What it’s really like to be a Venture Capital Associate
5 min read

What it’s really like to be a Venture Capital Associate

We asked a Venture Capital Associate at a top firm for honest responses to our interview questions. They didn’t disappoint. Find out what they actually do, get some insider secrets and tips on how to get a role in the industry.
What it’s really like to be a Venture Capital Associate

What do you tell people you do?

I tell them that I do deals.

I tell them that the partners in my firm really respect my opinion.

I tell them that founders call me up for advice.

What do you really do?

I really do all the grunt work behind the scenes, but don’t actually negotiate terms or have any say on the investments my firm makes. I don’t DO deals. It’s really training to one day do deals. The “grunt work” falls into four main categories:

  • Sourcing: Building a long list of companies in our investable universe and trying to put some structure around which ones might make promising investments. This database is one of the main assets of the firm (if done well) yet you will get no credit whatsoever for putting it together well.
  • Due diligence: To the degree to which we do any proper due diligence (the market moves so fast now) and we don’t outsource it, due diligence falls onto my plate. That means sending data requests, looking through data rooms and trying to determine whether there are any major red flags on a potential investment.
  • Ad-hoc analysis: If there is any request from a partner, fund investors or founder in our portfolio to do analysis, I’ll be the one doing it. Similar to due diligence but in respect to a specific question someone has had. Usually they are questions on market sizing, competitor analysis, go-to-market type stuff.
  • Reporting: The fund needs to report to investors on it’s position and I’ll be the one putting this together every month (there are also ad-hoc requests here). The best amongst us have done this so much it’s a well known process now (except for the ad-hoc requests, which can be fiddly).

So usually thankless jobs trying to gain experience in the industry. NOT doing deals.

💡
Pro tip: it would be very smart of you to join my free email list and I'll send you my five best tips that will turbocharge your personal and professional trajectory.

What is the biggest misconception about the role?

People think it’s a lot more exciting and glamorous than it really is. They seem to think that there is some magical moment that happens when a startup raises money. Unicorns fly and angels sing. It’s just paperwork and a bank transfer, kind of like going to the bank for a loan. But it’s equity, in a startup. Doesn’t magically make it anything more than a vanilla financing.

Why do most people get into this role?

Mostly for the money. They want to work their way into being a General Partner at the best VC firm in the world and make millions or billions by investing in the next mega corporation. It’s smart because once you invest you don't really have to do all that much, and you can make lots of money with relatively little effort and risk to your own money. Others will tell you it’s to make a difference and an impact in the world, but if that were actually true would they charge a 2% management fee and a 20% performance fee?

How do people typically enter this role?

I’d say it’s evenly split: 40% come from an investment bank, and 40% from a startup. The rest is probably 10% consulting and 10% other backgrounds.

Most firms have their preference, with some recruiting exclusively from investment banks and others exclusively from startups. This usually tells you a lot about what type of firm it is.

What three main skills do people need to bring to this role?

Skills you need to get it:

  • VC specific: You’ll need a working understanding of the economics of a VC fund, portfolio management, governance, reporting and the like.
  • Deal specific: You’ll need to understand the mechanics of a deal, know your way around term sheets, cap tables and various other deal mechanisms.
  • Market and company specific: You’ll need to understand the dynamics of different markets, how companies work (both customer facing and behind the scenes), the key value drivers of industries and companies or how to figure them out, and how to do due diligence on companies and people.

This is plenty enough to make you dangerous as a venture capital associate. Networking and charisma are needed down the track.

What opportunities do people typically get after this role?

There are four that matter:

  1. Move up in the firm,
  2. Move to a different firm for a better opportunity,
  3. Start a company, or
  4. Join a startup.

Of course, a lot of Venture Capital Associates wish that they would get an opportunity to start a fund of their own off the back of this experience. I excluded this from this list as it is unlikely someone with this level of experience will be able to raise a fund.

🚀
Just quickly: Want to learn about five quick, easy and high-impact ideas you can use to achieve your career goals? You can just by joining my free email list.

What did you least expect in this role?

First, how simple and unremarkable the venture capital business is. You can run these with a tiny staff, a small back office and it’s just getting capital in and sending capital out then charging a fee on it. The second is related to this, it’s just how incentivized a fund is to deploy capital. With most funds, once they deploy they can start charging management fees. This can become quite desperate, it’s insane. Note to self: do serious due diligence and structure it right if I ever invest any money as a Limited Partner.

What’s the most frustrating part of the role?

Not being listened to, especially when I have a unique insight and I know a company provides a really asymmetrical risk-return profile. They aren’t all winners for sure, but I do get to see the market from a unique perspective and get access to a lot of information.

What would only other people who do your role know about it?

You are only friends with other VC’s based on circumstance (if their interests align with yours) otherwise try to keep business and friendship separate. There can be some sharp elbows.

What would the haters say about this role?

That you’re a glorified analyst. A desk jockey with a fancy business card.

What advice do you have for people considering this role?

I mean, I’ve tried to be honest and try to really show you the behind the curtains look so you can save some time figuring it all out for yourself. Then use the information to do good things in VC and the world by avoiding or deleting the nonsense. All that given, it’s a fantastic job and I’m really lucky to have it. I’ve had worse jobs and never a better one. I guess I was just a little jolted by what the industry is actually like. Still great overall.

What’s the funniest thing that’s happened to you in this role?

I have a childhood friend (pre-VC) with a successful startup. A few years ago an investor pulled a term sheet on him at the last minute. The faux pas type of pulling a term sheet. It’s now funny to see this investor going around town, unaware that everyone knows of their behavior and how many good opportunities they have missed out on as a consequence. Your reputation is everything!

Before you go: I have interviewed 500+ professionals, surveyed thousands more, and I am always probing for their best tips, tricks and hacks to get ahead. There are five that stand out above the rest and you can get them right now by joining my free email list. You won’t find these ideas anywhere else.