would come in handy in gaining the trust of new entrepreneurs and assessing the worth of a startup.
#4 – Investment Banking Experience
It would be important to point out that an increasing number of investment banking professionals are looking to get into venture capital for the kind of growth prospects it offers. They have a unique advantage as well because the skill-based criteria in these fields are not so much different from that in venture capital, which typically include excellent communication skills, relevant deal experience and the ability to source investments.
#5 – Take help from Headhunters
It is true that a number of VC firms do not hire headhunters for recruitment but some of them do, which largely depends on the size of the firm and their focus area. Most VC firms dealing with early-stage businesses do not have enough resources to employ headhunters for hiring process.
However, those dealing with late-stage companies or larger firms may utilize their services, so one needs to keep in mind what kind of VC firm they are dealing with before deciding how important a role networking might play in getting into venture capital firm.
#6 – Positioning the Right Way
Depending on the type of VC firm, their requirements could vary a great deal and it would be useful to have an idea of what they might be looking for.
- Early-stage firms might be more focused on sourcing, market sizing, developing and evaluating investment ideas. Interview questions for this type of firm could revolve around industry trends and businesses that appear interesting to the candidate.
- VC firms working with portfolio companies could be more interested in individuals with a good background in operations which might include experience related to product management, marketing and entering into partnerships.
- Those leaning more on the private equity side would be that much intent on due diligence and deal execution and might prefer someone who is good with financial models, analysis of company financials and is comfortable at coordinating with lawyers, bankers, and accountants. The requirements closely resemble those for investment banking.
- Firms more focused on sourcing could be looking for potential recruits with strong communication and presentation skills as one might be required to make presentations and do a lot of cold-calling among other things.
# 7 – No Single Strategy Might Help
If you are thinking one of the approaches outlined above should work in most cases, you might have got it all wrong. Going one step ahead, it would be appropriate to say that no standard strategy might help interested individuals break into the industry. It is only a broader approach we have discussed and a great deal depends on the type of VC firm one is applying to. Those that fund early-stage companies might look for different professional skills and capabilities in potential recruits from the ones who prefer to invest in late-stage companies. Similarly, some of them could have greater focus on due diligence, sourcing or portfolio companies which would again require personnel with certain specialized skill sets. This is why no matter how much one might try, there can barely be a single standard path to carve a VC career.
Resume Building for Venture Capital Jobs
While it would be useful to list any deal experience one possesses but additional details about working with top-level executives would be helpful to get a venture capital job. Any experience in business development or market sizing might also be relevant.
- Listing your credentials might sound good, but it would be better to not stuff too much information and instead keep a resume short and simple. However, if you have earned an MBA or some other relevant credentials from a top institute, don’t forget to highlight it.
- In general, VC firms are looking for people with presentable personalities and a keen interest in startups and technology. If a resume is successful in creating this impression, it might be very helpful.
How to Tackle a Venture Capital Interview?
Usually, interviews at VC firms are far less technical structured unlike investment banking and private equity. Candidates might not be asked to take any financial modeling case studies or other technical assessments as is common in investment banking or private equity. A VC interview might be carried out in more of an informal setting, maybe even as a casual conversation over lunch or breakfast. Typically, they are more interested in finding out how much the person is actually interested in the field and if they are passionate enough to excel in the field.
- A lot of VC firms pay lesser than private equity firms and though prospects are good, they would not prefer to hire someone whose main motivation to work in the field is the kind of perks it offers. It can be considered more of a turn-off as the person might have little real interest in finding exciting businesses. This is why they are more attuned to the idea of a ‘cultural fit’ as compared to most other fields.
- However, in firms more or less inclined towards private equity side might prefer to go along with technical assessments as well. If applying for an alternative technology company, one should be prepared for questions related to technological innovations in the field.
What Most VCs Are Looking For?
Some of the most important points one must keep in mind is that VCs are not only looking for good industry knowledge but also well-formed opinions on industry and companies. For an investment banking professional, more of a balanced and neutral view of the industry might work well, however, on the buy-side, when you have to invest in businesses you need more of an opinionated approach to be successful.
Aspiring VC professionals should be confident in expressing their opinions about the industry at large and specific companies along with how they view their prospects based on certain key factors.
Focusing solely on the products instead of the market position of a company might also not impress the interviewer as much since investments in VC are primarily market-driven business decisions.
Venture Capital Video
In short, venture capital is an exciting field to work in but aspiring individuals need to possess not only the necessary knowledge and skills but also the right attitude to be a success.
For your benefit, you can find the below summary of how to get into venture capital.
- While networking might work well for early-stage and smaller VC firms, it may not always be the case as late-stage firms and larger VC firms usually hire headhunters so it would be recommended to seek their help instead.
- It is important to position oneself in keeping with the kind of VC firm one is applying for and it would be even more important to choose VC firms with a certain type of focus area that aligns well with the skill set of an individual.
- It is important to keep in mind that although VC might look similar to investment banking and private equity in terms of desired skill sets the similarity ends right there.
- In VC, there is a greater focus on hiring individuals with more of a presentable personality, excellent communication skills, intelligent opinions on investing in companies and a genuine interest in startups and technology.
- The interview process in VC is likely to be more informal as compared to investment banking and private equity. One should be confident in expressing opinions on specific companies and how they might fare based on relevant factors. Analysis of companies should be more market-oriented instead of product-oriented since the former approach holds greater relevance in VC.
In closing, we might add that venture capital is set to grow at a fast pace in emerging markets of India, Brazil, China and Canada, which might be all the more reason why aspiring VC professionals might look forward to exciting opportunities in these markets.
This has been a guide on how to get into Venture Capital. Here we discuss the strategies and tips on breaking into a venture capital firm. Also, we discuss resume building and top tactics to handle Venture Capital Interviews. You may learn more about Venture Capital from the following articles –