Why not to enter VC from Undergrad?
Hey all,
A bit of context, I'm entering my Junior Year and currently recruiting for Management Consulting Internships for next summer. I go to a semi-target (Not target for MBB but have On-Campus Recruiting for boutique and Big4 Firms - located in NY). I have an existing internship in Venture Capital at a newly founded syndicate (been around for 2 years) and have been an integral part of their growth over the last 8 months. I've decided that down the line, I'd like to work in VC - I actually enjoy it.
However, I've been heavily advised to enter a different field from undergrad for a number of reasons, most prominently that VC's value people with experience outside of VC just as much if not more than VC itself, and the promotion opportunities when climbing the ladder from Analyst to Principal or Partner is frankly horrible.
Therefore I decided to pursue Management Consulting (Which I also think I'd enjoy, except for maybe the constant travel) with intent to leave and pivot to VC after a couple of years.
How true is that evaluation of VC? Are there other reasons you advise not entering VC from Undergrad? Reasons you think otherwise? Interested in any relevant insight or advice.
TIA!
Operational experience
ok, so our VC teams have essential experience in the sectors they are investing in, as in - operational experience. They are not guessing where to send the check. (they are often SMEs, speakers and authors in their fields)
VC also requires a good amount of experience in dealing with people, not in your own team (that too, but that's just regular politics), but also in carrying out the actual job - your network, your companies, your investors, angels, ... it's a whole bunch of people you don't have as a junior analyst. You could get there eventually yourself, if you get hired somewhere. but it's not bad to have worked with a bunch of professionals in the industry before you actually make the jump to VC.
IB experience
Not bad to have a solid foundation a BB would teach you. It is relevant.
A gut feeling
Hard to explain, but work/life experience gives you an edge whether it makes sense to make an investment. You could easily do this on your own if it's a nascent industry like cryptos. But would you know how to understand heavy industrials and their innovation pipeline? Or within biotech without a degree or experience in that field?
Currently doing an internship at a $20B VC fund this summer and recruiting for fulltime now, but thinking I'm gonna do PE instead because its a better place to start my career. Here's my take:
As the other commenter mentioned, you have essentially no value-add as a new graduate. No Op experience, no network, and no venture investment acumen. It has been extremely hard to find VC's that hire from undergrad for this reason. They don't need you for sourcing, because they source through relationships, they don't need you for analysis, because they only really do qualitative analysis that doesn't need an analyst. However, once you move up the valuation chain to Series C and beyond into growth investing, firms need staff, like analysts, to complete quantitative analysis on these companies, which isn't really a thing in Seed - Series A investing due to lack of quantitative metrics. In turn there are many analyst roles where you do have value-add in these later stage venture and growth funds, so that's a good place to start if you want get into VC/growth now, and earlier venture later in your career.
For you, I'd stay stick with consulting. It's a relatively easy to switch to venture after 2-3 years of consulting. A lot of the asso/VPs at my current fund came from consulting. The consulting comp is more consistent and gives you much more optionality which is a great thing to have in your first full-time role. Venture can also pigeon hole you because skills you acquire in VC aren't transferrable to other asset classes or finance jobs due to the qualitative nature.
If you want to do VC, then go into VC. This "you need/should to do other things first" schtick that people often advise is literally just gatekeeping for the sake of gatekeeping.
Is it beneficial to have actual operating experience as a VC? Yes. Is it necessary? Ask Michael Moritz. Dude was literally a journalist. A ton of people go from IB to VC every year. None of them have any real operational experience.
Is it beneficial to get some type of IB experience first? Yes and no. IB is the best place in the world to get a certain kind of experience. There is some translation skill-wise to VC. Absolutely. But being a good VC doesn't necessarily follow from being good at IB. Fundamentally, they are two different jobs. An IB's job ends when the VC's job is just beginning.
And that's the point. If you want to be in VC, there is nothing that prepares you better for that role than actually being in VC.
This^
True with most jobs tbh. I told our interns they should go to IB if they want the experience working for a big bank with lots of young people. But for modeling, if you can get an IB offer then you're modeling skills are already good enough to work in the Buyside.
Do what you want to do.
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