Getting a Job in VC

First, bone up on what venture capital actually is -- entities directly investing capital into private companies for equity. Second, give yourself an overview of the universe of firms that might be doing venture work: Private partnerships and small, incorporated entities (prestigious and sexy, they give the industry its reputation) Divisions of major corporations Affiliates of investment banks Publicly held venture firms Venture capital funds formed by banks Venture leasing companies (they take equity in return for a lower rate on leased equipment or real estate) Direct investment activity by insurance companies, pension funds or investment advisory firms. SBIC's (Small Business Investment Companies). These are privately capitalized venture capital firms, which are eligible to receive federal loans to augment the private funds invested in them. SBIC's are privately managed, but are licensed and regulated by the Small Business Administration. Third, make sure you have a good handle on the the required skill set for a venture capitalist. Some of the skills mentioned here are not required of those in junior positions, but you will be evaluated on your ability to develop these skills over time.

Schmoozing : A skill used to find deals first and to get into the hot deals everyone has already found. Also needed when

doing due diligence on a company and its market -- you must find the sources of information you need and then extract the appropriate information from those people. A good network is a big success factor in any industry and that may be doubly true for venture capital. Consulting : You have to give superior strategic advice to your portfolio companies in the areas such as management hiring and firing, competitive positioning, technical and financial strategy, alliances and partnerships, and product mix. Your advice is supposed to be one of the big "value-added" features of taking a venture firm as an investor. Financial Guru : A venture capitalist advises an entrepreneur on financial strategy, works with I-bankers when an IPO rolls around, and manages his/her own funds. Fourth, figure out what job you might be qualified for.

Analyst/Associate -- Entry Level: If you were coming out of college and have little experience in the working world, this is how you start. Some firms call the entry level job "Analyst," some call it "Associate."

Associate/Senior Associate/Principle/V.P. -- Partner track If you have industry experience (e.g. telecommunications, medical devices, consumer products) and have your MBA, this is what you're shooting for. This position is often considered "partner track." An MBA is almost always a pre-requisite. The most important attribute is to show you "get it." If you don't know what we mean by "get it," then you probably don't. Good networking

skills are also key.

Junior Partner/General Partner This position enables you to make investment decisions. It is only conferred on those who have very deep industry experience or those who have shown they can make such decisions at another firm. A good set of golf clubs is a pre-requisite.

Managing Partner Big Dog. Raise your own fund and start a firm. Fifth, look at the numbers. There aren't many positions available, and the ones that exist are hard to find. Why? The venture capital industry is made up of only several hundred small firms (each consisting of between 2 and 40 people). People don't generally leave venture capital once they are in it. It's too much fun spending money on the latest ideas, working with highly motivated and intelligent people and the latest ideas, and giving yourself a chance to make lots of money. The Old Boy's Network is in full force in this corner of the economy. With demand for these jobs as great as it is, people usually keep quiet about who's looking so they aren't innundated with applications.

So how big is the industry exactly? No one knows, and the number changes depending on what you call a "Venture Capital" firm. We came up with the following estimates for the number of positions nationwide in the industry. Associates (entry level) : 150-200 Senior Associates (partner track): 100-150 Partners: 2,000 Firms: 600
(editor's note, c.smith, 10/20/00: these are dated numbers)

How did we come up with these figures? The most authoratative source for companies of the types listed above is Pratt's Guide to Venture Capital Sources. You should go visit it in the reference section of the Cole Room. They show 810 such firms. But if you call those 810 firms, you'll find out about 20% are out of business and another 20% are in the process of going out of business. So that leaves us with about 480 firms. However, some firms aren't listed in Pratt's because they are new and haven't gotten on the ball to get listed. And some firms simply don't want to advertise themselves at all. In short, we estimate that there are about 600 entities in the U.S. that are engaged in directly investing capital into private companies. Pratt's also lists 3,000 principals, or partners, within these 800 firms. The National Venture Capital Association's membership list includes 1,200 principals. From these two data points, we estimate of 2,000 active venture capital partners in the U.S. Estimating the Senior Associate and Analyst/Associate numbers is more difficult because the turnover at these position is rapid (2-4 years). Our educated guess is that there are 100 Senior Associates

and 150-200 Analysts/Associates nationwide.

Trends
Organizations such as Venture One, Venture Economics, and the Venture Capital Journal provide a great deal of analysis of the macro trends in the industry -- how much capital has been invested in VC funds each year, how much was deployed from those funds into companies each year, into which areas of the country and into which industry segments was the money deployed, what have the rates of return on those investments been, etc. But very little is known about the personnel issues within these firms, and even less is known about what goes on in the junior ranks. Capital Venture is better positioned to know about the junior ranks than anyone else, and we still don't have a firm grip on the trends. Let us suggest two such trends. The number of "non-partner professionals" in VC firms is growing around 5-8% per year. Why? Partnerships are recognizing they need to process more deals in order to continue to produce high returns in an increasingly competitive environment. Junior members are an efficient method of leveraging Partners' time. The average age of these junior professionals is increasing. VC firms are recognizing they can get experienced entry-level people for the same price as they need to pay recent college grads. Why? After learning something about the business world, many young people decide venture capital is the place to be and are therefore willing to take a pay cut for entry into the club.

Tips on actually finding a job.

Where are these firms? The very prominent and traditional venture firms are located in San Francisco and Boston. New York tends to have later stage, lowertechnology firms with more capital deployed per transaction, and, as a venture capital city, follows closely behind the top two. Chicago, Philadelphia, and Los Angeles are the next tier but also very strong. Most larger cities have at least a few firms that place themselves in the venture capital category.

As you go looking for a job, we would suggest not overlooking the less prominent, less competive areas of the industry. Why? 1. 2. 3. It might be easier to get a job. The day to day job is the same or better (because you'll end up doing more). Quality of life will be higher in the form of lower pressure and less constraints on your behavior.

On the other hand, working at the most prestegious firms gives you: 1. 2. 3. more job opportunities down the road. higher name recognition. a better platform from which to meet people in the industries

you follow, 4. and you get a front row seat on how the best minds in the business think.

Don't forget to look in geographic locations with high entrepreneurial growth like Minnesota, North Carolina, Texas, Utah, Colorado, Washington state, Pittsburgh, Atlanta, and Washington DC. The growth of their venture capital communities are not far behind the rise of their entrepreneurs, and you can get in on the ground floor. Don't only target the high-prestige, private funds. Also look at university funds, SBIC's and venture divisions of corporations as good places to start. If your goal is to eventually work for the better known firms, your best bet might be to pursue the lower profile firms, prove yourself for a few years, and then move back up to the "big leagues" later. There are many small organizations investing funds that no one finds out about. Here's one list we found for the Pittsburgh area on the WWW: ALCOA/Advent Venture Capital Fund: 1501 Alcoa Building, Pittsburgh, PA 15219. Tel:412-553-2982 APA/Fostin Pennsylvania Venture Capital Fund: 5 Radnor Corporate Center, Suite 470, Radnor, PA 19807. Tel:215687-3030 C&L Ventures: 1910 Cochran Road, Pittsburgh, PA 15220. Tel:412-341-1144 CEO Venture Fund: 4516 Henry Street, Floor 5, Pittsburgh, PA 15213. Tel:412-687-3451

 Fostin Capital Corporation: 681 Andersen Drive, Pittsburgh, PA 15230. Tel: 412-928-1400 The Loyalhanna Funds: 681 Andersen Drive, Pittsburgh, PA 15230. Tel:412-928-1440 Pennsylvania Growth Fund: 5850 Ellsworth Avenue, Suite 303, Pittsburgh, PA 15232. Tel:412-361-0500 Pittsburgh Seed Fund: 4516 Henry Street, Pittsburgh, PA 15213. Tel:412-687-5200 PNC Equity Management Corp.: One PNC Plaza, Floor 19, Pittsburgh, PA 15265. Tel:412-762-8892 Point Venture Partners: 2970 USX Tower, 600 Grant Street, Pittsburgh, PA 15219. Tel:412-261-1966 Robinson Venture Partners: 6507 Wilkins Avenue, Pittsburgh, PA 15217. Tel:412-661-1200 Stonebridge Partners: P.O. Box 512, Washington, PA 15301. Tel:412-223-0707 Wesmar Partners: 3 Gateway Center, 16 South, Pittsburgh, PA 15222. Tel:412-392-2350 Personality: These firms are typically very small, high pressure partnerships where the combination of personalites is critical to the success of the firm. Personality is as important as relevant skill sets. Networking: Ultimately, this is the key in every industry. It's the same in VC, but more so. Building contacts in the industry is key to finding and keeping a job.

International: Point blank, except perhaps in Western Europe and parts of Latin America, there isn't much outside the US that resembles American venture capital. Why? 1. 2. The US has a uniquely robust IPO market which gives the a VC an efficient way to exit an investment. The US has a robust legal infrastructure which facilitates creative, fast and binding arrangements between business entities such as a venture capital firm and a small company. In Asia, long term realtionshps pervade, and in Europe, government regulation of business activity dampens venturetype activity. Only in the US are the public markets so sophisticated and efficient that investors are forced to look to private capital markets (venture) for high returns. The capital markets in most nations are not so efficient that they need expert intermediaries to help direct capital investment into earlier stage companies. In other words, the venture-type thinking in most countries is still done in their fledgling and poorly analysed public markets. The US continues to hold the lead in medical and information technology. In many contries, government regulation intended to protect investors from charlatans also constricts venture-type investment.

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