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Capital Structure: What Is It?

How to Become a Venture Capital Associate

Venture capital (VC) companies scour the startup scene in quest of the next YouTube or Meta (formerly Facebook). They provide early-stage or tiny businesses that have little access to more traditional sources of financing, including bank loans, hazardous financial injections.

In return, the venture investors get a large management role and a share of the firm. The venture capital associate is the least senior employee in a VC company. However, these jobs are in high demand, come with a lot of responsibility and need independent thought, and pay well.

Job Description for a VC Associate

The two primary duties of VC associates are transaction sourcing and deal support.

Looking for New Deals

On the front lines of locating and vetting transactions are VC colleagues. They are required to approach this duty with an aggressive, sales-like mindset, often locating possible opportunities by making cold calls to businesses and entrepreneurs to schedule meetings. The associate then makes potential transactions known to the company partners.

Supporting Current Agreements

Like other financial analysts, VC associates help every stage of a transaction, from due diligence through modeling and implementation. They provide the preliminary analytics with due diligence that help a company decide whether to pursue or reject a contract.

When a venture enters a later stage, associates continue to work alongside the partner, much like private equity investments. Depending on how close the team is to concluding transactions, work volume and hours vary. VC associates may put in very long hours close to transaction closings, much like other financial experts. VC colleagues often get considerable remuneration as a result of the demanding and stressful work environment.

Some of the associates' roles are different depending on the kind of VC company.

Early-stage financing-focused venture capital companies source substantially more capital and do very little due diligence or modeling. Companies that specialize in late-stage funding use a more conventional approach to due diligence, modeling, and execution, much as a private equity company would.

Associate VC Pay

Depending on the size and area of specialty of the VC company, annual salaries and incentives in this industry might vary significantly. VC associates often earn between $60,000 and $133,000 per year.

A bonus, which is often a percentage of pay, might result in a substantially greater total remuneration.

Companies will also pay colleagues for sourcing or locating deals. In a venture capital company, incentives at the highest levels sometimes entail multiples of pay that are based on the portfolio and carry from investments.

VC Associates' Progression

Similar to private equity, the majority of VC pre-MBA associates have some kind of experience when they join a firm. This might include taking part in industry-specific training or working as an investment banking analyst for a while.

Pre-MBA associates are expected by companies to work there for two to three years before leaving for business school or another job. Many businesses really offer a two-year contract at this level.

The post-MBA VC associate is pursuing a career as a partner. If a partnership is the ultimate objective—and it typically is for post-MBA associates—then the best way to get there is to build a solid track record of sourcing businesses, closing deals, having a positive impact on the portfolio company, and exiting the investment to produce strong returns for the company.

Training and Education

Bachelor's degrees in mathematics, statistics, finance, economics, or accounting are acceptable for venture capital pre-MBA associates. VC companies often recruit individuals in the business who have no previous expertise in finance or venture capital since they prefer to concentrate their investments on a particular area. A scientist who founded a pharmaceutical business with success, for instance, may be hired by a venture capital firm that specializes in the healthcare industry.

In general, VC firms assess post-MBA associates depending on the institution they attended. Additionally, the traits desired might vary greatly depending on the stage of VC business (early vs late stage). Early-stage VC companies want applicants who have a working knowledge of markets and industries and who are capable of conducting analyses to ascertain market size and potential. The more conventional talents of financial modeling and transaction execution are sought for by late-stage VC companies.

Private equity vs venture capital

In terms of the transactions they do and the funding sources they use, venture capital companies and private equity are pretty comparable. However, they are different in the kinds of businesses they look for.

While venture capital firms seek to fund startups and smaller businesses without access to the financial markets, private equity firms often gravitate toward existing businesses, whether they are small or big. This difference is crucial since it clarifies the associates' responsibilities at venture capital companies.

Qualifications for a VC Associate

Associates in venture capital work in a specialized field of finance. VC associates have less structure than investment banking analysts and other financial analysts, who concentrate on modelling and transaction execution.

VC associates are entrusted with sourcing transactions, meeting entrepreneurs, and analysing company concepts even at the basic level. This may be appealing to a candidate who wants to get engaged and collaborate with companies.

According to Columbia Business School Professor of Professional Practice Angela Lee, "To acquire a job in VC, it's all about hustling." "When one of those highly sought-after positions comes up, you need to be networking and at the top of people's minds. Once a position becomes available, you must prove your capacity to find, choose, and assist startups."