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Oct 28, 2019 - 10:51pm

VC - typically Seed, Series A and Series B. Companies have little to no revenue, day-to-day is focused on sourcing (meeting entrepreneurs, taking pitches, going to events, reaching out cold to interesting companies) and research (due diligence on pipeline opportunities, writing 5-page memos, etc.). Comp is "low" ($120-150k all-in is market comp for associates, $200k is considered quite high). Hours are good at most pure-play VC shops (40-50 hrs/week). Diligence is very light (there's not much data to analyze), a lot of decisionmaking is based on "gut" impressions from the senior partnership and on theoretical discussions about what a company could become in the long run. There is little focus on economics/financials. Most common background in early-stage VC is product management and engineering, followed by consulting and banking. The heavy financial modeling skillset in banking (coupled with natural cynicism that develops as you hear your bosses trash talk their clients) is not helpful at all in early-stage venture.

Growth - Series C through pre-IPO, sometimes including high-growth public companies at the crossover funds, and occasionally also including low-leverage buyouts. There tends to be two subdivisions within growth:

1) Late-stage venture (a16z, IVP, Bond, Sequoia, etc.) - companies have typically reached "product-market fit" (~$10mn revenue+) growing quickly (100%+ yoy). Vast majority are not close to profitability, although typically burn is driven by outsized spending on growth (S&M) and not negative gross margins. Lots of discussion of unit economics and potential profitability at this stage, although negative economics are not a dealbreaker (see Lime, Bird, WeWork, Lyft, Uber, etc.). This is a dangerous stage - GPs are often a mix of early-stage VCs looking to upsize their funds (typically operators who do not have a lot of valuation discpline) and late-stage guys coming out of private equity funds or investment banks (often highly valuation-sensitive so they never do any deals). Hours can range from amazing to brutal (Vision Fund, for example. You can typically tell what the culture will be like by looking at the backgrounds of the GPs. If they come out of MF PE then they tend to bring those practices over). Comp is between early-stage VC and mid-market PE (ranges from $180k to $250k for the big funds), although there is a LOT of variance here. Outsized comp at megafunds (Warburg Pincus, SoftBank) and crossover hedge funds (Tiger, Lone Pine, etc.). Best background is private equity, followed by banking and consulting. Day-to-day depends on the firm, but typically will involve a lot of deal sourcing (cold outreach, industry conferences, taking pitches, etc.) and due diligence (financial model sensitivities, valuation, writing 30-page memos, etc.).

2) Growth equity (TA, Summit, some TCV, etc.) - more traditional growth investing, typically companies that are growing healthily (30% yoy?) and are cash-flow positive. Much more aligned with traditional private equity, although day-to-day involves a lot of deal sourcing (emails, phone calls, etc.). I've never worked in this kind of growth equity firm and don't know much about day-to-day or compensation. They recruit out of banking.

Private equity is heavily discussed and I won't rehash.

On competitiveness - both VC and growth roles are highly competitive, especially within top-tier funds. The issue isn't necessarily comp or prestige (for the most part), but driven more by 1) smaller teams and therefore lower recruiting needs, 2) often these firms do not use headhunters nor do they recruit on-cycle, 3) people who want to break in tend to be passionate about tech and that's difficult to fake, and 4) everybody knows who the industry leaders are and everyone wants to break into those firms.

VC/growth are unlike PE or hedge funds in that there is less reliance on investment acumen or discipline. The best VC/growth firms have amazing brand names and top-tier GPs who attract deal flow. The top venture firms generate top-tier returns because they see the best deals (which are very scarce), and the analysis is secondary to deal flow. As a result, when you're looking to join a VC/growth shop, make sure you are comfortable with the firm's reputation. It will be extremely difficult (especially in the current market environment) to get into good deals if you are at a lower-tier firm.

So, tl;dr -
VC = light hours, lots of sourcing, light diligence, lower comp. Best backgrounds are product, engineering, consulting then banking
Late-stage venture = heavier hours, sourcing balanced with diligence, medium comp (between early-stage and PE), diligence is a bit more intense. Best backgrounds are private equity, banking, then consulting.
Go to a good firm.

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