Breaking into VC: The Rough Guide

A question I get asked all the time, in emails or social DMs or in person sometimes, is about how to break into VC or Venture Capital. After all it is seen as a desirable, glamorous job (this isn’t strictly true), and given the few slots, intense demand, and limited public information (though this is changing fast, especially if you know where to look), aspiring candidates do not have too many options but to go into primary data-collection mode.

Now, I am sure I am not the only VC who gets hit with these requests. But one additional reason for these requests is that I am one of the few who shifted to venture from a non-startup, non-investing background (yes!), and that too in my early 40s!  Given this, I get a fair number of older, non-startuppy folks also who reach out to me for advice on transitioning to venture, apart from the usual 20-somethings.

Hence, this post, where I plan to aggregate all the advice and inputs I can offer candidates aspiring to break into venture capital. Specifically this is more relevant for those looking at early stage VC (Pre-seed to Series A). It isn’t that it is not useful for candidates applying to growth stage VCs but that some of these points made here may not hold as strongly. Nonetheless I am sure many of the points will be useful to give colour and context to any VC aspirant.

Over time, I hope to make this a living document – one which is continually updated with additional inputs, or revisions, so as to be useful for candidates in the future as well. Feel free to ask questions on topics, aspects not covered by this post in the comments section, and I will update the FAQs section at the end of this post, with my responses, and also giving credit to the person who asked the question.

Let us begin this post by acknowledging two important ground conditions, both interconnected, which both lead to and imply my advice to venture aspirants. Both ground conditions in fact run contrary to public perceptions, and hence it is important to set them out.

1 – A two-tier market

The venture or startup market is best understood as a two-tier market, not a single venture market. There is a market for first-time or fresh founders, and a market for repeat or fluent founders. The investment criteria, the investment amount or deal size, the valuation (which is a function of the deal size and dilution) are different for the two tiers. They are as good as two different markets, or worlds.

A first-time founder who isn’t a senior operator, or doesn’t have 2+ years of experience in a reputed unicorn startup brand, will struggle to raise a pre-seed round from an institutional investor / VC (who invests other people’s money). In the seed round the first-time founder will need to demonstrate traction or speedy revenue growth. In the 2023 venture market, with about $250-500k annualised revenue (or ARR) and double-digit monthly growth, they may be able to raise a $2m round on $10m post. A repeat founder, or experienced operator, depending on their profile can today raise even a pre-revenue formation round of $3 to $10m (even higher in some cases) at 20-25% dilution. Why is this so?

When you are a second-time founder, the demand-supply equation inverts in your favour. Because of the perceived lower risk of failure of the experienced second-time founder (though I haven’t seen a study that decisively concludes that second-time founders deliver more returns than first time founders), and because there aren’t that many experienced second-time founders, you have more VCs chasing fewer high quality founders. When that happens, founders have the power and they can pick the VC they want to work with. That reflects in the higher prices and deal sizes where experienced founders are concerned. Here, the VC business inverts to a sell-side business – we need to sell to founders.

My colleague Karthik Reddy mentioned in a podcast — “the trick of the trade is actually, it is not about you saying I know how to pick well, it is whether the best entrepreneurs want to pick you.”

The traditional view has been that VCs hold all the power or at least are more powerful than founders, because they control capital allocation. Yes, this holds at the early stages of company-building, especially when the founders are first-time founders, and when the company desperately needs capital (any stage, and could be first-time or repeat founders). Outside of this, the power equations can vary, and often even invert in favour of the founder when he or she is a repeat founder, and the VC is early in their career. And remember, when a startup grows from early to late-stage, the founder profile and power increases, sometimes ahead of the VC's. VC-founder power dynamics are not set in stone!

A good way to think of the first-time founder market is as a buy-side market, with the VC in a position to dictate terms and holding disproportionate power here. The repeat founder market, where the founder has far more power – more VCs chasing him than the reverse resulting in his or her being able to command higher deal sizes and valuations – is effectively a sell-side market as the VCs need to sell themselves to the founder. Alex Bangash, who runs Transpose, a fund of funds platform, describes this upper tier of venture as an ‘access class’, and describes this as the only investment class where the asset picks the manager.

The implication of the above is that to compete in the more important upper tier venture market – where the more fluent or semi-fluent founders are – you are competing in a market where the founder effectively picks the investor, or at least has far more choice, and hence the VC has to sell to the founder. This brings us to the second and inter-related ground condition.

2 – Understanding venture as enterprise sales

A good framework to understand venture, at least the upper tier of the venture world of repeat founders or experienced operators, or sell-side venture as I termed it above, is to see it as a market where the VC is a purveyor of their brand of capital. In the case of Blume, all of us in the investment team are purveyors of the Blume brand of capital which consists of $2-3m (our typical investment corpus), investment team’s (Partner or Investment Lead’s) time, and platform services (recruiting, fundraising support etc). Effectively we are selling this bundle to founders (the only currency we accept is equity in the founders’ company!)

Now, Blume’s brand of capital is distinct from Nexus’s brand of capital, or Stellaris’s brand of capital, even if the amount invested is the same, given it comes with the Partner’s time, the brand signal, the platform services corralled by the Partner + investment team, etc. Founders decide which brand of capital they think will help them grow their enterprise the most, and pay for it with equity of their company.

Now, VCs do need to be cautious in determining which company’s equity they should get access to, for they have 25-35 different companies (typical size of fund portfolio) whose equity they can get, and they need to make sure that these will grow in value as far as possible, and will not all be duds. Given the power law inherent to the venture business, about 3-5 will need to work out outstandingly well. The general assumption is that the more experienced the founder, the higher the chances of success, and the more that equity will grow in value.

Thus fundamentally, the VC economic model is that they are selling their brand of capital, for which the currency is the startup’s equity, and the ICP (ideal customer persona) is a repeat or a rising founder. The job of the VC becomes akin to the AE or Account Executive at an enterprise SaaS co, responsible for identifying, contacting, engaging and finally persuading the elite founder to accept their brand of capital. Venture is from this perspective, enterprise sales effectively.

3 – Enterprise sales execs have a better chance of breaking into venture than finance execs!

Viewing venture from these lens, of the two tiers of venture, and the upper tier of venture as one where the VC is selling to founders, gives you a sense of how top-tier venture firms recruit. We need to recruit candidates who we think will be able to connect, engage and persuade elite / repeat / rising founders. How do we know a candidate will be able to do so? This is hard to know, but there are ways to determine this. One way is to look for signals of ability to connect, engage and persuade rising founders, such as

a) the candidate’s past experience as founder or as VC, or as a senior operator who others founders will identify with, or proxies / signals such as

b) access to relevant networks (proxies being academic or corporate pedigree / alumni status, thereby signalling the ability to access or leverage those alumni networks to source founders), or

c) content creation – building a personal brand around startups and venture by writing on twitter, or LI or doing podcasts to signal your interest or efforts, or

d) working in startup related community orgs like SaaSBoomi, D2C Insider, Headstart, The Product Folks, The Venture Folks thereby signalling your awareness of startup issues and connect with founders, or

e) experience in venture or startup investing, either as part of an institution or even doing angel investing, or

f) supporting or advising founders and / or helping them directly on business or fundraising support

thereby giving us confidence that the candidate can connect and engage with a star founder and persuade them to accept the firm’s capital, or at the least, leave a good impression.

I repeat: your (perceived) ability to reach out, engage and persuade a founder to accept the firm’s capital is the single decisive factor in your getting hired. Now, note that nowhere here did I mention the word finance or valuation. It is not that finance skills or understanding doesn’t matter. It is just that it doesn’t matter as much as your ability to convince the founder that your capital is better than the alternatives.

4 – Why financial skills don’t matter as much in early stage venture

There is much less finance or math in the analyst role at an early stage VC fund than you think. Given the difficulty in estimating future revenue streams at the early stage, we do not use DCF (Discounted cash flow) to value our companies. I have written about how VCs value companies in my essay ‘Exhaust Fumes’ here. So if you have studied Arts or Commerce and do not have exposure to how public market valuations are done, then rest assured that it is not a handicap. It can be learnt. In fact, you may find many of the best venture investors, especially abroad have a liberal arts background.

Beyond the sourcing or the finding, there is the minding or the value add that you need to provide to founders, helping them win. If the startup does well, then you are locked in with the founder for a 5-10 year journey. A lot of the help that you provide is becoming a trusted sparring partner to the founder, providing a non-judgemental space for him or her to express their half-formed thoughts and then helping them think through that. In addition there is mentoring and counselling on various aspects including connecting them to other people. The venture business is a relationships business. It is intensely people-centric. Soft skills matter hugely.

That said, there is a lot of financial and quantitative thinking needed though (Finance and financial thinking aren’t the same!). You do need to see the startup and its performance in terms of various financial and product metrics. You need to be comfortable with Excel – especially as you support your existing portfolio on building (or evaluating) revenue and financial models for their fundraising.

To do really well in venture though, you would do well to see it as one branch of private markets investing. An understanding of how our peers down the funnel including those in the public markets side value companies, helps immensely. The best venture investors thus get finance and risk from a first principles level. In fact first principles thinking overall is a great skill to have in venture capital. You are seeing patterns or opportunities anew, and there isn’t a lot to fall back on. This is where the ability to think afresh from first principles matters.

This section is specifically true for early stage venture (Pre-seed to Series A). Beyond that you do need to have a good grasp of finance.

5 – Why you didn’t get the venture job!

If you applied to a venture firm, and got a rejection, but didn’t get clear feedback, then it is likely that some other candidate signalled the ability to connect and engage with a rising or star founder better than you. The signal of your ability to connect with rising founders is perhaps the single most important criterion that we use to create a shortlist. On most other criteria, we have many candidates at par (almost all are from Tier 1 colleges, almost all have worked in good companies etc etc.). That is where the signals listed in section 3a-3f (see section 3 above) matter.

Sometimes even ticking off most of the criteria listed in 3a to 3f may not be enough – it may not be that something is wanting on the candidate’s application / candidature, as much as the fact that there is something perhaps more relevant (and thereby stronger signals) in the candidates who we progressed towards the next round, i.e., there may be others who tick more criteria or tick better.  

Finally, given that most venture teams are small, and there is always a larger number of candidates than roles available, it is not surprising that venture is one of the harder segments to break into.

6 – Does the above hold at all levels?

Broadly yes. The Analyst (and even the Associate) role is largely about sourcing and supporting the senior colleagues on the investment review process (helping create docs, reference calls and diligence support etc.) Further up, the Principal and Partner roles still have sourcing aspects, but there is also a lot more focus on picking the investment, and then helping the founder win. At the apex, the General Partners also do fundraising from LPs or Limited Partners, which is pure sales. Thus across the VC role hierarchy, the importance of identifying, connecting to, persuading and engaging with rising founders doesn’t diminish. If anything at the senior levels, you spend a lot more time engaging with and helping founders, it becomes even more important for you to tick / signal 3a-3f. Sometimes with very large funds like Peak XV, Accel that are well-known brands, sourcing may not be as critical at the early stage, so the analyst recruited may not have any startup exposure, but will have excellent academic and corporate pedigree (IITs / elite US or UK colleges followed by 2-3 years in MBB or Wall Street)

7 – TLDR

Top-tier venture is sellside not buyside. You sell your firm’s capital and value add to the founder in turn for equity in their company. Founders pick you over your peer.  Hence your (perceived) ability to reach out, engage and persuade a founder to accept the firm’s capital is the single decisive factor in your getting hired. The signal of your ability to connect with rising founders (indicated in section 3a-3f) is perhaps the single most important criterion that we use to create a shortlist (when all else is equal, or sometimes even if not).

FAQs, or all the questions that you didn’t know which VC to ask!

Q1. I am not from a top-tier undergrad college (IIT / BITS), and nor have I worked in a tier 1 consulting co like (McKinsey, BCG, Bain etc). Can I still hope to get into venture?

Sajith: For various, and obvious reasons, venture is seen as a desirable and exciting job. It therefore attracts many applicants, many of whom have impeccable academic (IITs / NITs / BITS / SRCC etc.) or corporate pedigree (McK, BCG, Bain, Dalberg, ATK, GS etc.) Thus if you are from a school that is relatively less prestigious or less well-known, and / or you haven’t worked in similar companies, and you wish to apply to Blume or any other Tier1 VC, you could compensate by building a personal brand around startups and venture. Write on twitter, or medium, or do podcasts, or put together an initiative, to signal your interest or efforts (see 3a-3f above). At Blume, we will be giving more weight to such personal efforts that signal hard work and interest in startups, in our future hiring. Many smaller funds (microVCs, first time managers) also give disproportionate importance to the signals in 3a-3f. These may be your best bet.

Q2. I am graduating from a Tier 1 / High Tier 2 college. I aspire to work in venture capital roles in the future (say in 1-2 years from now) and was wondering where you think I should work in the next 1-2 years? Will working with a startup help my candidature? Or should I stick to investment banking roles?

Sajith: It is very hard for someone who doesn’t know you well or your context, as well as the role deeply to give super-specific advice. In general, I would say go for the role that pushes you out of your comfort zone and gives you greater learning per day spent. But I understand it is sometimes hard to figure.

With regards to planning your career for breaking into venture capital, as I have shared above, VC is akin to an enterprise sales job where you are selling your brand of capital (capital + firm value add + your value add) to the founder in turn for equity in their business. Most desirable investments are competitive situations, and it is the founder who has choice not you. Strangely top-tier VC is sellside not buyside! Hence, your (perceived) ability to reach out, engage and persuade a founder to accept the firm’s capital is the single decisive factor in your getting hired.

Given the above, if you are keen to plan a career for venture, it is better to pick roles which enable exposure to and interactions with top founders and give you more confidence in interacting with them. Maybe it is ibanking, or maybe it is actually working in a startup. Maybe it doesn’t really matter. If you have learnt to interact with founders and have the confidence you will signal it one way or another, wherever you worked.

Q3. You did talk about how access to network, content writing, founder / CEO office experience, etc., is extremely valuable. Would love to know if there is a systematic process I can follow on content creation – essentially where or how do I begin if I want to write. I want to, but I don’t know where to start and how?

Sajith: I understand 0 to 1 is always hard, and often the first step is the hardest. So, take baby steps. Don’t set wildly ambitious goals. Have modest ambitions. Your first objective early on is to build consistency (like exercising). You have one big advantage. Your first few posts will see limited audiences (typically your colleagues or friends). So, take advantage of that and try and publish content as frequently as possible. Remember it is your friends and close colleagues, who won’t judge you so much! Strive for frequency at this point – it is ok for posts to be short, but there should be consistency, such that you build a muscle memory for content generation. Consistency compounds. Even one article a month is fine. In two years you will have 20+ pieces! I have experienced this myself. It was my 90th or so article which was my first viral hit. I wouldn’t have got to that if I hadn’t built my content consistency muscle.

A suggestion. Focus on topics where you have an unfair advantage. If you are in customer success, write about the leaders in that field you admire, or how your company solved a certain problem, or summarise a podcast by a Customer Success leader, or interview one. Essentially you need to create content that you enjoy doing, doesn’t feel like work to you, and which only you can do. Over time, the consistent content creation will create an audience base for you. As examples of this, see Akash Senapaty on gamification, Mithun Mathusudhan on Bharat apps monetization, Dharmesh Ba on UX, all channeling their inner obsessions into great content. It is great content, because it is obsessive, and detailed, and they have nerded out. That passion comes through, and your audience resonates with that.

Q4. Great read and thanks for the shoutout Sajith! A question I have gotten from smart young folk which you might want to address now/later - a) what is more valuable for me in the early stages of my career - startup experience or venture experience? b) answer above question with constraint that I eventually want to get into venture. - Mithun Madhusudan

Sajith: In my opinion, startup experience (over investing experience) is a tad more valuable, especially if you are coming in Associate and above, because having relevant startup experience allows you to appreciate the founder’s context and challenges better, and add specific value to them. That said there is no universal rule. Some firms may find a profile with past investing experience works better for them. So it all depends. That said neither of the profiles is at a disadvantage. At Blume we would overweight startup experience more, though we have hired both profiles (e.g., Venkatesh Modi came from Locus but Sonisha Kukreja came from Pravega Ventures). I would honestly say it really doesn’t matter if you have startup or investing experience while applying:) That said, I would say having startup experience helps you add specific value to your founders, which may not be possible if you only have an investing background. Hope this helps!

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Feel free to ask any questions on topics or aspects not covered above in the comments section below and I will update the post as well as the FAQs section with my resonse and due credit to you.

Readings, References

We are beginning to see more and more pieces – tweet threads, posts, substacks – published on the interwebs talking about life in a venture firm, or on how to get into it. Whenever I come across anything interesting or relevant, I will paste the link here. That said, there is lots of such content on the interwebs and I am sure I will always miss something useful. Do search on your own, and if you find anything that I should link to here, then let me know.

Life of a VC

The 5 roles of the VC by Nikhil Basu Trivedi

Life of an Indian Junior VC by Tushar Behl

Tweet-thread by Sarah Tavel on challenges of moving from operator to VC

Advice by Sarah Tavel on how to succeed as a Junior VC

Getting into VC

Justine Moore’s wonderful notion page on getting into VC; + related twitter thread (U.S. centric)

This is a superb notion page maintained by Paige Finn Doherty – U.S. centric though

This is another really good resource guide about breaking into VC – by Pietro Invernizzi

U.S. centric but useful tweet thread by Erik Torenberg

Again U.S. centric but useful tweet thread by Jonathan Triest

How to become a VC by Delian Asparouhov

Excellent post from Ryan Hoover and Vedika Jain of the Weekend Fund with anecdotes and advice from lotsa VCs on breaking into VC

Gale Wilkinson's tweet thread on how to get a job in VC

Longish tweet thread by Johnnie Yu on breaking into VC

The Vestless VC's tweet thread on getting an analyst or associate job in VC

Long tweet thread on breaking into VC by Patrick Malone, a doc turned VC

Some of the content in this article is repurposed from an older article of mine. Thanks to Shrey Shah, Marmik Mankodi, Apurva Dixit for reading early drafts of this and sharing their views.