In this article we will discuss the often posed question of “How to become a VC“. And let’s be honest from the start, becoming a VC is not an easy task.
First of all, there is no “official education“ for future Venture Capitalists. Even the experiences of today’s VC investors, founders and partners tell us that sometimes “climbing through the window” is the only way into the VC world. For instance, the case of Jan Garfinke who had over 20 years of experience in successful med-startups, taught us that founding your own VC firm may be an easier task than landing a high-position job within an existing one.
As a matter of fact, most VC professionals would agree that there is no straight path into the VC business. However, we could set up some general prerequisites or steps, if you are thinking of pursuing the VC career.
How To Become a VC: The Potential Steps
Knowledge of VC Operations
The in-depth knowledge of the VCs main processes, activities, goals, structures, problems etc. is crucial. Simply, knowing the VC business would definitely help you in gaining and shaping experiences matching their activities and processes. And having such development path prior to your first attempt of entering the VC industry could actually land you the first VC job.
Business School Background
Naturally, having a top university and business school background (i.e. Ivy League), majoring in Economics, Finance, Business Management etc, is always a good start. It will equip you with both general knowledge and more specific business set of skills through highly reputed internships. And if those internships are done in VC firms, you know you are definitely on the right track.
The Startup Apprenticeship
A well shaped experience in startups is extremely important. Being a part of a successful startup or two will bring you in close connection with your investors- VC funds. Hence, through this close-cooperation you would not only gain invaluable insight into the VC operations in terms of deal sourcing and investing (your startup is going through this exact process), but you will also build relationships which could help you enter the next VC firm.
There are two levels at which we can see the startup step as beneficial and invaluable. On the one side, the aspiring VCs who shape their experience by being a part of several industry-diverse, successful startups will acquire knowledge and develop expertise in various fields. As a result, these VCs often turn out to be great investors since they have a wide range of industry expertise and are very analytical.
On the other side, if you are the founder of a successful startup, you will have the advantage of strong established networks (former employees and investors). In addition, you will be able to easily bond and “groom” the young entrepreneurs as you already walked their path. And finally, you will be considered an “expert“ in your industry field and therefore seen as a valuable addition to the VC team.
To conclude, both options have their strong points and there is no right or wrong choice here. However, one thing is certain, the step in a startup direction will definitely lead you a step closer to entering a VC firm.
Gain Experience In Consultancy Firms
Having experience in business consultancy firms as business developers, financial analysts or similar could also come in handy. For instance, here you would definitely gain experience in regards to assessing the business plans from various perspectives. This could prove very useful when aspiring to land a job as analyst/associate or even principal in a VC firm.
Alternative way to become a VC: Raise Your Own Fund
As we elaborated above, there are various steps you could take in order to enter the VC business. And depending on your development path, you could land an entry or higher level position job. However, this is not a given.
Even if you go through all of the hard steps, polish your CV and look like an ideal candidate for a VC position, you still may not get it. Sometimes, the only way to become a part of this world is to raise/start your own fund. And here, a whole new level of challenges await you.
First of all, without a proven record, gaining trust of LPs in raising your fund is going to be difficult. You have to think long and hard on the approach, the investment thesis and how you will “package and sell” your VC product, as VC fund is a product after all. Furthermore, you will have to prepare for substantial investment yourself, and have much more “skin in the game” in terms of the % of the total capital invested. Finally, with all the enthusiasm and knowledge you may possess, you will need to arm yourself with plenty of patience. Simply, finding and recognizing the unicorn in the startup environment is close to finding a needle in a haystack…
What is the right path to become a VC?
The answer is simple, there isn’t one. There is no right, set and paved road to entering the VC world, but rather a wide variety of approaches you could consider.
Although we cannot help you further with schooling and startup/consultancy firms’ experience, we can definitely help with the first step. A place where you can get a great insight into the VC business operations, requirements, and necessary tools, whether you want to land a job or start your own fund is our e-book: VC Journey Explained. And it can definitely shed some light on how to become a VC.