Venture capital (VC) firms search the startup world and look for the next Facebook or YouTube. They provide risky capital infusions to early-stage or small companies that have limited access to more conventional sources of capital like bank loans.
In exchange, the venture capitalists receive ownership in the company and significant managerial oversight. In a VC firm, the venture capital associate is the most junior member. Nevertheless, these positions are competitive, involve a lot of responsibility and independent thinking, and command strong salaries.
- Venture capital firms provide funding to startup companies and small businesses—namely, those with fewer options for raising money.
- Venture capital associates are responsible for sourcing new deals for their firm and for supporting those that are already in the works.
- VC associates can expect an annual salary of $80,000 to $150,000, though with bonuses this number can become significantly higher.
VC Associate Job Description
VC associates have two main job functions: sourcing new deals and supporting existing deals.
Sourcing New Deals
VC associates are on the front lines of finding and screening deals. They are expected to bring an ambitious, sales-like mentality to this task, oftentimes sourcing potential deals by cold calling companies and entrepreneurs in order to set up meetings. The associate then presents prospective deals to the firm partners.
Supporting Existing Deals
VC associates, similar to other financial analysts, support all aspects of a deal, from due diligence to modeling and execution. With due diligence, they produce the initial analytics that lead a firm to pursue or reject a deal.
Similar to private equity, when a deal moves onto later stages, associates continue to work side-by-side with the partner. Work intensity and hours fluctuate based on how close the team is to closing deals. Like other finance analysts, VC associates can work extremely long hours near deal closings. Because of the high demands and pressure, VC associates are often rewarded with generous compensation.
The type of VC firm distinguishes some of the functions of the associates. VC firms that concentrate on early-stage financing do much more sourcing and very limited due diligence and modeling. Firms that concentrate on late-stage financing do more of the traditional diligence, modeling, and execution, similar to a private equity firm.
VC Associate Salary
Annual salary and bonuses differ broadly in this field depending on the size of the VC firm and its specialization. In general, VC analysts can expect an annual salary of $80,000 to $150,000, according to Wall Street Oasis. With a bonus, which is typically a percentage of salary, this can be much higher.
In addition, firms will compensate associates for sourcing or finding deals. At higher levels in a venture capital firm, bonuses involve multiples of salary tied to the portfolio and carry from investments.
In 2019, venture capital deployed in the U.S. reached $136.5 billion, surpassing the $130 billion mark for the second consecutive year.
How VC Associates Advance
The advancement track is also a bit different at VC firms when compared to private equity. As in private equity, most VC pre-MBA associates come in with some type of experience. This can range from a stint as an investment banking analyst to some kind of industry‑specific training.
Firms expect pre-MBA associates to stay for two to three years and then exit to business school or another employer. In fact, many firms give a two-year contract at this level.
The post-MBA VC associate is on the partner track. If a partnership is the end goal—and it usually is for post-MBA associates—then the way to get there is to establish a strong track record of sourcing companies, closing deals, positively impacting the portfolio company, and exiting the investment to generate solid returns for the firm.
Education and Training
Venture capital pre-MBA associates may get bachelor's degrees in mathematics, statistics, finance, economics, or accounting. VC firms tend to focus investments on a specific sector and will sometimes pursue candidates in the industry who have no prior finance or venture capital experience. For example, a venture capital firm focused on healthcare may hire a biochemist that successfully started a pharmaceutical company.
Post-MBA associates, in general, get considered for a VC firm based on the school they attended. And depending on the type of VC firm (early versus late stage) the characteristics sought can differ widely. Early-stage VC firms look for candidates who understand markets and industries and can perform analysis to determine market size and opportunity. Late-stage VC firms look for the more traditional skills of financial modeling and deal execution.
Venture Capital vs. Private Equity
Venture capital firms are quite similar to private equity in terms of the deals they make and the sources of financing. They differ, however, in the types of companies they pursue.
In general, private equity firms tend to gravitate to established companies, whether small or large, whereas venture capital firms seek to finance startups and smaller companies that do not have access to the capital markets. This distinction is important because it frames the roles of the associates at venture capital firms.
Characteristics of a VC Associate
Venture capital associates operate in a unique area of finance. Unlike investment banking and other financial analysts who focus on modeling and deal execution, VC associates have less structure.
Even at the entry-level, VC associates are tasked with finding deals, meeting entrepreneurs, and evaluating business ideas. This can appeal to a candidate who is interested in being involved and partnering with businesses.
"To get a job in VC, it's all about hustle," said Angela Lee, a Professor of Professional Practice at Columbia Business School. "You have to be out there networking and be top of mind when one of those highly coveted roles opens up. Once there is an opening, you need to demonstrate your ability to source, select, and support startups."