Doing VC or PE right out of college?

I know WSO is more about banking, but I'm wondering about VC or PE right out of college. First, I know it's not impossible because I know people who have/are doing it. But I know it's typically an exit route after banking.

So is it so bad to do VC straight out of college without banking?

 

A lot of people want to do VC straight out of college but they generally can't because it's not an option. VC firms look for established people who have track records. Generally, the entry level VC position will be focused on sourcing. People straight out of college wouldn't be as effective at sourcing as someone who has several years of industry experience. What entrepreneur is going to listen to a 22 yr old giving them strategic advice on how to run their business? But an investment banker or consultant who has several years of experience? That person will be more reputable

 
Best Response

If you don't have aspirations to stay in finance after that initial role, a job in VC immediately after undergrad can actually be tremendous. A very close friend of mine took a job at a seed-stage fund. Base is $60k and bonus will be something below $10k. This friend's career aspirations all relate to tech and entrepreneurship and making the world a better place, so the legitimacy of the fund's name, the exposure to people of that caliber (who are successfully getting funding), the experience in sourcing, supporting portfolio company founders/teams, and observing exits (public or private) is absolutely ideal.

I presume that since you're on WSO, you're bent on finance. In that case, the same may not ring as true. I don't think anyone would tell you that it's "bad" per se, but there are definite drawbacks. An analyst stint in banking is considered the stepping-stone for any position in finance -- you can pursue so many different paths: PE, VC, HF, Corp Fin, consulting, etc. The downside of starting on the buy-side is that you don't have the analyst experience to fall back on. If you start in PE and dislike it, it can be harder to move around to your new target because you don't have the profile or skill-set they are looking for.

In short, banking provides tremendous career versatility. It gives you great optionality; many people recognize this and push so hard for the analyst role because they know they want to work in finance but aren't exactly sure the capacity.

I am permanently behind on PMs, it's not personal.
 

All goods points above although you can always use b-school as a reset button. The biggest downside is that most buyside shops do not offer the same level of comprehensive training programs that most banks do. I found that to be the biggest disadvantage for me as the learning curve was steep and I spent most of my free time teaching myself how to do all of the things that I should have learned during a 2 year analyst stint. It worked out for me (professionally/financially) but in retrospect I agree that an analyst role at a BB provides tremendous career optionality and signalling to future employers.

 

Being 1.5 years out as an undergrad hire I'd say don't pursue this unless you're absolutely sure startups are for you. Banking provides platform skills that (depending on your group) can open you to the breadth of opportunities/industries. In my case I realized I enjoy growth equity and LBO's more. Having not done banking prior to VC (which yes, is truly an awesome job and I love what I do) has made it very difficult for me to successfully pursue the transition I hope to make in the next 18 months.

"If you want to succeed in this life, you need to understand that duty comes before rights and that responsibility precedes opportunity."
 

I would not advise anyone to go VC straight out of school unless you have a computer science background. You won't develop the transferable financial skill-set a banker gets which you can take with you after you finish your analyst years, nor will you be valuable to start-ups looking for fresh talent, since you can't code. In fact, even most VC's don't consider their analysts particularly valuable. The senior guys are almost universally former entrepreneurs/senior guys from respected tech companies. They're not VC lifers. I don't even that exists, to be honest. To be valuable to a start-up, you need to have some sort of operational experience. If you're straight out of undergrad, the only thing you can really do to add value is 1) Source deals, and 2) Summarize Gartner reports.

I've talked to junior VC guys about their work, and to be totally honest, they were all pretty cagey about their career progression. It was disconcerting. And the senior guys I spoke to, and I'm talking people at big names, like Bessemer, Accel, etc, were pretty blunt: if you haven't worked at a start-up or gained product experience at a Google/Facebook, you're just not that valuable.

 
LBJ's hair:

I've talked to junior VC guys about their work, and to be totally honest, they were all pretty cagey about their career progression. It was disconcerting. And the senior guys I spoke to, and I'm talking people at big names, like Bessemer, Accel, etc, were pretty blunt: if you haven't worked at a start-up or gained product experience at a Google/Facebook, you're just not that valuable.

I believe you pretty much have to get "real company" experience to progress. The value of hanging out and doing sourcing for a few years is mostly in building network so if you 1) start something it's easier to get funding/mentorship and 2) join a startup you can select the right horse more easily 3) want to join a big firm you have some brand value to get yourself onto a cool product team. If you cannot already code, you can learn how in your free time (although doing something like Hacker School is probably more effective).
 
Vergil:

Well it looks like everyone agrees VCs are out of the question. But what about PE? Same situation?

Are we talking shitty boutique bank vs. shitty PE fund, or BB bank vs. shitty PE fund? If the former, I'd probably go PE. But if it's a BB or a respected MM firm like Houlihan/Harris Williams vs. a PE analyst position at even a somewhat respectable middle market fund, I'd go BB/MM bank every time.

When you're starting out of school, your job should provide you with either a) brand/credibility, or b) transferable skills, and ideally both. A blah PE firm gives you "b" but no "a," and potentially neither. A respected investment bank gives you both. Yes, PE is technically "sexier," but you're trying to build a 20-30 year career in finance. What if this relatively unknown fund goes under? You're fucked, and that name on your resume isn't going to open many doors at all. My advice for those starting out is to go for the brand first. Play it safe. You don't need to hit a home run on the first pitch.

 

In regards to VC, it is certainly possible to get an analyst position right out of undergrad if you network your ass off. I run an undergraduate accelerator and have been able to speak with general partners at Sequoia, Khosla, First Round, Spark Capital, and a few others and they all say the same thing: If you are hired as an analyst out of undergrad they only expect you to stay in that position for two years. At that point you better be ready to go out there and start your own company. A lot of VCs don't have a promotion track, they fully expect you to use the knowledge you've gained as an analyst and go build your own company. If you are hoping to work your way up the VC ladder, realize that it's nearly impossible without getting your hands dirty outside of the office.

 

I think there is a clear difference between starting at a small fund in Northern California versus a small fund in who-knows-where major U.S. City.

"You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right." -Warren Buffett
 

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