Venture Capital

Venture capital consists of funds obtained from backers that are invested in young, innovative companies (often in the tech and health care sectors) in exchange for an equity stake that hopefully can be translated into a profit when the company goes public or is merged with or sold to another company. The National Venture Capital Association (NVCA) reports that “venture capital is a catalyst for job creation, innovation, technology advancement, international competitiveness, and increased tax revenues.” Some of America’s most well-known businesses were founded with the help of venture capital, including Facebook, Apple, Amazon, Whole Foods Market, Google, FedEx, Starbucks, Staples, Dropbox, and Intel. Forty-two percent of U.S.-produced drugs approved by the Food & Drug Administration between 2009 and 2018 originated with venture capital funding, according to research released by Silicon Valley Bank.

Associates, analysts, managing partners, general partners, and entrepreneurs in residence are the key players in this industry, but venture capital firms also need chief financial officers, controllers, accountants, lawyers, and marketing, public relations, computer security, information technology, and office workers.

Venture capital firms are located throughout the United States, although most are headquartered in major cities. There are also opportunities throughout the world—especially in Europe, Israel, China, and India. Africa, Latin America, and Southeast Asia also have burgeoning venture capital sectors. Most VC firms have fewer than 15 employees. In fact, the NVCA reports that the average VC firm had 7.1 principals, down from nearly 9 principals in 2007. Many funds have only a few partners and support staff (secretaries, receptionists, etc.). As a result, VC firms need new hires to hit the ground running and begin producing immediately. This means that there are few opportunities (except in support positions) for those with just a bachelor’s degree and no industry experience. Most venture capital firms seek workers with a college degree, plus several years of experience at a management consulting firm, private equity firm, or investment bank. Others seek experienced professionals from the information technology, health services, engineering, or biotech sectors, or offer partnerships to successful entrepreneurs who are in their 30s and 40s.

Venture capital partners have excellent earnings. Managing general partners/chief executive officers at venture capital firms received base salaries of $548,898 and total cash compensation of $667,002 in 2016 (the latest year for which data is available), according to Compensation and Employment in the Private Capital Industry, from Preqin and FPL Associates.

In 2019, venture capital firms invested about $133 billion into 10,430 companies, according to the NVCA. The largest area of venture capital investment was in software, where companies received 34 percent of total funding. This was the second-highest annual total since 2000. New commitments to venture capital funds in the United States increased to $51 billion, up significantly from $17.7 billion in 2013. Venture capital firms in California, Massachusetts, and New York comprised 84 percent of total U.S. VC assets under management in 2019. There were more than 10,000 venture-backed companies across 50 states and the District of Columbia, 242 metropolitan statistical areas, and 397 Congressional Districts.