Considering a Career in Venture Capital

Posted by The Editors on June 15, 2011
Considering a Career in Venture Capital

If you're at all interested in money and technology-and the place where they intersect-you might give thought to a career in venture capital. 

But breaking into the VC world isn't easy. For one thing, the industry is still very small and concentrated. There are several hundred VC firms nationwide, but each hires only a few lucky people every year at most. For another, VC has traditionally been a very elite club, favoring multiple-degree-holders with Ivy League pedigrees and several years of high-tech or other industry experience. And VC firms are cutting back on hiring due to the tech and dot-com downturn, as well as the other major events that have led to the current not quite stable economic climate.

VCs include the famous players, such as Kleiner Perkins Caulfield & Byers, the Mayfield Fund, and Bessemer Venture Partners, as well as many smaller funds, like the well-regarded Hummer Winblad, Ampersand Ventures, and Geocapital Partners. At first glance, firms appear to be remarkably similar. They have a small number of employees (generally somewhere between four and forty), they have a large amount of money to invest in entrepreneurial ventures, and they are all looking to be part of the next phenomenally successful startup.

Despite these shared characteristics, each of these firms has adopted its own approach to succeeding in the competitive and risky world of start-up financing. Firms differ in fund size, regional focus, industry focus, and stage of investing.

Larger firms, like Boston-based Summit Partners, have in recent years concentrated on creating megafunds of $1 billion or more, focusing on later-stage investments. That leaves smaller companies, like Onset Enterprise Associates and Venture Strategy Group, free to invest more modest funds at earlier stages.

You may not find a VC firm in your hometown, but you'll find them in cities as varied as Kirkland, Washington; Austin, Texas; and Fort Lee, New Jersey. Silicon Valley-which stretches from San Francisco to San Jose, California-still has the highest concentration, with nearly a third of all investment funds. Boston comes in second, with nearly 20 percent of funds located in its greater metropolitan area. Minneapolis is another notable center for VC.

Although some firms specialize in low-tech investments, in recent years, most VC firms have focused on technology-intensive fields such as software, biotech, and telecommunications.

A number of players in the venture capital field are divisions of large corporations, affiliates of investment banks, buyout firms, venture leasing companies, small-business investment companies (SBICs), and other wealthy private investors, called angels. Although these players don't usually come to mind when the discussion turns to VC, they also evaluate, fund, work with, and sell entrepreneurial organizations looking for capital.

Depending on your background and interests, you'll want to target VC firms that might be right for you. If you're straight out of college, working for VC firm is a great way to make connections with the people behind the hot, up-and-coming start-ups you may be interested in working for down the road. For MBAs, an up-or-out career track makes it even more important to find a firm that fits with your career goals.

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