Equity Research (Retail) --> Venture Capital

Hey all--

This site has led me along my path since coming out of college, and for that I am extremely grateful. I never had much direction coming out of school (non-target), but knew I liked the markets and knew that I wanted to make money, so with a lot of ups and downs I've successfully been in equity research for just about 2 years covering the retail sector across multiple sub-sectors (softlines, hardlines, broadlines and luxury).

With that said, over the last year to 1.5 years, I've become EXTREMELY interested in entrepreneurship and start-ups in general. To the point where I've become noticeably less interested in the work I do on a day-to-day basis. Don't get me wrong, I still love learning the ins and outs of companies, particularly ones that are mulling over an IPO, but outside of that this job bores me more often than not. I've recently started poking around how I could exit to a VC and have seen some very conflicting views on the subject matter. I see a lot of bankers make the move, but I would argue (outsider looking in) that someone coming from research has a MUCH better understanding of actually what makes a company tick, what it's growth drivers are and how realistic its assumptions and goals are. This isn't to say that bankers can't also grasp all of these facts, but whenever we're on the phone with a banker here, valuations are always suggested at astronomical multiples and the company's growth prospects are typically blown WAY out of proportion.

I'm a CFA Level III candidate and will likely not actively seek out any positions until I take the exam in June but, from what I understand, getting into a VC has a lot to do with networking--so it may serve me to begin that process.

For all you monkeys out there, my questions are simply: (1) Is this a realistic exit op? If so, why? If not, why not and what can do I from here? (2) What are the best sources for me to really start to learn about VCs, start ups, etc. that are relevant while interviews/talking to VCs? (3) Does the CFA offer ANY 'leg up' over the competition in the VC world? and (4) What's the overall career path of someone entering VC? Does EVERYONE have to leave after 2 years to go to b-school or a portfolio company or are there people that truly just advance?

Comments (19)

Jan 8, 2016

I'll put my 2cents. I just finished my Masters in Finance (career change), I am also a CFA Level III candidate and interviewed with every single sector in Finance one of them being VC. It will also help you to know that my dream was and still is Equity Research but my experience as a project engineer is never appreciated and they just look at my lack of experience in finance.

During my VC interviews I learned that Finance is not the core ability they are looking for. They do like that you are good with numbers (my first interviews and exams were MBA/GMAT like) but you need to really impress them in your entrepreneurship abilities, personal experience starting something (business, club, investing in a friends company or whatever).

They need to see that you are much like them and have a passion for startups and that you understand entrepreneurs. This was the reason I didnt get the job. You need to show them that you have the same passion for starting a company as their clients ( mention you would like to start your own VC in 10-15 years) and remark that since you understand what makes big companies tick you can somehow give important advice to the young companies. You should also try to sell your ability to identify market and business trends since VCs make money when they are the first to invest in companies nobody else has faith in.

In summary, yes this is a realistic exit op but you need to make sure you like the lifestyle (very different from equity research), the problem solving culture (ER is much more organized and formal while VC is much more casual and messy) and the young vibrante energy that exists in VC. I was told by the VC founder that getting into VC is not about the money, is about the thrill of bring part of a new thing and being with people eho feeel the same way, if you care about the money go to PE.

Best of luck!

Jan 8, 2016

Thanks for the speedy response! I, in fact, do get very excited thinking about helping take a company from next to nothing to an exit and am operating a business of my own on the side (with another one in development).

I, of course, am in the business of making money though -- but have not heard anything similar to what you've described. Everything I've heard points toward making a decent chunk of change in the VC world. Maybe not apples to apples when compared to PE, but from what I understand you're still taking home a nice paycheck. Have I been misinformed? Any VC associates on here care to elaborate on pay?

Jan 8, 2016

it sounds like your in such a good position - why do you want to transition?

Jan 8, 2016

I think it's hard. You have the odeur of backoffice. That's a very different thing

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Jan 8, 2016

I think of ER as more of a conduit to HF than to VC. 2 years is a long time to miserable, but I'd say do IB if you want to be in VC.

Jan 8, 2016

VC is a tough game to get into and honestly I don't see many guys making the jump from ER, and I cover an industry where there is a ton of overlap between Silicon Valley and Wall Street. If you want to be in VC you have a better chance if you found a successful startup, which will give you some cred. Seriously.

I really can't comment on whether IBD would be a good entry point into VC. I tend to think it won't be.

Unlike banks, there isn't a ton of middle ground at the VC's. You're either a junior, just out of college ,pre-MBA or you are a partner. Sequoia has something like 130 employees total. Morgan Stanley has 60K. Do the math.

Jan 8, 2016

I know of a girl who got in Investor Growth Capital (Investor AB's VC arm) from JPM's healthcare ER. More the exception than the rule, but it is possible.

The vast majority of candidates we consider are industry specific M&A bankers and some consultants.

As a candidate with ER background, you'll have deeper sector knowledge than an M&A analyst covering the same industry, but you'll have no deal execution experience. You could mitigate that by being super well versed in all the deals that have happened over the LTM (acquisitions/exits and VC financings) and by asking your friends at funds about the various parts of executing a deal.

Still, the straighter route into VC goes through industry-specific groups in IBD or industry-specific groups at consulting shops.

Jan 8, 2016

I agree that industry-specific experience is required. For a healthcare VC role, for example, they will want a person who's got a life -sciences undergrad degree.

Jan 8, 2016

I remember I saw someone with HC ER background at New Enterprise Associates. I would contact her to ask for a piece of advice.

Jan 8, 2016

While I can't really comment on how common it is or how to best position yourself for it, the move is possible; back in 2010 the head of Morgan Stanley's global technology research team left to go to Kleiner Perkins.

Jan 8, 2016
23mich:

While I can't really comment on how common it is or how to best position yourself for it, the move is possible; back in 2010 the head of Morgan Stanley's global technology research team left to go to Kleiner Perkins.

That kind of lateral moves are impossible to a newbie/2-yr. analyst.

Jan 8, 2016

Yeah, her name was Mary Meeker dumbass.

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Jan 8, 2016
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