PS#047: The VC Recruiting Cycle
Today, we’re going to take some time to talk about the venture capital recruiting cycle.
As the venture capital industry has evolved, firms have fallen into a cadence for recruiting and hiring new investors. We’ll walk through this cadence, the opportunity, and the typical process involved in internships/full-time recruiting.
Alright, let’s get started.
The opportunity.
Most venture firms build their recruiting processes around their fundraising schedules.
This is driven by the economic structure of VC firms, which typically includes a management fee based on the amount of capital under management.
For example, a $50M fund may have a 2.0-2.5% management fee. 2.0-2.5% multiplied by $50M is about $1.00-1.25M in management fees per year. The management fee doesn’t change year to year (unless the firm raises more funds), which means they need to be thoughtful about how they spend their set budget.
Larger firms (with many funds) don’t usually have this issue, but a lot of the smaller and midsized firms do. They are dependent on raising new capital to make new hires and expand their organization.
With these economic constraints in place, a lot of VC firms will take advantage of internships as a means of accessing more resources (both during the school year and over the summer).
There’s two key points to take from this current dynamic…
Firms are limited by their management fees – If they are raising or have raised a new fund, they may have more management fees to spend on new hires.
Firms are often resource constrained and will look to internships as a means to access additional resources.
Therein lies the opportunity.
Most firms are open to trading experience for resources (i.e., internships), especially at the lower cost of an internship. This creates a path for breaking into the industry and finding a full-time role (whether with this firm or another).
It also means that when we are recruiting for VC positions, we want to make sure that the firm in question has raised enough capital to support your potential role at the firm. A lot of firms may promise a path to a full-time role, but really don’t have the capital/management fees to support any additional hires.
In either case, the opportunity is there. It’s all about making the case.
The Timeline.
OK, that’s the opportunity. Now, let’s talk about the timeline.
Most recruiting processes tend to follow the school calendar. There are certainly opportunities offered throughout the year for aspiring investors, but a significant amount of them pop up throughout the school year and in advance of summer internships.
Essentially, there are three separate entry points for internships…
Spring semester
Summer internship
Fall semester
Spring Semester
Most of the new, in-semester opportunities will pop up towards the end of the year (i.e., November, December) with a start date in the spring semester. Firms are looking to take advantage of the new crop of students and get ahead of the summer recruiting process.
For aspiring investors, this means that we need to get started on our preparation early in the fall so that we are ready to take advantage of these opportunities. Plus, If you do well during the spring, you can often extend the internship into the summer.
Summer Internship
The majority of firms looking for interns are targeting summer internships.
Even if they haven’t announced a formal process, most firms are open to the idea of having an intern (especially considering the lower cost vs. hiring full-time). All you need to do is make the case and create your own internship.
These processes will likely start in the spring semester with the possibility of obtaining a 10-12 week internship (unless you’re able to extend it). Since this will be during the summer and not during the school year, you’ll have the chance to fully focus on your role as an investor.
Fall Semester
Most of the fall semester opportunities are extensions of the previous summer internships.
If you’ve done well over the summer, you will likely have an opportunity to extend your internship through the fall. In some cases, a firm will offer this extension after seeing your performance. In other situations, you’ll need to ask or make the case for extending your internship.
Asking for an extension on your internship allows you to stay in the game and continue building your reputation as a new venture investor.
This is exactly what I did.
After I had secured a summer internship, I didn’t want to give up my seat at the table. I extended my internship through the fall, then through the spring, until I eventually secured the full-time role.
Full-time Opportunities
Most full-time recruiting processes will typically happen on the same timeline as summer internship recruiting. If you’re preparing for this vs. an internship, you’ll be able to follow a similar timeline in terms of preparation.
Parlaying internships into full-time opportunities can be tricky due to the dynamics that I outlined in The Opportunity section of this issue. The firm in question may promise a full-time role, but might not have the management fees to actually support the position. Unfortunately, I’ve seen this story several times. It’s important to figure out whether or not the fund can actually support hiring more full-time investors.
Even with this risk in mind, the best strategy is to try and maintain a seat at the table for as long as possible (i.e., extending your internships).
This will give you time to build your reputation, skill set, and relationships within the industry. Even if that internship doesn’t have a full-time opportunity, you might be able to build relationships with other firms that lead to a full-time role.
The Process.
Unfortunately, most VC firms are pretty bad at running recruiting and interview processes.
While the venture capital world has come a long way, the industry still lacks a lot of structure when it comes to interviews and recruiting. Truthfully, a lot of this is due to the fact that it’s hard to say who will actually make a great investor. We’ve seen investors with all sorts of backgrounds be successful, no specific background has proven to be the preferred path.
On one hand, this is great news. As long as you can demonstrate the skill set, you should have a chance at landing a seat at the table. On the other hand, it tends to lead to long, drawn-out processes that may involve lots of conversations, case studies, more conversations, and an ambiguous criteria for new hires.
However, even with that lack of structure, most processes will use some form of the following…
Application
Initial screen
Culture interview
Verbal case study
Written case study
They may cover these items in a series of separate interviews, through one “super day” of interviews, or via a long, sporadic process.
I’ve seen and experienced all three.
The Plan.
The good news is that I have a plan for approaching this recruiting process.
In the next issue, I will walk you through the plan and how to leverage the content I’ve built to make sure you’re prepared.
