More than most industries, in venture capital, it’s who you know that counts. So building your personal network is absolutely crucial to landing a venture capital job interview.

There are a number of strategies that can help you get started. Start with your own personal contacts, family, friends and classmates who may know someone who knows someone either at a VC firm or perhaps a start-up that works with a venture capital firm.

The venture capital world is more connected online that most. So you need to use social networking sites such as LinkedIn, Facebook and others to expand your network. Monitor and join various discussion groups. We would even go so far as to suggest that you create your own blog with a particular venture capital focus, and start writing about ventures in that space. If your writing about a particular industry is both relevant and insightful, you can generate solid leads with venture capital firms.

Here’s a case in point: Union Square Ventures is known for asking VC job applicants to forgo submitting a resume, and instead demonstrate how you are connected online, such as your personal blog, articles, and companies with which you work. Essentially, they want to see your passion for early stage companies and knowledge for how the venture capital game is played. In fact today, a combination of your LinkedIn profile and your online articles may replace your venture capital resume altogether.

There are many fascinating blogs on venture capital to serve as models. Marc Andreessen has one called Pmarca. Another site, theFunded.com, provides reviews of venture capital firms.

Beyond personal contacts and online resources, be sure to exploit alumni networks of both your business and undergraduate schools. An alumni network is a great way to open doors for “informational interviews” with venture capital partners. If you are still in business school, be sure to join your school’s venture capital club.

You may even want to contact professional recruiters who specialize in placing venture capital jobs. If you have the right skill set, they can get you into a VC firm quickly. Others may be more interested in senior positions. However, it’s a good idea to forge a relationship with a few recruiters and stay in touch with them over the years as your career unfolds. They often have access to positions that are not available through any other channel.

Finally, do a thorough web search for venture capital industry events in your area and attend a few. At these events, it is important not to position yourself as a typical candidate with resume in hand. Instead, approach these events with a strategy. Carve out your niche and demonstrate value in the conversation. Discuss industry findings and, most importantly, investment activity within a particular industry niche.

Constantly expanding your network of connections with venture capitalists and other industry members is both a good strategy for breaking into the industry and being successful throughout your career. For venture capitalists, it’s an essential job skill.

Here are some resources that can help with your networking activities:

This is Going to Be Big
http://www.thisisgoingtobebig.com/2007/06/how_to_get_star.html

Seth Levine’s Blog   http://www.sethlevine.com/

Galante’s Venture Capital & Private Equity Directory provides in depth profiles of over 1,700 venture capital, mezzanine, and buyout firms. Available in hard copy and CD.

Venture Capital Journal  www.privateequityweek.com/
The Deal    www.thedeal.com
VC Buzz     www.velocitycap.com/VC%20Buzz%20-%20October%2017%202000.htm
National Venture Capital Association    www.nvca.org 
Garage.com    www.garage.com
The Elevator.com   www.thelevator.com/
 

No matter where you are in the private equity world - just starting out, mid-level or in a senior position - networking is critical to your success. So much of the work is highly personal; it’s who you know that counts, whether it’s finding potential investors or uncovering the next investment opportunity. So it should come as no surprise that landing a job in private equity often comes down to networking.

Hopefully you started building your personal network while still in business school, one of the most fertile grounds for a lifetime of business contacts. Your classmates, and who they know in the industry, are your first source of leads even if some of them are competing to get into the same industry. If you share a source or referral with them that may not be a perfect match for you, they will remember the gesture and hopefully reciprocate in the future.

You need to begin a process of “informational interviews” with whomever you can meet in private equity to gradually expand your network and uncover private equity job opportunities.

By this point, you will have crafted an airtight resume that highlights your deal experience, unique abilities, education and other accomplishments. You may or may not present it at these information interviews, but you’ll keep it handy just in case.

Prepare and practice introducing yourself, your “elevator pitch” so to speak. Who you are, what you’re looking for, and whether or not you can speak with them for a few minutes to get their advice on the industry and their particular firm. Even busy professionals are often willing to give advice, especially since someone probably took the time to help them when they were job hunting.

First impression count. Speak confidently and clearly; offer a firm handshake. Be sure to have business cards with you at all times. Get used to striking up conversations with strangers. You may stumble upon an outstanding contact at the most unlikely places, perhaps at on an airplane or at a sports club.

The next step is to take advantage of your alumni networks, both from business school and undergraduate. It’s likely that they have alumni in private equity, and this common bond can potentially open doors for you. Many top business schools put on networking events during the year and invite well-known members of the private equity industry to speak at them as well.

Join online networking sites such as LinkedIn, Classmates.com and Facebook and see if you can find classmates in the industry and discussion groups of PE professionals. Join the groups, monitor and contribute to the online discussions.

Do a thorough online search for private equity events and seminars in your area and try to attend some. Or, you might enroll in private equity training or coaching classes. The teachers and your classmates at these events are also fertile ground for expanding your network.

You may want to identify a few recruiters who specialize in the private equity industry. While they may be more interested in placing more senior people, they may still offer you a few minutes of their time and advice. Keeping in touch with them and building a long-term relationship will pay off as your career unfolds. Recruiters often have access to private equity jobs that no one else knows about.

Next time, we’ll look at networking for venture capital jobs.

If you are fortunate enough to receive an offer for a private equity or venture capital job, never accept it on the spot. Instead, politely thank them for the offer, express your enthusiasm for the job and their firm, and ask to think it over for a few days. Try to buy at least a week to evaluate the offer and build your case for more.

This gives you time to build a case for your compensation package. You might mention specific skills that you’ve acquired, high profile or unusual deals you’ve worked on (M&A, IPOs, Convertibles, etc.), and the key skills you gained working on these deals (such as modeling, valuation, and others). In the case of a venture capital job, you need to demonstrate your ability to contribute to the firm, your passion for a particular industry, or the entrepreneurial culture overall. If you’ve started a business, worked on any deals, even part-time, or done any research for a local start-up or angel investor, you can build a strong case for a higher salary range.

Remember, a good firm is seeking high quality professionals who are able to deliver value. Never be afraid to ask for something. Employers are prepared to negotiate, and often feel more comfortable hiring someone who knows his or her professional worth. If you are as good as you say, they expect you to negotiate and are waiting for your counteroffers.

It also helps to negotiate from a position of strength. Knowledge about the market and compensation for similar jobs is one way. If you have more than one offer at the same time this obviously gives you a better bargaining position. You are able to mention that you are comparing compensation plans from both. Of course, this must be done diplomatically. You may want to indicate that you would prefer to work for their firm if they could match the compensation offer provided by another.

Finally, get the final arrangement in writing. Follow up your meeting with a letter thanking them again for the offer, mention when you’ll be starting, and outline both the salary and other compensation details that you have ironed out verbally.

Negotiating your complete compensation package sets the tone for your relationship with the company for years to come. How you handle this delicate task establishes how much respect they have for your abilities now, and the next time a compensation discussion comes up in the not-too-distant future.

References:

www.computerworld.com

www.bankrate.com

Even professionals who are used to negotiating multi-million dollar deals for private companies or start-up funding for new ventures find it stressful when it comes to putting a value on their own skills and experience, and negotiating for more. 

Nevertheless, there are certain principles that industry experts and recruiters agree on, when it comes to negotiating compensation at a new firm. The first is that any mention of compensation should be pushed to the very end of the discussion, and only after a firm job offer is made.

You should politely and firmly deflect any questions about what sort of compensation you’re looking for until it is clear your skills match what the firm is looking for. If either side mentions a specific figure or range, it automatically creates a marker that is difficult to move away from. For instance, if you mention too high a range, it could end the discussions before you’ve even had a chance to demonstrate the full value of your skills and experience. If you mention a figure that’s too low, it opens the door for a low-ball offer or creates the impression that you do not value your skills highly enough.

Before the process even begins, you need to thoroughly research compensation ranges for similar positions. Use online sources such as Job Search Digest’s annual Private Equity Jobs Compensation Report. Or scan the hundreds of jobs listed at Job Search Digest for similar positions. Later on, you will need to link this information with your unique skills and abilities in order to justify asking for more.

Think beyond dollars and build your total compensation package. Put together a list of the perks and bonuses you might want to include, such as signing bonus, health and dental insurance, paid vacations, paid sick leave, retirement or 401k plans, tuition reimbursement, even things like flextime or remote work options. Entry-level positions at private equity or venture capital firms may be more limited in the salary ranges they offer, but may be able to offer a fair amount of flexibility in terms of other forms of compensation.

Next time we’ll talk about what to do if you receive a firm offer with the salary and compensation spelled out.

The 2008 Job Search Digest compensation survey found that MBAs in private equity and venture capital jobs were earning $16,000 more than non-MBAs. Many open positions still request an MBA and the survey found that over 70 percent of Partners in firms had an MBA.

On the venture capital side, average total compensation in 2008 was $255,000, up 14 percent over 2007. However, research for venture capital jobs in the San Francisco area, a venture capital hotbed, shows a marked drop-off last year, reaching a low point in April, 2008.

Moving forward, when we compare private equity and venture capital compensation we may see a divergence of fortunes. When including carry, buyout professionals took home more than their venture capital peers, due to a market that favored more mature companies over start-ups. The longer-term nature of private equity investments may also give some PE firms more of a cushion to ride out the current downturn, and allow them to hold PE compensation steadier than for venture capital.

We expect to see a drop in venture capital compensation when the 2009 figures come in, due to a number of factors. The economic downturn, a scarcity of IPOs and exit strategies, along with a lack of new funding, has forced many VC firms to perform a triage with their existing investments and concentrate only on the most viable. There is also a surplus of experienced financial professionals from investment banks now looking for jobs, which will continue to exert downward pressure on salaries and compensation.

References:

Job Search Digest

www.fis.dowjones.com

www.wetfeet.com

www.indeed.com
 

Job Search Digest conducted our annual Private Equity Jobs Compensation Survey in the Fall of 2008 and received private equity compensation data directly from hundreds of private equity and venture capital partners and employees from firms, both large and small. Some of the participating firms include: Credit Suisse, Delta Partners Group, Intel Capital, Kaiser Permanente Ventures, Lehman Brothers, Soft Bank Capital and many others.

Although compensation held steady at that point, both PE and VC professionals did see trouble on the horizon. This has been borne out in the second half of 2008 by a significant drop off in deal volume and near disappearance of IPOs, along with difficulty in raising new funds.

In 2008, compensation for North American private equity professionals, including salary, bonus and carried interest, averaged $426,500, versus $408,000 at venture capital firms. Managing general partners, senior partners and partners at buyout firms posted median compensation including salary, bonus and carried interest distributions of $1.3 million, versus $956,500 at venture capital firms.

In the Job Search Digest survey, we found that private equity earnings vary by title, with the highest earnings by the CFO, Partner or Principal, Managing Director and Vice President. Compensation takes a significant leap when moving from Analyst to Senior Analyst, and likewise, Associate to Senior Associate.

The bigger the private equity firm, the better the compensation, depending on the fund’s performance. Funds in the mid range ($100 to $500 million) raise the bar when it comes to compensation. However, performance can pay off well for a junior employee at a smaller fund. This suggests that it may be a good career move to start off at a small fund and make the jump to a larger firm when moving up to Senior Analyst or Senior Associate level.

Next time, we’ll look at an interesting trend regarding MBAs and private equity compensation, and why PE professionals may fare better than their venture capital peers in the current downturn.

Unlike private equity and investment banking, venture capital is an industry that many professionals enter later in their careers, after they’ve gained years of relevant, hands-on experience in a particular industry.

Thus the first questions are likely to encounter are why you want to make the switch to a venture capital job, and why this particular firm? You’ll need to do a significant amount of research on the firm in order to answer that question intelligently, while showcasing the experience you’ve gained that relates to their specialty.

Let’s assume you are focusing on a particular industry, such as technology, biotech, or energy, for instance. What are some recent key developments in the industry? What have been some of the most interesting IPOs or acquisitions in the industry in the past year or two? How does that relate to this venture capital firm’s portfolio companies, and what opportunities do you see moving forward? Discussing how industry events may affect their firm is an excellent way to demonstrate your in-depth industry knowledge and a way to impress the interviewer with your thoughtful analysis.

The venture capital world is highly interconnected. Personal networking is key to uncovering opportunities. So your interviewer may want to know what blogs you follow, what associations and events you attend, what social networks you’re a part of.

You may be thrown a technical question or case study, such as how to evaluate a portfolio company and its business plan. Unlike investment banking, where the numbers always tell the story, two things drive success in venture capital: a solid management team and market potential. Your ability to evaluate company leadership and to make a case for the sales potential of an emerging product or service will demonstrate your abilities as a venture capitalist.

There may be questions designed to ferret out character and “fit” with the firm, such as:

-Where do you see yourself in five years?
-What was your biggest success? Or failure? Why? How did you react?
-What managerial experience have you had?
-What do you look for in a venture?

The end of the interview gives you one more chance to differentiate yourself. This is a good time to ask a pointed question about the firm, to demonstrate your understanding of the firm’s specialty. You also want to ask what they are looking for in a candidate and how closely you measure up to that standard. End the interview with a strong close on the value you believe you can bring to their firm.

References:

www.investopedia.com

Yale University School of Management   www.som.yale.edu
 

Private equity firms are looking for talented bankers and generally focus on a few key things: your poise and how you present yourself; your basic skills in the industry; how well you’ll “fit” with their firm, and your deal experience.

The way you introduce yourself is often overlooked but it creates a strong first impression. Be ready to describe yourself confidently, in a few sentences (think “elevator pitch”) and make sure you mention what you are doing now, any key skills you possess, and the quality of the training you have. Private equity interviews are a bit less formal than investment banking interviews, more of a conservation. So establishing personal rapport is important.

You may have to answer the obvious questions of why private equity? Why our firm? Your answers will reveal how much research you’ve done about their organization. Being able to link your reasons with their company strengths is obviously a plus.

Some firms will throw you a bunch of technical questions, to test your basic level of skill and understanding of the industry. These could cover valuation methods, industry terminology, or where you think the opportunities are for the industry in the next three years.

Then there are the “fit” questions about why you want to be in private equity. Here you need to focus on reasons such as acquiring more in-depth knowledge, more responsibility, and adding more value to transactions and client businesses.

Private equity firms want analysts and associates with solid M&A and LBO deal experience. So it’s critical that you decide in advance which deals you are going to focus on. Chances are they are the ones you chose to highlight on your resume. It’s better to pick transactions that are either unusual or where you made a significant contribution, so that you can discuss your contribution or what you learned. When discussing deals, give a quick overview of the company, industry and highlight the major points before zeroing in on the conclusion you want to leave with the interviewer.

If you don’t have any M&A or LBO deal experience, you need to find types of projects that demonstrate similar skills, such as work that improves the operations of a company, due diligence or in-depth equity research.

A private equity interviewer may also give you a case study to evaluate, with background documents such as an offering memorandum, filings and other company documents. They’ll want you to examine the materials and present your investment recommendations either in person or in document form, with Excel spreadsheets. Some firms may have you do this on the spot; others may give you weeks to prepare it. The important thing is to focus on the key points regarding the industry, company, management team, financials, and risk factors and how you would structure the investment.

Finally, some firms will toss a few behavioral questions your way, as a means of revealing your character and performance in difficult situations. For example, they may ask:

-Tell us about a time you failed on a project and how you reacted
-How have you dealt with conflict with a co-worker?
-Do you prefer to work in teams or alone?
-What did you do when a co-worker or client was upset at you?
-How would you handle a situation where you were blamed for something that was not your fault?
- What are you most proud of in your career to date?
-Where do you want to be in five years?

You will begin to assemble a binder or Word file of your answers to these different types of private equity interview questions. You’ll practice your answers so they sound natural, specific and convincing. And you’ll be constantly updating and modifying this interview book until you land that elusive private equity job.

References:

Streetdirectory.com

www.mergersandinquisitions.com

http://jobsearchtech.about.com

www.vault.com

Landing a venture capital job interview is only half the battle on your march toward a venture capital career. You still have plenty of work ahead of you to prepare for the interview and hopefully convince a few skeptical venture capitalists that you’re right for their firm.

The VC firm is looking at your ability to contribute to the firm. Doing a bit of your own due diligence will help in preparing you for the interview and determining whether this firm fits within your own venture capital career goals.

First off, know the firm’s portfolio. You will likely be asked why you want to work for that particular firm, so be sure to gear your answer toward the focus of the VC firm. You’ll want to determine how much capital the firm has invested, their successful exits, and the investments that have not performed well for them.

The more you know about their firm, the better off you’ll be in the interview. Are they focused on seed capital? Early stage? Late capital? Do they have one or two investments that do not seem to fit with their overall portfolio? Why? Key information sources include the firm’s website, press releases, Google search, plus broader business search services such as Hoover’s or Dow Jones Factiva.

You also need to demonstrate your passion for the industry, whether it’s technology or the entrepreneurial culture overall. Passion and enthusiasm for finding and starting the next great company is what keeps venture capitalists going.

Study the firm’s principals and their biographies. Google their names and check out their blogs or social networking sites. Since venture capital firms are often much smaller than investment banks and private equity firms, they look for personalities that fit in well with their firm and culture. See if you share some of the same interests as the partners, and determine how you can bring that out in the course of the interview.

Know their competition, too. Conduct research on competing firms and their portfolio companies. Sometimes asking a pointed question about why a firm passed on a particular investment, versus another venture capital firm, can open up a discussion in an interview and show the interviewer that you’ve done your homework.

Familiarize yourself with venture capital fundamentals, the jargon, and how term sheets are structured. Not knowing what a key term means could hamper your success.

Think about your background as it relates to startups. If you’ve started a business, worked on any deals, even part-time, or done any research for a local start-up or angel investor, figure out how you can work that into the interview.
Finally, you’ve got to show them that you can hit the ground running. VC firms are driven by ideas, innovation, and the ability to execute. Demonstrating that you have great ideas gives you an edge above the competition. Guy Kawasaki, the famed Silicon Valley venture capitalist, says you should prepare five ideas for your venture capital job interview. This is known as your “investment thesis” and some experts consider it a make-or-break part of your interview. Think about the specialty and niche you bring to the table, along with the focus of the VC firm, and cater your ideas to future investment opportunities that fit their strategy.

References:

JobSearchDigest.com

http://futurevc.blogspot.com

The interview process for a private equity job resembles that for investment banking, in the sense that there is typically a “first round” of screening by phone or in person to determine whether you’re qualified for the job. Then there’s a much more in-depth “superday” of interviews where you’ll meet many different people in the firm, including Associates, Principals and Partners while they try to decide if you’re a good fit.

However, there are some nuances to the private equity interview process. You may have several interviews with the same person. You will typically have to do some sort of case study, either in advance or on the interview day, which you present to members of the firm. And you may be tested on your leveraged buyout knowledge and financial modeling skills.

Private equity firms are generally smaller than investment banks. Since they do not hire as many people, they can take more time and be more selective.

When interviewing, private equity firms will look for analysts with good M&A and LBO deal experience. They’re in the business of buying companies. So your capital markets or IPO experience doesn’t interest them. You’ll need to make a list of all the deals you’ve worked on and carefully decide which ones to feature, and why they mattered. Go back and review the details of these deals so they’re fresh in your mind. Chances are, they’re the same deals featured prominently in your resume. In this respect, it’s better to pick unusual deals or ones in which you contributed something significant, or learned something significant.

LBO deals are a good choice because you can describe why the deal worked and demonstrate your knowledge of the process. When talking about a deal, give a brief overview of the company, industry and major deal points, and then describe what was significant about that deal.

By all means do your homework and be prepared to discuss the PE firm’s portfolio and spend time researching the firm’s major competitors as well. By asking a few pointed questions, you can get the interviewer to “sell” the firm to you during your meeting.  Some experts suggest that asking about things such as the business model, revenue model or other strategic questions about a portfolio company is a good way to showing you understand their business.

Private equity firms usually focus on well-established and already profitable companies. If your interest leans more toward technology or start-up firms, then you may want to tweak your resume and interviewing focus toward venture capital instead, which we’ll discuss in our next post.

References:

www.mergersandinquisitions.com

www.ehow.com

Tuck School of Business, Dartmouth College   http://www.tuck.dartmouth.edu/