Breaking into VC from story

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.

Comments (46)

Sep 14, 2007 - 4:07pm

Good job. I'd do the same (work for free), but like you said...need that money :(.

Hows the total comp at your firm? Your hours?

Since it was a new analyst position, what exactly do you do?

Sep 14, 2007 - 4:47pm

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

Sep 14, 2007 - 5:24pm

Hey VCmonkey, thx for the insight. I might get an opportunity to work at a VCFund this fall as an intern (i am still an undergrad) but I don't really have much of a clue as to what exactly VC Funds do. Like I know as much as a regular person interested in finance jobs but not specifics. I want to show a lot of interest in the company but I am guessing that requires extensive research. Only I do not know exactly what to research on (specific to what I might have to do). The company website doesn’t provide much information except that the Fund is focused on technology and clean/green energy companies.
Can you please help with the specifics of VC Funds? Thank you.

Best Response
Sep 15, 2007 - 1:45pm

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.

Sep 24, 2007 - 12:13am

Hey everyone, sorry I was away for a few days so I could not answer questions. In order to help explain VC career paths, I've included a list of titles with corresponding experience/education/future career moves. If you want me to expand on anything, just post on this thread and I'll try to answer it:

Title - Relative number of positions relative to firm
- Typical Education*
- Typical Work Experience and Accomplishments
- Typical Future Expectations
* Note that very technical areas (i.e. biotech/networking equipment and related technology/semiconductors almost always required at least a master's degree in a technical and related subject)

Analyst - Very Few or None
- Undergraduate Degree (Technical subjects preferred)
- None or max 1 year of technology investment banking/management consulting/venture-backed startup/high-tech operations and sales
- Promotion to associate OR exit and work for portfolio company as business development guy OR exit and work for Google/Yahoo/Microsoft/Oracle as corporate strategy analyst OR exit to other finance (i.e. technology investment banking, hedge fund, other venture capital) OR exit to MBA

Associate - Few
- Undergraduate Degree (Technical subjects preferred)
- Minimum 2 years of technology investment banking/management consulting/high-tech operations and sales/experience in venture backed company as business development guy/technical guy
- Promotion to Vice President OR exit and work for portfolio company as business development guy OR exit and work for Google/Yahoo/Microsoft/Oracle as corporate strategy analyst OR exit to other finance (i.e. technology investment banking, hedge fund, other venture capital) OR exit to MBA

Vice President - About 25% of investment professionals
- Undergraduate Degree (Technical subjects preferred), Graduate degree preferred in related area, MBAs will start out as Vice-Presidents only if you have the qualifications listed below. Otherwise, MBAs without the qualifications below will start out as Associate.
1. Need to clearly demonstrate success as either analyst/associate for other VC/PE firm. This means you have sourced & executed a "very significant" number of highly successful venture deals at attractive valuations.
2. Need to clearly demonstrate success on Wall Street/Management Consulting. This means being a "thought leader" on areas related to technology. For example, McKinsey Engagement Managers will have published articles in McKinsey Quarterly. Investment banker will be "known" as go-to-guy for technology IPOs/M&As for deep understanding of technology issues.
3. Play a significant role (management) as part of a winning venture-backed team. This means you were at least a VP for a highly successful technology startup.
- Promotion to Principal OR exit and work for portfolio company as VP-level person on management team OR exit and work for Google/Yahoo/Microsoft/Oracle as corporate strategy team leader OR exit to other finance (i.e. technology investment banking, hedge fund, other venture capital)

Junior MD/Principal* and Managing Director** - Many
*The only real way to become a Principal is to be promoted from Vice President. I've seen very few Principal-level hires. The only way you can be hired as a Principal is if you were a VP/Principal at another venture fund in the past.
**I'm certain no one on this board is looking to join as an MD, basically to join as an MD you need to have been the CEO of a highly successful startup or an MD for another venture fund.

Phew...that's it for now, I'll answer the remaining questions in days to come...

Sep 26, 2007 - 12:58pm

So I got a few questions about the financial skills required to join a VC fund, specifically financial modeling.

General Disclaimer: If an early/mid-stage VC fund demands strong financial modeling skills, you should run for the hills. Why? Because venture finance is not about complex deal structures, layers of debt or dividend payments. Venture is about fundamental company investing. The complex transactions only occur with very large and later stage deals or LBO deals.

There are two models that VCs need to understand: valuation models and capitalization table ("cap" table) modeling. In English, this means (1) constructing some kind of analysis to derive the value of a startup and (2) doing a scenario analysis to evaluate returns for the investors and management of the startup.

The first exercise, valuation, is different from public company valuation. In a DCF analysis, a venture capital investment candidate will typically have a discount factor of 40%+. This means that even small changes in cash flow will cause gigantic differences in NPV. So for most early and mid stage companies you can cross out DCF. Comporables valuation, on the other hand, is very valid. Generally, startups valuation will be relative to other venture deals in the same space AND NOT publicly traded companies. Why? Venture capitalists assume all kinds of risks that publicly traded companies do not have, i.e. risk of board dynamic failure, risk of new critical hires, risk of failure of technology adoption, risk that management will not be able to operate in both a startup and hypergrowth environment, etc. Typically, valuation will start by asking, what's the lowest valuation that is reasonable for such a firm (given how many other VCs are chasing the deals). If many other VCs are chasing a particular deal (i.e. PayPal, Vonage, etc), sometimes the valuations become ridiculous and you'll see the top-tier VCs pulling out of the rat race. So valuation is based on either (1) what are the valuations of similar startups or if that is not available (2) what is the lowest value we can negotiate given our reputation and value-added?

Capitalization table modeling on the other hand, is quite complex. Basically in cap table model, you need to determine the different dynamics and returns in the future, given various scenarios. The different scenarios may be: many new rounds of Series A/B/C/D investments with new terms for the preferred shares/an M&A at a very low valuation/a succesful IPO/the founder selling his shares and exiting the company/the consequences of firing the CEO who is a significant shareholder/a sensitivity analysis for an IPO at different prices, etc. Needless to say, this can become very very complicated especially if there are more than 2 VC investors in multiples investment rounds. Note that if there is a "down round" (i.e. the valuation of the company falls from one round to the next), this triggers anti-diluation, which has all kinds of nasty consequences for the financial model.

How do you learn all this modeling? It's not too difficult. If you have a minimum level of financial aptitude (have taken finance classes, investment banking, etc.) you can learn the modeling based on old models developed in-house by the venture fund. If you study an older model, you should be able to pick it up fairly quickly.

BTW: almost all the information I post on the board is publicly available. So even though this information may seem "secret", it has been posted in many different blogs and forums relating to entrepreneurships and venture capital.

As always, keep the good questions coming,

Sep 26, 2007 - 1:06pm

do you mind sharing what the promotion opportunities at your fund are? I'm also an undergrad who worked in VC as a summer internship. However, I'm reluctant to return to VC full time as an analyst because I was under the impression that analysts in VC generally do not have much of a career path. Most associates are recruited from MBA schools or banking/consulting, and exit opportunities are not that great. Basically, you can't really expect to climb all the way from analyst to principal without taking a detour into another industry along the way.

Oct 19, 2007 - 1:38pm

Well at my fund, there is an understanding that I will leave at the VP level and join a startup. You are right that Analyst --> MD without tech/startup experience is pretty much a no-go. But that's what I want to do anyway. And once you're in the VC world, it's a tiny world, so you have a leg-up on all the consultants/bankers trying to break into the industry because you have already passed the critical hurdle (accepted into a top-tier VC). At least this is what my associate friends tell me. In any case, there aren't that many analysts at IB/MC shops that stick around until they make partner. You'll see in your career (especially in North America) that moving around from place to place is a good thing to get a variety of exposure,

Oct 27, 2007 - 2:43am

You say that "MBAs will start out as Vice-Presidents only if you have the qualifications listed below. Otherwise, MBAs without the qualifications below will start out as Associate."

Does that mean that you can get into VC with an MBA despite not having any VC experience?

I ask, because I am looking hard at going for my MBA in the near future. I have a Finance undergrad, and 3 years of unrelated work experience (general commercial/contract type work in oil/gas). VC is an attractive field for me, and if I could get in out of an MBA, I would.

Thanks for the info ;)

Nov 8, 2007 - 1:04pm

Hey Simon,
Usually when MBAs join a top tier VC/PE fund they almost always have 2+ years of investment banking or management consulting experience. Also, the MBA schools are usually top 3: Harvard, Wharton, Stanford. The exception is if you have top tier engineering skills from a top 5 school and maybe a top 10 MBA program. For example, I know someone with an MS Electrical Engineering and MBA from Columbia who got into a venture capital fund as an associate. The exception for venture capital funds is if you have high tech sales/operations or leadership positions in a startup (does not have to be a successful startup, but of course that's preferred),

Dec 26, 2007 - 5:11pm

Hi VCmonkey,

How is equity research experience valued in VC? Any advantage if I covered a specific industry (tech, health-care)? Does it give enough knowledge to enter a VC?

How about this path? ER->M7 MBA->VC. Is this realistic or off the ground?

Thx for the info!

Oct 31, 2014 - 2:06am


Hi VCmonkey,

How is equity research experience valued in VC? Any advantage if I covered a specific industry (tech, health-care)? Does it give enough knowledge to enter a VC?

How about this path? ER->M7 MBA->VC. Is this realistic or off the ground?

Thx for the info!

I know this post is very (very!) old, but would really like to see some opinions on IBWannaB's question here.

Not everyone is meant to make a difference. But for me, the choice to lead an ordinary life is no longer an option.
Mar 13, 2008 - 7:26pm

What do you folks know about the VC / PE industry in Canada???
Hell, is there one? Is it as lucrative as in the U.S.?
Basically, I'd like to know anything and everything, so shoot!

Also, I'm a Professional Engineer with direct experience in Product Development, high tech mech/elec technologies, etc, and am getting an MBA at a top 10 international school. What place is there for me at a VC firm? I'd consider myself a technical expert, but have no banking experience. Analyst or higher?
Thanks for your time.

Apr 5, 2008 - 1:46pm

VCMonkey, qualify your statement please....

I've found that VC is a pretty hurtin' unit in Canada; this I know.

Regardless of this, what are my chances as an engineer with a good MBA springing into VC without any banking experience. I tend to think IB or Trading experience is pretty highly regarded in VC.



Apr 7, 2008 - 9:32am

Let's think about how you add value as an employee at a VC fund:

  1. Generating proprietary investment ideas (finding investment candidates before others do)
  2. Focusing on a niche sector that is on the verge of "explosive growth" that others have not yet identified. Think YouTube, MySpace and other industry pioneers.
  3. Adding operational/technical value to companies and helping them through technical issues
  4. Adding financial value to deal situations (first investment, sale through M&A, IPO, etc.) Being able to negotiate complex financial transactions.
  5. Adding marketing/bizdev value to assist with go-to-market strategies

  6. Your work experience is in Canada (i.e. not a startup hub), so it's unlikely that you have a large network of entrepreneurs, technology executives, and venture capitalists who can refer you to interesting deals.

  7. Unless you work for a startup (assuming you do not), you have not "proven" your ability to identify "hot" sectors in the technology industry before others have. This means it's unlikely you will be to do anything in this area. Maybe you have a blog on technology (or something equivalent) to prove your merit.

  8. Yes, your deep operational/technical knowledge will come in very handy to portfolio companies. And you should be able to help them, especially with technical issues.

  9. I'm assuming you have little to no financial experience. So you will not be able to assist in "deal" situations.

  10. Unless you've worked in bizdev, I'm assuming you're knowledge of sales is limited.

Does this make sense? As you can see, today you are probably an uncompetitive candidate for the venture capital industry. My best advice for you is to join a startup in a technology hub (Ottawa is the best hub in Canada) and then network your way into venture capital. Also, keep thinking about the above five points,


Apr 21, 2008 - 4:25pm

VCmonkey, I was curious if you would mind sharing with us the approximate number of employees at your firm, as well as the total "AUM"??

I'm curious because I am currently in undergrad, at a no-where-near target school, however, I managed to get an internship (unpaid, other then some "phantom equity" on the back-end) at a newly formed PE firm that invest in lower-middle market companies. There are very few employees, pretty much just the partners, an office manager and me and the AUM is currently 50M with a final close of the first fund anticipated to be around 75-100M.

I am trying to figure out where I would fall as far as salary would be concerned if I was offered a position. Although getting offered a position looks unlikely, I have another whole year of school, of which, I intend to stay for the entirety and hopefully garner an offer, if I added a significant amount of equity. The good news is, one of the two founding partners would most likely champion me staying, however, I know that their first move as far as hiring goes would most likely be at the Associate level as this person would be able to help generate deal flow, and/or bring in potential limited partners.

Thanks for any information and/or data that you can provide.

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so." - Ronald Reagan
Apr 27, 2008 - 12:18pm

Excellent information.

I am also doing an internship at a VC firm (mostly debt investments) this summer. Any recommended industry sites/publications to get me up to speed on the industry before starting?

Thanks a lot in advance.

May 26, 2008 - 4:46am

This has been the most informative post I have come by on this website thus far. It has helped me know I am pursuing the field I would best fit in and enjoy as a destination career. I have a question, would you say, as a VC, it is better to be book-smart or street smart? I have always had the innate ability to foresee multiple outcomes to a situation and tend to come out on top, also, where would be the most ludacrive marketplace to be internship-shopping for next summer? At the moment I live in Las Vegas over summers but the VC scene isn't very large as most hotels and entreprenurial firms have the money on-hand already or can come by their own leverage. Also angel investors are at a surplus out here. If I can't find a VC firm, would working at a private equity group or hedge fund be beneficial? Which one would be best to look for? Another option, should I search for a start-up company in technology to work for? Thanks

Jul 3, 2008 - 1:21pm

There is a lot of generalization in this thread - almost too much. VC monkey clearly has some great points, but don't take his posts as gospel. The venture industry is filled with people from various backgrounds and experiences.

Jul 7, 2008 - 2:16am

No offense meant. You've been extremely helpful to the board. I just want to point out to others that the VC industry, in particular, has quite a varied cast.

Please continue...

Jul 21, 2008 - 9:05pm

hey, i was just wondering what the top vc firms were.
and how the salaries compare between hf, vc, and ibanking
from what ive read, ibanking has a higher salary for analysts and associates but when you get up to vp/md levels, hf/vc offer better lifestyle AND much better salaries

Sep 16, 2008 - 11:38am


If you are concerned with salary as a Compass Point, you'll never be happy if you want to do VC. Some managers/firms can mostly live off the management fees, but it's unlikely they'll ever raise LP money again. Venture is really for people who love what they do, because of the time horizon of investments (5-10 years) and the high risk (even decent VCs sometimes have to restart due to a bad fund or series of funds). Your pay, I imagine, is directly correlated to the success (or failure) of the fund, at least at the junior level because almost no analysts/associates participate in carry.

In any case, it's generally accepted that the best firms are Sequoia, Accel, Benchmark, KP, DFJ, NEA, although they have had varying levels of success with their bubble-era funds. There are more, but those are the headline names that a little rummaging around on the internet should get you. Check them out if you want to learn more.

Apr 12, 2009 - 10:27pm

good thread

The world has changed. And we must change with it.

------------ I'm making it up as I go along.
Sep 8, 2010 - 12:13pm

def worth its weight in gold thank you!

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