Investment banking skills used in VC

Hi! I’m glad you’re here. You’ve made it to issue #25 of VC Demystified🪄.

My name’s Nicole - I’m a Principal at an early stage venture fund, and I know firsthand that VC can often be a black box. Breaking into the industry may feel daunting and resources can seem scarce and inaccessible. I wanted to put together a newsletter to give others the playbook I wish I had when I first started.

Someone once said to me that I play a very active role in my life. And it struck a cord with me because I never thought of life this way. But it’s true. There are people who want something and they go after it day after day and then there are people who want something and only dream about it. You being here means you are playing an active role in your life too.

I’m proud of you!

Today’s deep dive: The truth about how investment banking experience translates to early-stage venture capital

My personal mission is to open as many doors as possible for other people and this newsletter is just one avenue to do that. As always, I will continue to post VC insights daily across my socials for those of you who prefer those channels.

The truth about how investment banking experience translates to early-stage venture capital

Let’s face it - many VC firms want their juniors to have an investment banking (IB) background.

As a result (and sadly), a good percentage of VC job applications look like the below:

So let’s get real about about why this is the case.

I’ve always been an advocate in the ecosystem stating that investment banking is NOT necessary for early stage venture. And I do strongly believe that.

But as someone who did 4 years of investment banking before VC, I’m going to tell you exactly what skills VC firms admire about someone with an IB background and what skills are transferrable to the day-to-day of a VC investor.

The reason I don’t think IB is necessary is because most (if not all) of these skills can be learned on the job.

OR if you are aware of them before breaking in, you can learn them prior to kickstarting your VC recruiting.

Let’s get into it!

Here are 8 key skills from investment banking that are valuable in early stage VC:

1. Financial Analysis and Modeling

• Skills from Banking: In banking, you likely developed strong financial modeling skills, including creating and analyzing financial statements, cash flow projections, and valuation methodologies. These skills were learned for mature companies so the level of analyses were much more intricate.

• Application in VC: Financial analysis and modeling for early stage VC is significantly simpler than in IB, but it’s helpful to have the base because then you eliminate any learning curve. I’d say the most important analytic skills to know are basic revenue builds, public comparables and VC exit math.

2. Excel and PowerPoint Mastery

• Skills from Banking: Presenting PowerPoints, financial analyses and recommendations to clients or internal teams is common in banking. You likely developed strong excel and PowerPoint skills, mastering how to utilize excel functions and tables and how to craft a presentation page compellingly.

• Application in VC: One of the major jobs of a VC junior is crafting investment memos. In order to do that effectively, you’ll likely need to know how to use Excel, PowerPoint, and/or Word well, while also understanding how to present the information appropriately.

3. Understanding of Financial Markets

• Skills from Banking: A solid understanding of financial markets, instruments, and economic indicators is important in banking roles. Investment banking is an advisory role to both public and private companies, it is NOT a trading role. Which means you are not trading stocks and monitoring public markets minute by minute. What you learn in banking is how company performance, business models and industry factors affect the company’s valuation and broader public markets.

• Application in VC: This knowledge helps in understanding the broader context in which startups operate, assessing market conditions, and predicting how external factors could impact potential investments down the line. Most importantly, it helps you understand a startup’s potential exit opportunity via M&A or IPO and the importance of the cap table at an exit.

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