Before Facebook, Airbnb, or DoorDash were household names, they were early-stage startups — all companies that needed money to start growing. This is where venture capitalists came in to save the day.
What is a venture capitalist? A venture capitalist is a financial professional who looks for early-stage companies with high-growth potential, invests in them, and works with them to help them succeed. In exchange for their investment, they receive equity in the company, which they hope will make them money as the company grows. If you’re interested in an innovative, exciting, and high-profile career path, here’s what you need to know about becoming a venture capitalist.
What Do Venture Capitalists Do?
If you’ve seen Shark Tank, you might have a good idea of what a venture capitalist does. People like Mark Cuban and Barbara Corcoran are listening to people at young, early companies, and they’re deciding whether they want to give them money to help their business grow. This is the basis of venture capital!
In simple terms, venture capitalists give money to young, growing companies; in return, they get a stake in that company. They provide this financial support with money from individual investors, foundations, corporate pension funds, and more.
A venture capitalist’s goal is to invest in a company while it’s growing. Then, once it (hopefully) becomes successful, they aim to get a good return on their investment (ROI) through a company acquisition or when the company goes public.
What Does a Venture Capitalist Do on a Daily Basis?
Venture capitalists split their time between researching new companies to invest in and nurturing companies they’ve already invested in. On a day to day basis, a venture capitalist might:
- Source deals: Find companies to invest in by networking with entrepreneurs and attending events.
- Meet with team members: Learn from startup founders about their business plans, vision, and strategy.
- Conduct due diligence: Conduct research on a potential investment target by looking at its financial statements, competitors, and overall business vitality.
- Negotiate deals: Negotiate investment terms with entrepreneurs, legal teams, and other stakeholders.
- Manage their portfolio: Work with current companies to provide guidance, connect them with resources, and stay updated on progress.
- Fundraise: Manage fundraising for the venture capital fund they work for, including meeting with potential limited partners (people who may give money to the firm for them to use for investments).
- Follow trends: Stay up to date with new developments, companies, technologies, and entrepreneurs in their space.
H2 Ventures Venture Capital
Work with H2's venture capital team to figure out what company to invest in next.
Avg. Time: 5 to 6 hours
Skills you’ll build: Startup scouting, opportunity analysis, investment lifecycle, financial modeling, comparable company analysis, forecasting
Venture Capitalist vs. Angel Investor
Both venture capitalists and angel investors give money to up-and-coming businesses. The main difference between the two is where they get their money from. Angel investors invest with their own money, while venture capitalists use the capital of the firm they work for.
How to Become a Venture Capitalist
Becoming a venture capitalist (VC) isn’t necessarily a linear career path and you don’t need a specific degree or certification. When you work in venture capital, your industry experience — even in adjacent industries — is what matters most.
Most entry-level venture capitalist jobs require a bachelor’s degree, but there’s no “venture capital” degree you’ll need to get. Instead, your degree should be in a relevant field such as finance or business. As you progress up the ladder, most mid- and high-level venture capitalists also have an MBA. While an advanced degree isn’t required, an MBA can help advance your business knowledge and expand your network — which is crucial when you’re trying to find and decide what companies to invest in.
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There are two general ways to get experience working in venture capital: first, by working at a venture capital firm, and second, by working at a startup.
Working at a Venture Capital Firm
While venture capitalists all work to invest in companies, working for a venture capital firm that invests in technology companies is going to be different than one that invests in education companies.
“There are a lot of internships in the VC space, and we highly encourage people to explore these opportunities to determine the culture and sector that best fits your goals,” Sean Flood and David Touwsma of EFO Ventures wrote in an email interview. “With many internships, there are valuable roles to be part of the team that analyzes opportunities, understands products and founding teams, looks at financial models, evaluates investment decisions, etc.”
Working at a Startup
Many venture capitalists work in another sector at a startup. Once they’re more familiar with what it’s like to work with venture capital firms, they become a venture capitalist themselves later in their career. This kind of experience is invaluable for later-stage venture capitalists.
“There is also no replacement for having been part of an early-stage business,” Flood and Touwsma say. “Getting the battle wounds and experience has obviously been our path and teaches valuable lessons that can be applied to any business. Working in the finance, sales, or business operations departments of a startup will most likely give you the best insight as to how the company runs and gets funds.”
Clair Byrd, partner at Wing Venture Capital, agrees — and even warns those interested in venture capital to stay away from traditional venture capital entry-level roles.
“Cut your teeth at a real, growing tech company before trying to hop into venture,” Byrd recommends. “There are so many folks who are scouting, working as associates, etc. who will have an incredibly challenging time ‘working their way up’ when in competition with peers who have real operating experience and technical knowledge and subject matter expertise for the same roles. But if you have startup experience, a technical subject matter expertise, and ties to the founder community, you will be in a much more advantageous position than just trying to go straight to venture after university.”
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Avg. Time: 5 to 6 hours
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Venture Capitalist Skills
VCs need a mix of hard and soft skills to succeed in the various functions of their role.
Hard skills like data and research help venture capitalists find new companies and decide which ones are right to invest in. Yet students who want to go into venture capital shouldn’t worry about learning traditional finance hard skills. Instead, Byrd thinks it’s better to focus on gaining various business skills at a startup in a relevant industry.
“You don’t necessarily need an Ivy League education in finance anymore,” Byrd says. “Venture firms are looking for leverage outside of their primary product (dollars) to differentiate themselves from other financiers. For example, many new investors were product managers at companies before making a move to venture. This skill set is valuable to VCs in a number of ways — the real-life experience building and selling a product/software creates greater understanding of markets and challenges getting traction in those markets. PMs can help founders make real tactical decisions about what they are making, why, and when — an ability folks with a traditional finance background might have less confidence in doing.”
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Working at a startup in any role can give you invaluable insight into how a startup works, from the work environment and types of resources needed, to challenges, goals, and more. For example, as a writer who’s worked at two different startups, I’ve experienced firsthand how startup teams are structured, how business decisions are made, and how goals are set. These insights would help me understand what to look for in a startup as a venture capitalist, and how to help nurture a startup within my portfolio.
People skills are another essential trait of a successful venture capitalist. Good people skills, including soft skills like collaboration, active listening, and communication skills, can help you better understand founders and their mission.
“Ultimately, VC is really about people and your ability to build and maintain relationships based on trust with many different types of people, during times of stress and uncertainty,” Byrd explains. “Good judgment about people, having high integrity, and being deeply reliable are the hallmarks of a great venture capitalist.”
Venture Capitalist Salary
VC firms make money when they sell a company or have it go public. When working for a VC firm, you may have a set salary, yet bonuses can fluctuate depending on investment success.
Overall, venture capitalists tend to make high salaries, even in entry-level roles. According to Glassdoor, the average venture capitalist salary is $119,000, with an average base pay range of $80,000 to $129,000 and average additional pay between $13,000 and $25,000.
|Total Average Salary
|$64,00 — $107,000
|$10,000 — $19,000
|$80,000 — $135,000
|$14,000 — $27,000
|$99,000 — $169,000
|$21,000 — $40,000
Despite these averages, venture capitalist salaries often aren’t standardized, and one analyst might make a lot more or less than another depending on the firm, what companies they invest in, and how their investments perform that year.
“While a career in VC can be lucrative, it isn’t ‘easy money,’ and there is a lot of risk,” Flood and Touwsma say. “We believe to be truly successful, you have to be passionate about the sector and be very focused on adding value to the companies you invest in, which goes far beyond the monetary investment.”
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