Key Takeaways

  • GPs are opening the aperture when it comes to the experience they look for in pre-partners. De-emphasizing the importance of a rarified set of credentials means VC firms can access a much more diverse array of pre-partner talent— people with varying perspectives, backgrounds, and experiences who can add substantial value.
  • Offering an inside look at how you think is important on both sides of the recruiting equation. That’s especially true when it comes to a firm’s culture and values. Many pre-partners would prefer to work for a firm whose values are clearly stated and align with their own thinking.
  • GPs are often unwilling to share carry equally with junior investors. That stance may be worth reconsidering, as carry has emotional weight: Pre-partners want a piece of the action as recognition for their contributions and their role on the fund team.

How competitive is the market for junior venture capital (VC) talent today?

This is the most competitive environment I’ve ever seen, in part because there are more funds in the market today than ever before. In addition to traditional venture funds, there’s been an explosion of crossover funds run by private equity and hedge fund managers who are expanding into early- and growth-stage venture, single and multi-family offices, and corporate VCs. All of these funds are aiming to build strong teams to drive deal flow and help portfolio companies.

General partners aren’t just vying for talent among themselves, either. Junior investors are sometimes launching directly into fund formation, either via the traditional route or by using platforms such as AngelList to raise capital from limited partners. Some are even flipping to the other side of the ledger to become startup founders themselves.

The end result: An ever-larger number of firms are looking for pre-partner employees who have lots of employment options on the table.

How can general partners find the best and the brightest amid this growing competition for talent?

The answer in many cases lies in looking beyond people with standard investment banking or MBA backgrounds and thinking more broadly about what kind of candidates might be a good fit.

One strategy that shows great promise is expanding geographical reach. There are excellent candidates outside of San Francisco, Los Angeles, New York, and Boston—and many of them want to stay right where they are. For instance, while I’m New York-based, I’ve been living in Miami recently, and I’ve met a number of talented local pre-partners who would love to join a VC firm—if they could stay here.

Of course, GPs aren’t always open to overseeing a geographically dispersed team, even after we’ve all worked from home for the last year. There are genuine concerns about how to develop and oversee junior hires in a remote environment, and some VC firms’ cultures depend heavily on face time. Still, for firms that are open to a distributed team, the talent pool may be much deeper.

GPs are increasingly looking to hire team members with diverse backgrounds. How are you seeing that play out?

It’s happening in a number of ways. First, GPs are opening the aperture when it comes to the experience they look for in pre-partners. De-emphasizing the importance of a rarified set of credentials means VC firms can access a much more diverse array of pre-partner talent— people with varying perspectives, backgrounds, and experiences who can add substantial value.

Firms are also starting to consider people who are trend spotters or thought leaders in a specific sub-sector. These candidates are publishing on Substack or finding an audience on social platforms such as Clubhouse, and while they may not have a traditional VC background, they’re demonstrating a depth of knowledge and insight on topics that are relevant to the VC ecosystem. What’s more, their posts are public, which gives GPs a chance to really understand how these individuals think and write—even before the first meeting.

Additionally, new platforms are emerging to help firms identify and develop a more diverse array of pre-partner candidates, and SVB is actively involved in supporting these initiatives. Our venture firm clients are sourcing talent from HBCUs, for example, and offering internships and fellowships to individuals from underrepresented groups. There are also online venture capital education programs, such as NVCA-sponsored Venture Forward’s VC University or Venture Deals by Brad Feld and Jason Mendelson. SVB is a founding partner of NVCA’s Venture Forward initiative, as well as All Raise, which aims to increase the number of female decision-makers (e.g., checkwriters) at US tech venture firms with more than $25 million in AUM from 9% to 18% by 2028. Recently, SVB partnered with Valence, a network of Black professionals, to provide recruitment opportunities for SVB and our investor and startup clients.

What role does a VC firm’s culture play in talent attraction?

Offering an inside look at how you think is important on both sides of the recruiting equation. That’s especially true when it comes to a firm’s culture and values. Many pre-partners would prefer to work for a firm whose values are clearly stated and align with their own thinking. For some VCs, this approach is in their DNA; others shy away from making public statements about social issues. GPs who have strong internal consensus on values and ethics might consider going more public with their stances as a way to both attract and retain junior talent.

What retention strategies are you seeing to keep junior talent?

They vary widely. Some operate under the assumption that pre-partners will only stay for two to three years. In this scenario, an active retention strategy doesn’t make financial or logistical sense, as certain investors intend to cycle through a pre-partner position early in their careers and then go on to start their own company or fund. Other firms, however, take an active and intentional approach to training and mentoring junior talent through a culture of apprenticeship. They may seek board observer seats for pre-partners or offer them enhanced exposure to portfolio companies. These firms have an obvious advantage when it comes to attracting and retaining pre-partners who are looking for a structured or linear approach to career development. That’s especially true in the Covid-19 era, as GPs have become even busier, chasing a faster deal cycle. In this landscape, VC firms with an explicit commitment to developing junior talent really stand out.

How does compensation fit into the picture?

It’s obviously important. However, there’s an inherent tension: Pre-partners are always looking for higher total compensation and greater access to carry. For their part, GPs are often unwilling to share carry equally with junior investors. That stance may be worth reconsidering, as carry has emotional weight: Pre-partners want a piece of the action as recognition for their contributions and their role on the fund team. At times, that emotional value may outweigh purely economic calculations. For instance, a pre-partner might be more interested in a lower salary plus carry than one that offers a higher salary and no carry. Recent compensation research from the Emerging Venture Capitalists Association (EVCA) is a good starting place for empirical comparisons. Pre-partners and GPs alike can look at how their compensation models, including access to carry, compare across roles and titles.

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The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates. This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. You should obtain relevant and specific professional advice before making any investment or other decision. Silicon Valley Bank is not responsible for any cost, claim or loss associated with your use of this material.

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