Last week I shared some thoughts on the parts of venture capital that don’t make sense, specifically regarding the structural barriers to investing in the asset class, both as a GP and as an LP. This week I want to dive into the oddities of another element of this industry: the venture capital job market.
Over the past few years, I have formally and informally mentored dozens of aspiring VCs, seeing a fairly close view of the dysfunctions of this labor market.
Let’s start with the exploration phase. In conversations with people who have come across VC as a potential career path, the first question I usually ask is, “What is it about venture capital that has piqued your interest?” Very often, I find that the answers reveal a misconception of what venture investors actually do (e.g. “I love launching new products”) and instead suggest that the seeker would enjoy a different role (e.g. joining an early stage startup) much more than they’d like being an investor. This leads me to the first bizarre realization: it feels like every other person I meet wants to be a VC, but very few seem to know what a VC actually does.
One of the most frequently asked questions is, “What is the day-to-day role of a venture investor?” Frustrating as it may be, the answer is, obviously, “It depends”. It depends, mostly, on fund size, stage focus, and role type. Generally, the larger the fund, the more specialized the role; the later the stage, the more quantitative the analysis; and the more senior the role, the more strategic the work. Of course, there are exceptions and hybrids, but generally, investor roles vary vastly from one another, and finding the right fit for your personal interests is very much a needle-in-a-haystack situation.
Let’s say you formulate a general idea of what you’re looking for and begin your job search in earnest. For junior- to mid-level roles (typically analyst, associate, and principal roles), if the job openings are even shared publicly, you will likely encounter a mix of somewhat arbitrary and/or elitist prerequisites:
“Top-tier university degree required” (yes, everyone else is chopped liver; sorry, I don’t make the rules)
“Background in management consulting or investment banking”
“Attention to detail a must”
“Pre-MBA only” (the most bizarre and offensive shifting of goalposts, in my opinion)
In many cases, the application process will require you to draft sample memos, share investment theses/analyses of trends, build financial models, provide your thoughts on the fund’s existing portfolio companies, and curate lists of interesting startups (often explicitly aligned with the specific funds’ investment areas — how convenient for them!). It is not unusual for these processes to take you 20-40 hours a week.
The reality is that after months (or, in some cases, years) of these interviews, most candidates inevitably fail to land a role, often for little reason beyond the fact that there are simply hundreds of applicants vying for a single position. While disappointing, this is expected.
What’s less intuitive is the fate of those who do end up in the coveted venture roles. Given the amount of time spent on vetting, interviewing, and testing candidates, you would think that this process is the firm’s beginning of a long-term investment in a future partner. In rare cases of partner-track (or partner-potential) roles, this is indeed the case; but in many, it could not be further from the truth. Whether it’s disclosed at the beginning of the application process or discovered later on, most junior- to mid-level venture positions are rotational, with the expectation that any hires will move on from the firm within 2-3 years. Yes, all of this time and effort, to find yourself in a dead-end role.
This brings us to another somewhat underappreciated reality of venture roles: every position is either discretionary or non-discretionary in nature. In discretionary roles, you are being hired for your judgment. You are hired to leverage your unique point of view to source, choose, and help companies. In contrast, non-discretionary roles are, in a nutshell, support roles: you are there to source leads, build models, conduct due diligence, write investment memos, and “learn the craft of venture investing”. You are then, in most cases, expected to seek a discretionary role elsewhere, either by joining another fund at a more senior level or starting your own. You can (and most firms likely would) make the case that many venture roles are “a mix of both”, but let’s call a spade a spade: if a job description prioritizes attention to detail, working under tight deadlines, and having spent time at a top tier consultancy or investment bank, the firm is optimizing for a killer analyst more than it’s searching for its next visionary leader to identify outlier investments.
As venture’s popularity has increased, a whole sub-industry dedicated to helping people “break in” has emerged: blogs, webinars, resource guides, Slack communities, paid bootcamp programs, and more. And while these resources often provide excellent information, diving into the specifics of articulating investment theses, sourcing companies, networking, and preparing for interviews, they don’t actually solve for the extremely lopsided nature of this labor market, in which the demand of candidates outpaces the supply of jobs by multiple orders of magnitude. Once all of these candidates become experts at navigating this job search, where will they go?
To firms with arduous and, frankly, exploitative hiring processes, particularly for mostly non-discretionary roles: is all of this really necessary? Is there evidence that asking candidates to spend so much time on your interview processes correlates to strong performance in the role, especially one that is short-term in nature and limited in scope? And especially for those who consider these roles at least partially discretionary, have you considered that your onerous interview requirements may be perpetuating the homogeneity of the industry by boxing out candidates who do not have the luxury to dedicate dozens of hours of unpaid labor to your interview process, ultimately depriving you of hiring those with not only differentiated backgrounds but also the highest investment potential?
To candidates agreeing to these hiring requirements: why? Let’s say you get the job. Congrats! Your two years fly by. Now what? What were you hoping to gain? What are you now hoping to do?
If the answer is that this whole circus is a necessary stepping stone to a discretionary role, then as an industry, we have to face the reality that these job practices are yet another form of structural gatekeeping and a failure of our collective imagination. The venture industry desperately needs more people, from varied backgrounds, with different paths to bring fresh perspectives and fund truly world-changing companies. And building new structures that get us closer to that potential has to start with a hard look at the things that are simply not working about our current systems.
With the evolution of syndicates, equity crowdfunding, rolling funds, and more, the opportunities for individuals to learn and build personal track records outside traditional structures are becoming clearer. We simply can’t keep doing the same things and expecting different outcomes. If you are working on alternative venture investing pathways, please share ideas and stay tuned. As always, feel free to reach out directly (@geri_kirilova on Twitter or geri@laconia.vc via email).