Venture Capital (VC) firms are one of the key players in the global tech startup ecosystem.

These institutions raise capital from limited partners –ranging from family offices to pension funds– to invest in tech startups in various stages and of various verticals. Made in exchange for equity or ownership in the startups, through these investments, VC firms work together with founders to grow these startups. They eventually intend to exit through channels such as acquisitions or IPOs.

Some of our readers might be reading this article to prepare themselves for a career in VC firms; they would like to get an idea of how these guys work. But we are publishing this article with startup founders in mind, particularly those who are in the midst of a fundraising journey.

It is important for founders to know the roles of the individuals working in a VC. Understanding the difference enables founders to be more strategic in their approach, as different roles have different levels of authority in deciding an investment –or one might say, the person who is eligible to write the check.

In an article published by Inc., Christine Bechhold of Empire Angels wrote that VC partnerships are “confusing even to those on the inside.” This happens because different firms may use the same title in different ways, but in general, there is a basic hierarchy that is commonly implemented in various firms. To clear out any confusion, Bechhold recommends founders not hesitate to ask questions with the venture capitalists that they meet.

In general, a VC usually consists of an investment team and a support team. As the names suggested, the first one focussed on doing the work of scouting and investing in high-growth potential tech startups in the market that they operate in.  The latter supports the VC firms and their portfolio companies in functions such as marketing and public relations or operations.

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The following is a list of job titles that typically exists in a VC, starting from the most junior role:

Analyst

As the most junior member of an investment team in a VC firm, an Analyst may have limited decision-making power. But their role remains crucial to the VC firm as they are the ones who are in charge of doing research and due diligence, building a network, keeping up with industry trends, and making outreach to potential investees.

In terms of qualifications, analysts are usually pre-MBA degree holders and may have a background in tech, finance, banking, consulting, or even journalism. After two to three years in their position, they might get promoted to Associate, join an MBA programme, or start their own companies.

Associate

Associates focus on analysing business plans and industry sub-sectors and executing transactions. As their job involves conducting screening exercises of potential investees, despite not being eligible to make the final decisions, Associates have the ability to filter out companies and influence the principals and partners in their decision-making process.

In their fundraising journey, founders might stumble upon individuals with Senior Associate roles. Usually a post-MBA, they typically stay in the roles for two to three years before being considered for a principal position or pursuing other opportunities.

While it is easy to underestimate the Analysts and Associates in your network, due to their limited decision-making capacity, we must remember that these roles bring their own value to the VC firm involved.

As senior members of the investment teams, Principals have plenty of influence in a VC firm. They are also the ones who will be working very closely with portfolio companies following an investment. Their key strengths include their vast network in the startup ecosystem, enabling them to identify new opportunities, negotiate terms of acquisitions, and execute successful exits.

With their ability to bring in deals and generate returns to the firm, they might get promoted to Partner.

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Partner

The top of the food chain. Jokes aside, Partners are a group of individuals who own the firm and have control over the capital that is being invested. They are the ones with the final word on an investment deal.

The role of a Partner includes identifying key investment parameters, making final decisions about investments and exits, being a Board member in some portfolio companies and becoming the face of the VC firm itself. They report the fund’s performance to the Investment Committee.

Partnerships within a VC firm can be structured in a hierarchy or in an equal positioning.  But in their fundraising journey, founders might stumble upon a General Partner and a Limited Partner.

A General Partner invests their own money in the fund while raising the rest of it. They are also in charge of managing the fund, making investment decisions, and might even be in charge of operational and administrative responsibilities if they also have the title Managing Partner in it.

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