Definition of Venture Capital: Venture Capital is a form of financing offered to early stage, high growth potential companies in exchange for equity (i.e., ownership in those companies).
Venture Capital firms raise money from Limited Partners or LPs (such as pension funds, endowments, and family offices), then aim to grow their portfolio companies and eventually exit via acquisitions or initial public offerings (IPOs).
Since the risks are so high, VCs expect the majority of their investments to fail. But if they find the next Google, Facebook, or Uber, they could earn exceptional overall returns, even if 90% of their portfolio companies fail.
VC firms are often categorized based on their investing stage, industry focus and strategy. This results in myriad opportunities for firms to carve out their own niche.
Ranking VC firms is hardly an exact science. Nevertheless, here are 9 of the top VC firms based on the number of prominent partners in the global top 100 in recent years (source: CB Insights).
Bessemer Venture Partners
Venture Capital Professionals allocate their time between sourcing deals and helping their portfolio companies grow. The job can be divided into these 6 functional areas:
Keep in mind that the structure of VC firms varies a lot, so the titles are less standardized than in the investment banking career path or the private equity career path. That said, a “typical” hierarchy looks like this:
It’s very difficult to break into venture capital directly out of undergrad, and even if you have the perfect academic background, it’s not necessarily a great idea to do it.
To be useful to a VC firm, you need some full-time, real-world experience and at least the beginnings of a professional network. Professionals usually enter the industry at one of three stages:
For more information on Venture Capital Recruitment, check out How to Get into Venture Capital.
Unlike with investment banking, formal case studies and modeling tests are not that common in VC interviews; you’re more likely to get into a deep discussion of your investment ideas.
Nevertheless, careers in investment banking and private equity are often stepping stones toward a career in venture capital. In addition, certain soft skills such as networking are an invaluable asset in the Venture Capital space.
Some of the relevant courses offered by Mergers & Inquisitions and Breaking Into Wall Street to support a VC career path include: