Size of VC - Career
How does the size of the VC fund you're working at affect your responsibilities and career progression? Say a small, <100M with few employees compared to something like Sequoia with many billion dollar funds, what are the upsides and downsides? From what I understand, most of the pay comes from carried interest once you reach senior roles, so would it be preferable to reach partner at a smaller fund so you get carry rather than be an associate at a huge fund?
Think of the analogy as working for an upstart boutique M&A bank vs. a bulge bracket. Generally (though not always), you will have more responsibility and room for advancement at a smaller/newer fund than at a larger/established one. It's extremely difficult to make GP at most of the mega firms, pretty much impossible in periods like this. Most of those partnerships are already large and entrenched. You either have to start a new practice internally (very cyclical), or play the waiting & politics game. On top of that, large firms tend to be very hierarchical, with multiple layers and levels, not unlike a PE megafund. You can have a decent salary but not get much carried interest, which itself might not turn into much if the fund underperforms. Large funds are harder to return. If you have a $2B VC fund, the fund needs to return $2B before any carry is earned, which is a tall order. Small funds are usually leaner, so there's the possibility for rapid promotion, and meaningful carry if the firm performs well. The downside of course is that small funds are more volatile. They are more risky - they tend to be earlier stage focused, more concentrated, and have less stable LPs (non-institutional). There's more existential risk that the firm could go under, which is much less of a risk at an established Tier 1 VC.
Thanks for the information. Purely hypothetical, but if you were a junior, would you want to work at a megafund or at somewhere smaller? Let's say if you had banking/consulting experience, would you be more willing to take the risk at a small VC? Also, how do careers in VC differ based on geography, say US vs Canada/Israel/emerging markets?
It depends on whether you see yourself building a career at that particular VC fund or not. Generally, I'd advise to start with a top brand, as that sets you up for future success and you get to see excellence (in deal flow, investor quality, portfolio quality, LP quality). Kind of like how if you start your career at GS or MS, you get instant exposure to best in class deals. But you have to be comfortable leaving after 2-3 years, as promotion paths are rare at these big funds.
As for geo, the advice above broadly still applies. Non-US VC is both harder in some ways in that there are fewer quality deals, or easier in some ways since it's less competitive.
Yeah, I think its probably less risk and better to start out at a brand name. Thank you for your advice - really appreciate it. Wanted to inquire, where are you in your career now? I saw you were an associate a decade ago, how have things gone since?
I've stayed in VC the whole time. Feel like it's my calling. Without revealing too much, I've switched firms several times in those years, and have been in both established shops and emerging shops. I'm now a partner at a new shop. It's been a wild decade. The industry has exploded, especially at the tail ends (seed & growth).
Advice on breaking in?
That's great to hear man, glad that things have gone well for you. Hopefully I can follow in the footsteps.
Hi, if you don't mind me asking, how do you feel about the future of VC as a whole in the wake of SVB and market turbulence? Funds are tightening and investor confidence is shrinking, do you think it'll carry lasting impacts for the VC industry, especially as someone trying to break in? I have a family member who ran his own startup and got a glimpse into what VC is like. It's such an interesting field, but 2023 seems like a shit time for trying to break in as an undergrad
Yeah it's a hard time to be in VC right now. But on the bright side, it's way better to start in the industry now IMO than to have entered during the peak of the market (2019-21) & have a legacy portfolio that's struggling. Very nice to start fresh. Valuations are lower, deals are a lot less competitive (outside of AI). But yes, it's really hard to be a VC now. And hard to break in since most firms aren't hiring, in fact many are laying off people.
Always worked in $1Bn-2Bn AUM shops in EU, but I think you might be trading prestige (which I think matters less in vc) to experience. Just comparing to my peers in large late-stage VCs I got promoted much faster to VP, carry sooner, involved in LP discussions, end-to-end execution from day 1 and also glance at the fund operations. I've done like 10 deals during my career while my megafund peers have done 1-3 or something. I've had opportunities to join very large established funds over the years (think like Index, Eurazeo, Bain Capital) so it does not exclude anything. That said, the reason I had to move in the end was definitely fundraising struggles, so economy does impact more the smaller ones.
May I ask your view on the late-stage VC/GE as an asset class in EU? It seems less attractive in numbers and development of startups and unicorns compared with USA/APAC?
EU will probably never match US in terms of numbers or 'coolness'. I'm European, worked a few years in US fund, yet hyperhappy to be back in Europe and support the ecosystem here. I like the culture and people here more much more. Investing wise, there are deffo ton of companies here and maybe less competition for the same assets. You can't really bank on IPOs for exits in Europe like you maybe can in US so you underwrite for lower exits. Funds are also smaller here in absolute $ sense for same reason (but with the same firepower). I don't know much/anything about APAC. It's all matter of preference really and where you come from. I think if you're idk Polish it's an uphill to be successful long-term in US venture.
What do you think of Crypto/fintech VC? To me it seems most of them are dying. Been hearing good talks about renewable or nuclear energy too.
If you're passionate about it you can probably become very good at it. But the world changes and you want to be flexible. Might be better to work in a generalist fund but focused on the sectors you mentioned - you'll be competing against them in any case in every deal. Then you can pick a new sector when things go out of favor again.
Crypto VC is not dying at the very least. Some of the 22/23 vintages will be the second best VC vintages in history after crypto 18/19 vintages.
.
I wrote a bit about why I don't recommend VC for juniors here, in part because of this: https://www.wallstreetoasis.com/forum/venture-capital/is-venture-capital-overhyped-for-young-professionals#comment-3538701
The TLDR is that the majority of VC "funds" out there are semi-retirement jobs, or run by people who have no idea what they're doing but thought this industry sounded fun. Those funds do not offer much in terms of prestige, learning, career advancement, or economic reward.
The only kind of small fund I would even consider over a large one is a spinout from a Tier 1 player, i.e. a new venture from someone who was Partner-level at Insight, Sequoia, Benchmark, a16z, General Atlantic, and so on. At those, you have the pros you mentioned -- faster career advancement, opportunity for meaningful carry, etc. -- and the benefit of being able to learn from somebody who actually understands the craft, how to evaluate investments, how to build a team. Note that you will not get any "prestige" because you e.g. worked for a guy who used to work for NEA... you will probably only be as successful as the firm is, and that will take years to know for sure.
Otherwise you go large established fund all day and trust that you can lateral to one of the above if you ever need to.
Dolore nostrum numquam autem. Sunt harum laboriosam qui nihil sunt id perspiciatis. Earum rem rerum quia rerum sed officiis non. Et adipisci esse quas ea.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...