Venture capital firms are increasingly important as a source of working capital for companies, particularly startups. If you are interested in investing in VC companies or raising money from them, there are some basic things to know about venture capital. They include at least human resources involved in the company, their primary roles, and how the company works.

Many startups have successfully made their way to Initial Public Offering (IPO) due to the support from VC companies. They vary widely in the sizes, from small to middle-sized VC companies to those with billions of dollars.

Basic Things to Know About Venture Capital: Human Resources

Of course, the first things to know about venture capital are individuals, who work at the firms and their basic roles. Okay, let us discuss them from the lowest to the highest level (or they called them from the junior to the senior individuals), as cited on Forbes:

Analysts

They are the most junior individuals in a VC firm. They are most university fresh graduates or MBA students, who are having internship programs. The main roles of analysts include attending conferences or studying deals that may have relevancy with the investing strategies of the fund. However, they have no authority to make decisions. Instead, they may be very helpful in helping the management to make informed decision about their investment strategies.

If you are looking forward to raising money from the VC firms, then the analysts can be a helpful ‘bridge’ between you and the senior individuals within the firm. Overall, the main roles of analysts are doing market research, studying the market trends, as well as studying the competition.

Associates

They are immediate positions after the analysts. Also, they can be classified into junior or senior associates, depending upon their tenure. They mostly have financial background and excellent skills in building extended relationships. Like the analysts do, they do not have authority to make a decision. Instead, they feed the seniors with inputs during the decision-making process.

The Principals

Now, we arrive at the decision-making level, namely the senior people, at the VC firm. They are immediate positions after the associates. They have an authority to make decisions about investment options. Their authority is limited to the investment choices. Their authority does not extend to the implementation of investment strategies within the firm.

If you are raising fund through venture capital firms, you will most likely deal with principals, from the beginning phases until you receive the fund in your account. They are potential partners if you plan to build partnerships with VC firms. They have decision-making power, but they are not the most senior people in the firm.

Partners

Yups…. They are the most senior people in venture capital firms. Their positions are immediately above the principals. Partners can be classified into general partners and managing partners. General partners have power in investment decisions, while managing partners have powers in operational decisions. However, both general and managing partners are responsible for raising funds to be used by the firm to invest in one company or more.

Is that all? NO. There are actually some other key persons in the venture capital firm. As they are basic things to know about venture capital, do not miss them on the next post!