WHAT ARE THE DIFFERENT JOBS IN VC AND WHAT DO THEY MEAN?
“Venture capital may be a difficult sector to navigate. Anyone can learn about investments and withdrawals, but few understand how everything works behind the scenes.”
WHAT IS THE ROLE OF VENTURE CAPITALISTS?
Venture capital firms gather cash from Limited Partners such as pension funds, endowments, and family offices and then invest in early-stage, high-growth potential companies in return for shares (i.e., ownership in the companies).
Then, they want to expand these businesses and ultimately exit either acquisitions or initial public offerings (IPOs).
People who work in venture capital are often referred to as "venture capitalists," but a distinction is necessary since different job titles have different duties.
So, who are the people working in these VC firms? What exactly do their job roles mean?
ANALYSTS
They often have two or three years of prior experience, most often in banking, consulting, or at a start-up.
Analysts are younger members of the team with little decision-making authority, yet their position is critical to the firm. They often have two or three years of experience in banking, consulting, or a start-up. Networking, keeping a close eye on the newest market dynamics and the fastest-growing firms, and cold-calling prospective target companies to discover more about their company and secure a meeting with the founders are among the major tasks of an analyst.
ASSOCIATES
Although associates do not lead investments, they are often present at events and conferences. Their role is often usually public, enabling them to meet with a huge number of firms, act as a first filter, and bring the most important cases to the attention of the founders and partners. They are in charge of analysts. Their job involves communicating with a huge number of businesses and undertaking screening procedures to discover which of them are likely to be of interest to principals and partners. In simpler words, they are tasked with sorting out the most interesting cases.
PRINCIPALS
Principals are senior members of the investing team. They work very closely with firms after investment, in addition to assisting the company in discovering and meeting the industry's most talented entrepreneurs. Deals are rarely led by the principals. However, they are reliable, long-term members of the team.
They are responsible for the progress of portfolio firms; with whom they collaborate closely after the investment. They often have a large network of connections and utilise this expertise to communicate with others in order to identify new investment prospects, negotiate purchase terms, or effectively depart portfolio companies. Principals who prove their ability to bring in solid contracts and create good profits for the business are allowed to become partners.
PARTNERS
Venture Capital firms are rarely ‘companies.’ They are most commonly a kind of limited partnership held by the firm's Partners. Therefore, the 'Partners' of a VC company are the firm's owners, and so influence the capital that is invested.
Partners are responsible for high-level duties such as identifying critical investing parameters, areas to invest in, making investment and exit choices, serving on the boards of some portfolio companies, networking, and representing the company as a whole.