Breaking into VC/PE from undergrad is very challenging. I did it coming out of university (I cannot reveal which university since that will give me away...I'm on my firm's website). I also cannot reveal which VC fund for similar reasons, but I will tell you that it is an independent (not bank arm) and top-tier VC based in Silicon Valley.
In my case, I offered to work for free over a summer. In the end, they ended up paying me which was nice. You'll see that most professionals are not cold-hearted and will be nice if you show the willingness to work hard. I would recommend this if you do not have financial difficulties as it shows real dedication (no risk for the VC fund, serious candidate). I had some entrepreneurial experience in digital media, and spent the previous summer working as a business analyst in the technology group for a commercial bank (i.e. evaluating end-user requirements for custom-designed software).
I know a lot of people say that you should never work for free, but in my opinion, as an undergrad student your degree is commonplace so I don't see any problem doing so in order to break into a competitive field. Even if you're from an ivy (like me), the competition to break into PE/VC is fierce. After the summer, the partner who I worked for really liked me and pushed the other partners to create a new analyst position at the fund.
Feel free to ask me any further questions. I've talked to various VPs/Associates at my fund regarding recruiting new hires as well. So if you're interested in breaking into the industry I may be able to help you out.
The hours in VC is why everyone wants to work in the buyside. A lot of our investment team members are ex-ibankers, ex-consultants who burned out and became frustrated at their old jobs. At my fund, the hours are approximately 8AM-7PM every day. We never work weekends or pull all-nighters. The latest I have ever gone home is 11AM, and that was for an internal project that was being sent directly to the investment committee (i.e. all the partners who make investment decisions). Travel is fairly light too, I travel around 2 to three 3 times per month. Mind you, it's much much worse at the senior level. The partners typically travel 2 to 3 days per week.
From my informal conversations with people in the venture industry salaries are approximately as listed below: (Base/Performance Bonus/Deal Sourcing Bonus*/Carry) Analyst: 60,000/30,000/5-10,000/0 Associate: 100,000/50,000/10-20,000/0 VP: 200,000-250,000/?/?/0M-1M** Principal/Junior MD: 500,000/?/?/1M-2M*** MD: 1M/?/?/3M-9M*** *Deal sourcing means finding and executing an investment opportunity **VP carry based on performance of portfolio companies with board level representation only (i.e. not carry of all companies in portfolio)
***MDs are typically compensated based on performance on entire portfolio
I received quite a few PMs asking me about what the job entails and specific financial skills required, so allow me to elaborate.
80% of the job duty of an analyst straight out of college is deal sourcing. In English, this means generating investment leads that can be transformed into real investments. 20% of the job is assisting in due diligence following a "Hot Deal" lead. Again, this means constructing financial models and marketing strategies that will help the investment team determine whether or not to invest. Usually, the technological evaluation will be performed by an expert within the team (i.e. a software deal with a VP with software experience/CompSci degree, a telecom hardware deal with an advisory board member who is the ex-CTO of BellSouth, etc.)
Deal Sourcing In the case of a "good" venture capital fund, deal sourcing starts out by targeting a certain industry. Proactive deal sourcing is a better practice than reactive deal sourcing. Let's say I'm targeting the candy industry (silly example, I know). First, I research relevant aspects of the candy industry (dynamics, key players, market size, product leaders,etc.). Then the analyst sits down with other VPs/Associates/MDs and tries to answer the question: OK, so where is this industry headed ? This is a really really difficult question and is where you appreciate the value-added of a senior MD. Let's say we hypothesize the candy market is moving towards sugar free products. Once you answer this question, you figure out: OK, so what are the characteristics of a startup or mid-stage company that can exploit these changes. With this question answered, you now have a good mental picture of what kind of company you are looking for.
We are looking for a candy company that creates candy with revolutionary sugar-free products (no one else has come out with them), has defensible technology that will ensure its market leadership, and can be scaled nationally using venture capital. We expect the underlying technology used to become the dominant design in the industry, and there are no major health or security issues emanating from the technology. In addition, this investment candidate is open to management changes that the VC/PE partners will request using its rolodex of contacts. Bingo! Now we have a target company. Now the analyst goes out and starts looking for such a company. How? Reading trade journals, attending industry conferences, even cold-calling relevant professors in a university department related to the candy industry.
Due Diligence Most VCs have a few investment bankers with strong financial modeling skills for tech companies. So these senior professionals train the analysts in financial modeling for technology startups. The financial modeling aspect of VC is really quite simple and this knowledge can be easily transferred. I would not stress financial skills too much (esp. for early stage, would stress for growth equity, mezz finance, and obviously LBOs), although it is important for an analyst to construct financial models from scratch.
In addition, you will learn due diligence on an ad hoc basis by sitting in on meetings, talking to associates and pretty much through osmosis. There is no "formula" or "checklist" for due diligence (like in accounting or law). Good VC firms develop individualized methodologies for a prospective deal. Once you've done intense research on one sector, you'll be able to contribute a lot to the due diligence process. If you are an analyst you should request a mentor for weekly 1 hour meetings. I've found this to be very helpful.
You'll notice sometimes VC funds insist on technical majors (i.e. CompSci). This is not because CompSci majors know everything about IT investments, it is because they have the "technical basis" to understand new technologies (even outside their domain of expertise). So having a technical aptitude is important.
Let me know if you have any other questions.