If you’re preparing for a VC fundraise, understanding how these firms are structured can make a big difference. Not only does it help you figure out who to reach out to, it helps you build relationships more intentionally and strategically.
The VC team: Who Does What?
Here’s a breakdown of the key roles you’ll typically find in a venture capital firm:
Managing Partner / General Partners (GPs)
Partners
Principals
Associates
Here’s a breakdown of the key roles you’ll typically find in a venture capital firm:
Managing Partner / General Partners (GPs)
- Most senior leaders in the fund
- Often contribute their own capital and lead the fund’s overall strategy
- Responsible for raising money from LPs (Limited Partners) and making final investment decisions
- Often sit on boards of portfolio companies
Partners
- Senior investors who lead deals, due diligence, and negotiations
- Often specialize in specific therapeutic areas (eg. oncology, gene therapy)
- May serve on boards or act as hands-on advisors
- Also play a key role mentoring junior team members
Principals
- Rising senior team members who work on all aspects of investments
- Lead due diligence (scientific, regulatory, financial) and may help shape deal terms
- Often involved with portfolio support, strategic, operational or fundraising-related
Associates
- Often the first person you’ll interact with at a VC fund
- Analyze scientific data, market potential, and competitive landscape for potential investments
- Support screening, modeling and due diligence
- Often have advanced degrees (PhD, MBA) or early finance/biotech experience
Analysts
Venture Partners / Entrepreneurs in Residence (EiRs)
- Focus on research, data crunching and building investment memos
- Provide important prep work and support across deals
- Typically newer to VC but often have strong technical or business backgrounds
Venture Partners / Entrepreneurs in Residence (EiRs)
- Not always full-time, these are industry experts or experienced biotech entrepreneurs who advise on investments, support portfolio companies or help spin out new companies, leveraging their operational experience
- Help evaluate companies, advise on strategy or incubate new ventures within the firm
You might hear advice like “only pitch to partners” and to only target the highest ranks from the beginning, but don’t underestimate the value of building relationships with junior team members. Associates and principals are often your first champions inside a fund. They do much of the legwork during diligence and can be instrumental in moving things forward. Treat them with the same respect and openness you’d offer anyone else, as they might be the ones advocating for you behind closed doors. And remember: Associates and principals are also under pressure to bring in great deals. So reaching out to them first can be a smart move. As your conversations progress, they’ll usually loop in partners as needed.
General VC Fund Dynamics: What Is Going on Behind the Scenes?
VCs Have to Fundraise Too
Just like you, VCs must raise money, only they do it from Limited Partners (LPs) like pension funds, endowments, family offices or corporates
Investment Strategy
Each fund is built around a thesis.
Deal Sourcing and Due Diligence
Investment Execution
VCs Have to Fundraise Too
Just like you, VCs must raise money, only they do it from Limited Partners (LPs) like pension funds, endowments, family offices or corporates
- General Partners (leaders of the VC fund) typically contribute 1 - 5% of the fund themselves to align incentives
- Fund sizes vary widely from $10M to $500M+, and as closed-end funds they have a set lifespan (e.g., 10-12 years).
Investment Strategy
Each fund is built around a thesis.
- Some target early-stage science (Seed, Series A), others prefer later-stage clinical assets
- Some are platform-focused, others look for single-asset plays across one or many industries
- Most funds invest in 10 - 30 companies to spread the risk and optimize returns
Deal Sourcing and Due Diligence
- Everyone at the fund may scout opportunities - through conferences, accelerators, academic spin-outs or referrals
- Once a company is in scope, the due diligence process begins, diving into the science, IP, team, market, regulatory risk and financial strategy (more on that in the next section)
Investment Execution
- Funds invest via equity (preferred stock) or convertible notes by leading or co-investing in funding rounds. Lead investors set the company valuation and terms of the deal.
- For larger rounds, funds often release capital in stages, tied to clear milestones
|
Portfolio Support (Post-Investment)
|
To get a sense of the level of support that VCs provide post-investment, try to talk to their current portfolio companies. |
Exits and Returns
After an exit:
Fund Close
At the end of a fund’s lifespan, GPs begin to wind down/liquidate remaining assets and raise the next fund. Repeat founders often maintain relationships across multiple fund generations.
- As mentioned earlier, VC is a high-risk, high reward game:
- VCs are aiming for ~3x return on investment (ROI) after the closed-end fund reaches its end date (otherwise they’d just put their money in the S&P 500, which would typically double in that time period).
- Successful exits can yield 10x-100x returns from individual companies, but most investments fail or break even. The general paradigm is called the 100-10-1 rule (VCs evaluate 100 companies, invest in ten, and one of them “makes the fund”).
After an exit:
- LPs get their capital back +~80% of gains (per the fund’s terms)
- GPs earn ~20% carried interest
- Annual management fees (1.5-2.5% annually) cover operations.
Fund Close
At the end of a fund’s lifespan, GPs begin to wind down/liquidate remaining assets and raise the next fund. Repeat founders often maintain relationships across multiple fund generations.