When Bill Gurley graduated, he wanted to be a venture capitalist. He went to New York for the first time in his life -- to beg for meetings with venture capitalists and was told “Don’t even think about it kid. Go work for 20 years, and then come back.”
There is no straight career path into venture capital.
Gurley stuck around in New York and went on to become one of the biggest sell-side analysts on Wall Street, quickly narrowing his focus to “this thing called the Internet, which no one knew anything about at the time.” Microsoft founder Bill Gates recommended Gurley for his first venture job with Hummer Winblad. Gurley jumped at the opportunity, and said yes before even hearing the entire offer. Today, Gurley is a General Partner at Benchmark capital, one of the Silicon Valley's leading venture firms.
In any venture firm, the cast of characters includes the General Partners (GPs, managing directors or managing GPs), vice presidents, principals, associates, and analysts. Investment professionals are responsible for making investment decisions, managing the portfolio and generating returns. Associates and analysts often support the lead investors in due-diligence or portfolio monitoring activities and eventually rise up to leading investment decisions. The primary responsibilities of the investment team differ along the lines of seniority. On any typical day, the GPs would juggle a number of activities: negotiating terms for investment opportunities, participating in boards of current portfolio companies, responding to any LP/investor requests, and putting out a few fires along the way. On the other end of the spectrum, an entry-level analyst is expected to source investment opportunities and screen these for further deliberations. Roles such as Venture Partner and Entrepreneur-in-Residence positions are created to host proven entrepreneurs. Such professionals may source investments that fit within the fund's investment strategy, or offer sector expertise to assist other partners in making decisions. Newer titles have evolved as fund operations have become more focused. For example, in larger funds, roles such as ‘Director of Business Development’ or ‘Head of Deal Sourcing’ have emerged. For each of these positions, the entry points and tactics vary.
After spending two years in the investment banking industry, Daniel Axelsen moved to NEA on Sand Hill Road where he is focused on enterprise software investments. “Having worked on some major acquisitions, such as 3PAR’s acquisition by HP, I acquired a strong set of skills in industry analysis and financial modeling” he says. Daniel has honed his expertise further to seek investment opportunities in evolving markets. He has dived into the early stage universe and speaks fluently on trends such as cloud computing, security and bitcoin trends. “I was stunned to see how hard working most partners are at our firm” he says. To newcomers seeking to dip their toe in venture capital, he says, “You have to prepare for a set of radically different tasks each day. Don’t let anyone tell you this is easy. And you learn quickly to not take the first opportunity that walks in the door, but rather analyze the universe for the best.” Getting into a Sand Hill Road firm takes a bit of luck, experience and skills – Daniel was able to score a position with a top tier venture firm. (Daniel is now a Principal at Vy Capital, a Sand Hill road VC firm)
Yet for others, the challenges of getting in can be significantly higher. Take the example of a pre-MBA analyst position posted at Bessemer Venture Partners, one of the longest-standing VC firms in the country (the firm started in 1911). More than 650 resumes, 42 first-round interviews, and 7 second-round interviews later, one offer was made. That's about 0.15 percent odds for an entry-level position! Such odds are daunting for any aspirant. Yet other positions on LinkedIn attract a large number of applicants, as many as 300 for each position. Brant Moxley, managing director at Pinnacle Group International, an executive recruiting firm that focuses on private equity and venture capital career opportunities, says, "The demand is staggering—there are ten times the number of applicants for every job opening in the venture capital arena. Strong operating experience, demonstrated technical and financial skills or experience in the investment banking business may also be a badge of honor at the entry level. What I find fascinating is while everyone wants to get in the business of venture capital, not many understand what it takes to stay in the business."
Cold calling your way in
John Doerr of Kleiner Perkins Caufield & Byers (KPCB), once remarked “I cold-called Silicon Valley's venture groups, hoping to apprentice myself to one." His cold-calling efforts did not get him a job at KPCB, but eventually, after five years at Intel, John would land at this firm. Brooks Byers, who had asked John to get some experience, famously invited John Doerr for a 5:30 A.M. jog to see how motivated he was. John was at the track the next morning and landed the role.
Like Doerr, Robert Nelsen chased Brooks too, but found his calling elsewhere. "I remember cold-calling Brook Byers, founder of Kleiner Perkins Caufield & Byers (KPCB) about a hundred times ... I was always interested in venture capital," says Robert ("Bob") Nelsen. Nelsen went on to be the co-founder of ARCH Venture Partners, which has now grown to manage $1.5 billion in assets. In his 20-year investment career, Bob has led nine companies to valuations of $1 billion or more. "Venture capital was my first career choice. I got a guide—this Pratt's Guide to Venture Capital Sources—to find out about this business," he says. In his first year of business school, Bob read about the launch of ARCH and approached the founder, Steve Lazarus. "I told Steve I would work for him for free." Nelsen started with ARCH as soon as he finished college.
"Back in the 1980s, I heard once that all venture capitalists operated from 3000 Sand Hill Road," says David Cowan. The ultimate Mecca of any wannabe venture capitalist, Sand Hill Road is a small strip that houses venerable names in the venture business: Kleiner Perkins, New Enterprise Associates (NEA), Sequoia, Draper Fisher Jurvetson (DFJ), Battery Ventures, and Canaan Partners. David, who had a brief two-year stint at Oracle, was eager to explore possibilities in the venture universe. One fine afternoon, he drove to Sand Hill Road and walked unannounced into one of the venture firm's offices. The lady at the front desk was firm: "No, we don't have any openings." But David persisted. "I am sure you know a few firms who would be looking." The lady pulled out a copy of the Western Association of Venture Capitalists directory and circled a few names. "I wrote letters to five firms. Two of the five offered me a position," recalls David, who has been with Bessemer Venture Partners, for over twenty years.
Cold-calling a VC firm rarely works—especially in the modern day. "I don't think that approach will work today—the business is much more complex and competitive," warns David. What may work is likely a web presence. Famously, Union Square Ventures recruited a two-year rotational analyst position by not seeking resumes but asking for "web presence." Union Square defined web presence as "anything accessible via a URL. It could be a blog, a social networking profile, a portfolio, a company, a social bookmarking archive ... it is whatever you think best represents who you are online." At the entry-level position, differentiators can be few and competition fierce. A web presence can be a head start in building your path into a venture career.
Candidates often underestimate the power of internship opportunities. Many practitioners would be open to a thoughtful email or a call along the lines of “Hi, I am graduating next year and wanted to explore a summer internship. I have studied your investment thesis and have identified a few opportunities that may be of interest. Let me know if I can come by and discuss these.” That kind of an opening gambit is bound to get a response. These few links may provide some fodder for hunting suitable opportunities in the promised land of venture capital -
So what does a VC do exactly?
A typical VC’s responsibilities or a position description often reads as follows:
Key tasks and responsibilities: Participate in and contribute to all aspects of the investment process with responsibility for all quantitative and qualitative analysis of portfolio companies and funds
- Analysis: Qualitatively and quantitatively evaluate potential transactions including performing detailed sector and company research and analysis. Conduct due diligence and assist with deal execution and transaction management. Carry out portfolio company analysis including valuations and financial modeling. Prepare materials for Investment Committee and other internal meetings. Interact with external consultants and advisers as required regarding analysis. Assist with closing administration
- Structuring and Execution: Participate in the development of appropriate deal structures in close liaison with legal team. Work with the legal team to prepare and coordinate the execution of agreements, offer letters, purchase agreements and other legal and transaction documentation.
- Post-Investment Monitoring: Familiarity with Board member roles and corporate governance. Keep up-to-date on portfolio performance and address any specific requests for action or approval. Prepare returns forecasts, commentary and other investment information for limited partners meetings.
- Deal Sourcing, Marketing and Fundraising: Conduct desk research for marketing, deal sourcing and fund raising. Build strong relationships with GPs /Investors /Consultants /Advisers. Undertake warm/hot calling and cold calling (all usually as part of a team focused on a specific geographic area, industrial sector or transaction type)
- Skills: Solid knowledge of relevant (Healthcare, Energy, Technology) sector. Transactional experience and analytical abilities. Advanced financial, business modeling and writing skills
- Competencies: Results driven, ambitious and highly motivated. Strategic and commercial acumen. An entrepreneurial approach, initiative & adaptability. Team player with a strong work ethic. Well informed on market trends and key players. Excellent networking skills
Do a quick self assessment and ask yourself if you can impact at least 3 responsibilities mentioned above. And know that this is a relationship business - VC firms are small shops with typically a handful of people working very closely. Chemistry matters. Especially for senior positions, it's important to engage early with the firm and be prepared for a longer path.