enture capital is about more than money. It is about building an ecosystem to support and develop startups. Is money is a prominent part of thi? Yes, but there are other functions that play an increasingly prominent part of the venture capital landscape. Venture capitalists are becoming far more than financiers. They are becoming recruiters, consultants, referral agencies and more. This is due to the stark reality that many of the best startups that are worthy of investment are so under-resourced that even with good funding, they cannot perform these functions alone.
In addition, even with a strong funding stream, they may lack the contacts and standing to access the additional non-financial resources they need. This means that there are now a number of excellent opportunities within the venture capital space for those who are not interested in becoming directly involved in investment decisions but still want to support entrepreneurs in building strong businesses. What are these opportunities? What is their strategic significance? What kind of a career path do they lead to? We shall explore these questions in this post!
The Traditional Venture Capital Career Path
The traditional, investment-centric career path in venture capital has a number of steps. A promising undergraduate will be hired to work as an entry-level Investment Analyst to crunch numbers, conduct industry research and provide support work including helping more senior personnel with due diligence. Pre-requisites are a strong academic record and preferably internships in related work such as finance or perhaps experience at a startup.
A grounding in business and finance along with strong communications skills is essential since much of the work in this role will involve interacting with entrepreneurs and venture capitalists. The age range is normally 22 to 25 with compensation between $60 to $100K. After a few years, top Analysts may be promoted, or leave for business school or a graduate degree of some kind.
The next step in the career progression is Venture Associate. Experience as a top Analyst or in management consulting, investment banking or product management is a pre-requisite for this role. There are essentially two types of venture associate roles: pre-MBA, post-MBA, or post-advanced degree. These types do not essentially differ as in both cases Associates do more work in sourcing deals and deal execution as well as meeting with entrepreneurs. They are also more actively involved in the due diligence process and help investors to make their investment decisions.
However, by dint of experience and training as well as a common language, Associates with a graduate degree will be more trusted to act as representatives of the firm and their opinions will have more clout with senior personnel within the firm who will likely have similar training. The age range is typically 24 to 28 for Pre-MBA Associate and 28 to 30 for Post-MBA Associates. The former can earn $150 to $200K while the latter earn $200 to $250K due to the premium for their graduate degree.
Successful Associates are then eligible for promotion to Principal after 2 to 3 years. In this role, they will manage a portfolio of investments, source new deals, and make investment decisions. They also actively work with startups to realize business objectives. Principals sit on startup boards and have more decision-making authority due to the equity their venture firm holds in the startup. In this role leadership skills come into play as well as the imperative to have a holistic understanding of business strategy in dynamically changing markets. The age range for Principals is typically 30 to 35 with total compensation ranging from $250K to $400K.
The final step in the venture capital career progression is to Partner. Partners control how the capital at the venture capital firm is invested. This requires a strong understanding of how the industry that is the focus of the firm’s investment thesis operates as well as having the contacts required to raise funds from investors.
They have excellent communications skills as they frequently make presentations at conferences and industry workshops. They are actively involved with boards, limited partners and general partners. The age range is at least mid to late 30s with total compensation of $400K to $600K for Junior Partners and $500K to $2 million for General Partners.
While each of these roles are distinct, they all entail a combination of excellent communications skills, financial modeling acumen, business strategy, industry knowledge, networking and politicking and the ability to earn and maintain the trust of wealthy investors. A passion for constantly staying up to date on rapidly changing technologies and markets is essential.
Venture Capital in the Information Age
There are a number of trends that are reshaping the world of venture capital. These trends are in turn leading to new roles within the venture capital industry. One of the most important trends is the growing importance of knowledge as a source of competitive advantage. According to IBM, knowledge is doubling every 13 months. There is now an ocean of data available from a wide variety of sources. For example, over the last 15 years, the volume of data has increased by over 70 times.
A single zettabyte is 1,000,000,000,000,000,000,000 (1021) bytes or about 250 billion DVDs. Due to this trend, the ability to make sense of this data and translate it into actionable business intelligence that is relevant to the fast-moving world of venture capital is critical. To adapt to this reality, venture capital firms are leveraging tools like Glean and Coveo. But more importantly, they are emulating their colleagues in Big Finance by making greater use of data scientists or “quants”. According to Damien Cristian of the data-driven venture capital firm Koble:
“By structuring massive volumes of information into usable datasets and pairing them with groundbreaking proprietary algorithms, we can transform the process of sourcing, evaluating, and investing in startups….For the first time, the underlying technological conditions are right for machines to beat humans at early-stage startup investing. By applying the same quantitative strategies that have disrupted public markets to early-stage startup investing, VCs can smooth the distribution of returns, creating risk-adjusted performance that crushes traditional human-centric funds….It creates a systematic and non-human startup investment process, evolving the asset class and unlocking massive value for founders, investors, and society.”
A position as a data scientist in venture capital will pay well as according to ZipRecruiter, the average salary is $110K but it can go as high as $207K. But what does one do in such a role? According to Pivotal Life Sciences, a health industry venture capital firm, Large Language Model/Generative AI Data Scientists play an important role on their Data Intelligence Team by supporting all steps of the investment process ranging from deal sourcing to exit.
Experience with the most recent large language models such as GPT-4 is essential along with expertise in AI platforms such as SageMaker and MLFlow as well as working knowledge of cloud computing systems such as Google Cloud, Microsoft Azure and Amazon Web Services. Finally, a knowledge of relational database architecture and data management through competence in SQL is key.
This position pays well with a salary range between $175K to $240K. But it highlights the increasing demands being placed on venture capital professionals as to be competent in the increasingly central arena of knowledge management they must have personnel well versed in the cloud, relational databases, AI, machine learning, statistics, and ideally the domain—in this case life sciences—to which those skills will be applied. It’s a tall order.
Financial Management
Aside from data scientists who work to manage the flood of information about markets and technologies and potential investment opportunities external to the venture capital firm, the internal operations of venture capital companies are becoming more complex. One of the critical aspects of the fact that venture firms are increasingly successful in raising funds with hundreds of millions of dollars is that this in turn makes it more challenging to manage their internal operations as they must keep track of the information about this funding and how it is being invested.
Financial management, reporting, and administration are all exploding in complexity—and this is generating demand for professionals in these spheres who understand how to tailor these disciplines to the specific dynamics of the venture capital industry. For example, venture firm B Capital, which was founded by Facebook’s Eduardo Saverin hires Finance Managers at a salary of $100 to $150K. The company has $6 billion in assets under management. The purpose of the role is to provide support for fund accounting, portfolio company reporting, quarterly and annual valuations as well as internal/external reporting. This becomes more complex as the number and size of the companies in a portfolio increases. While traditional roles in venture capital require a skill set that is more in tune with those of management consultants and investment bankers, this is a role designed for CPAs—those who are less about taking calculated risks and more oriented towards mitigating risks with strict adherence to rules and regulations. The job requires a professional who is proficient in auditing and public accounting, compliance requirements, the development of financial statements, and the mechanics of launching new funds to onboard service providers and open bank accounts.
This can become quite complex as each startup may have its own tools to help with finances so knowledge about these tools is also essential. What is imperative is that not all of the financial professionals in the venture capital industry work on the investing side but rather there is a growing body of financial service actors inside of venture capital who simply manage the immense amounts of money flowing through the venture capital firm.
Investor Relations
One of the most important trends in the venture capital industry is that firms are staying private for longer periods. In 1980, the median age of a company at initial public offering (IPO) was 6 years but in 2021, the median age had risen to 11. However, this is understandable as in 1980, the median market value of a company at IPO was $105 million but it had risen to $1.3 billion by 2021.
At the same time, between 1980 and 2000, the number of IPOs had declined from 6,500 to approximately 3,000. Companies are staying private longer so as to reap greater financial benefits when they finally do go public. This is especially true because of investor’s obsession with unicorns—companies valued in excess of $1 billion. A study of unicorn companies indicated that approximately 60% of them stay private for at least 9 years.
As the companies in a venture capital portfolio stay private longer, hiring practices are changing and there is a need for new kinds of personnel. Firstly, since companies are not accessing the immense amounts of capital in the public markets, they must make due with private capital. That places a premium on investor relations and maintaining strong communications with fund investors while also being able to get the word out about exciting companies so as to attract new investors to a fund and keep investors informed on fund performance so they will want to stay invested.
Investor Relations positions can be extremely lucrative. Andreessen Horowitz, a leading venture capital firm, offered one that paid between $250K to $300K. The role entailed actively working on account management with limited partners across numerous funds including bio/health, games and seed. It was a senior role requiring a professional to directly work with finance, legal and compliance teams to coordinate capital formation and investor relations activities at the venture firm.
Activities included the design and production of financial analyses to support investor communications; responding to LP data inquiries/information requires; crafting private placement memorandums, due diligence questionnaires and presentation materials; and the synthesis of varied data sources to build a comprehensive narrative around fund performance.
The skills required are considerable as they include at least 7 years working in finance in a similar role but not necessarily related to venture capital; an orientation for detail especially with regards to spreadsheets, written documents and visual presentations; teamwork as investor relations requires collaboration across many different segments of the venture firm; and above all else the demonstrated ability to tell a story with data. This final point is critical.
Almost all of the new roles in venture capital are not just about interpreting data but also require the capacity to demonstrate what the data means so that one can sell the startups generating it as well as highlight the success of the venture firm. An underestimated part of what all stakeholders in a venture firm do is marketing.
Community Management
Also, due to the fact that firms are staying private longer, it is imperative to maintain stability amongst the coalition of stakeholders that are working to build value at the startup. These stakeholders include founders, employees, investors, suppliers, and board members as well as others of strategic importance to the long-term viability of the enterprise. This work is done by a new type of venture employee known as a Community Manager. The Community Manager facilitates connections between all of the stakeholders in the startup and provides them with the resources that they require. They promote collegial relations. This can be done by organizing social events and helping them to connect in whatever way they would best like.
Community Managers can earn a surprising amount--$140K to $160K. The core of the job is relationship building so the capacity to organize events while being responsive to the needs of varied personalities is essential. Since “building relationships” is somewhat ambiguous, the job also requires a doer who is able to identify where there is a need and engage proactively to address it. Strong communications skills are a must. However, technical skills are also required as customer relationship management (CRM) tools are actively used in this role.
The job also entails the curation and development of asset events such as webpages, invitations, presentations and the like as well as the distribution of materials to stakeholders within the organization’s portfolio. In addition, the job is probably best for those who have a strong grounding in a particular locality since knowing the best dining spots and having relationships with vendors for catering and restaurant venues will come in handy. Ironically, as the venture capital industry evolves and advances, greater demand is being generated for professionals who operate at what might be considered the lower end of the spectrum.
Recruitment
Venture capital firms provide far more than financial capital to startups. They now play a critical role in the human capital and talent management decisions of their portfolio firms. This is not just a nice-to-have capability but an essential one that the top startups will be seeking. Indeed, 80% of a company’s value creation flows from its intangible assets, most notably talent.
Startups looking to position themselves for long-term success want access to a rich network of highly talented and experienced professionals outside of their network who have been vetted by reliable actors who understand what is required to succeed in the dynamic world of startups. Having a strong talent department is now critical to the competitive advantage of the best venture capital firms.
This function extends beyond making recommendations and includes assisting startups in learning the art of recruiting and interviewing, particularly for technical roles which can be quite challenging to vet. A great venture capital investor does not just write a check but rather is a partner over the lifecycle of the firm from seed investment to exit. To ensure that this partnership succeeds, they will be actively involved in solving problems and increasing value for the startup. Both of these processes are people-centric.
The better the quality of the people that are hired, particularly at the earliest phases of the firm’s development, the greater the capacity to meet the challenges that the startup will face. The firm will be required to make a pivot to address a new technological disruption in its target market. This will require a constant renewal of engineering and product design capabilities. Still, no matter how good the product or service that it has developed, the firm will also need great salespeople to convince customers to buy it. Part of the reason that 9 of 10 startups fail is not just the power of entrenched competitors, it is because of how difficult it is to compete in rapidly changing markets which in turn require new skills and capabilities to adapt to meet those changes.
A great talent department at a great venture capital firm can be essential in addressing this issue. This is especially true because venture capitalists don’t just invest in one firm in a particular market segment, they have a whole portfolio of investments in an industry. If one company is no longer viable, they can connect the personnel of that company with another growing company and they can either collaborate or employees can choose to leave to pursue a better opportunity at a firm within the portfolio. The key is that the overall network of the venture capital firm with regards to talent is typically larger and more robust than that of a single startup.
A Talent Associate in venture capital can expect to earn $90K to $125K. There is a bias towards human resource professionals with a background in finance or startups but specialized venture capital firms such as those in the life sciences will naturally seek professionals with a keen understanding of the relevance of scientific training means for the firms in their portfolio.
Responsibilities include screening, interviewing, evaluating, and negotiating with potential employees while also interacting with the senior leaders who will make the final hiring decisions. Since equity is often a part of compensation, an understanding of how to structure and negotiate such arrangements is essential. Likewise, active involvement in client meetings is a consistent part of the role. This is a job that is on the cusp of the general revolution in human resource management as it demonstrates the increasing skill and aptitude required to succeed in this domain.
Public Relations
Marc Andreessen. Vinod Khosla. Peter Thiel. Venture capitalists are becoming rock stars. A simple investment by the right firm or individual can have a dramatic impact on the fortunes of a startup by changing how it is perceived in the eyes of the market. Indeed, it was because Theranos and FTX had so many high-profile investors that they led so many to ruin. The point is that public relations and communications are more important to both startups and venture capital firms than ever before because in a very real sense: image is everything. Guarding a positive reputation and cultivating a good one is absolutely essential to the long-term viability of a firm particularly as it approaches a liquidity opportunity or exit. There are few things worse than bad press before an IPO.
Just as we are generating more information than ever before, so too we can distribute it in more different ways than ever before. Books, newsletters, podcasts, YouTube videos, webpages. Moreover, we are not restricted to mainstream media but there are a whole host of alternative media venues that have increasing sway particularly with younger populations who are adept at accessing them. This function is increasingly too important to be outsourced especially because venture capitalists want the freedom to establish their own brand and distinctive voice as investment professionals. A good public relations team at a venture capital firm can help it to build trust. In all financial services industries, trust is essential but this is especially true with a high-risk business such as venture capital.
The ability to curate and shape the message of the firm so as to effectively target its desired audience while building trust with them is essential. This is true not only of well-heeled investors but more importantly of the talented entrepreneurs who determine whether or not a venture capital firm can succeed. Knowing how to be visible to one’s target audience is a key part of attracting support from the startup community.
They need to believe in the venture firm which means that the firm must articulate an appealing message that is anchored in the facts of how it has delivered value for the startups that collaborate with it. Finally, crisis management is in increasing demand which makes public relations essential. This is especially important for startups and venture firms in the life sciences space or anything involving safety wherein human lives are at risk. It is imperative to have staff on hand who can respond immediately to craft a message to mitigate or minimize the damage of an accident or drug with unexpected side effects.
One of the most important benefits of a venture capital firm public relations role is that it can help the firm to establish itself as a thought leader in its industry. By publishing articles with important insights, making venture capitalists aware of the best conferences to attend and panels to present at as well as where to go to get their name and that of the firm in the public eye, public relations professionals can enhance the brand of the venture capital firm. This is essential for its long-term viability. Likewise, they play a critical role in marketing the startup before the IPO by generating a positive public image with potential investors.
Public Relations salaries can be on a par with those of Partner salaries at venture capital firms. The Head of Communications for a healthcare venture capital fund on LinkedIn, pays $400K to $600K. Although a scientific background is not required, candidates with a background at a large pharmaceutical firm or consulting and financial services are preferred. The role entails a great deal of social media management and strategy as well as the writing of press releases and collaborating with portfolio managers to tell the story of their products.
As the venture capital community evolves, so too opportunities are expanding within it that extend far beyond the traditional realm of investing. Venture capitalists are no longer just financiers. They are ecosystem builders and as it takes longer for those ecosystems to mature to make exits profitable, more is being required of the firm. They must manage larger and larger amounts of data so they need data scientists. They must coordinate stakeholders for longer periods of time so they need community managers.
They are managing almost gargantuan sums of money so they need excellent investor relations personnel and financial managers to ensure regulatory compliance. The need for talent is always essential. And the ability to tell a story about the companies in the portfolio and the investors is more important than ever before so public relations is central to what VCs now do. The venture capital industry is exploding in complexity but this is creating opportunities for many new types of professionals to join this dynamic business.
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