Investment Banking to Venture Capital: What to Unlearn

Moving from investment banking to venture capital is a common path, and in our view the hard part is often less the skills you are missing than the ones you have. Banking trains you to value a business from its cash flows and comparable transactions; early-stage venture usually has neither, and survey evidence suggests most investors do not use the discounting toolkit you spent two years mastering.

That's an awkward thing to hear after two years of 80-hour weeks. It's also good news: the part that transfers is the part that's hard to teach.

Banking trains you to grind a process to a close. That muscle carries over intact. What bankers who make the move tend to rebuild, deliberately, is the way they judge teams and markets.

Why VC firms hire bankers, and where the fit breaks

Banking is a hard, structured apprenticeship. Mergers and Inquisitions' 2026 salary update puts analysts at large US banks at roughly $100K to $125K base and $165K to $225K total, with associates at $285K to $500K total.

The hours are the price. Its investment banking hours guide reports 70 to 80 a week for analysts. Fortune reported in September 2024 that JPMorgan had capped junior hours at 80 a week in most cases, a first for the bank, while Bank of America rolled out software requiring bankers to log their hours daily.

Firms tend to hire bankers because they are reliable under deadline, they can build a model and run a process without supervision, and growth-stage funds genuinely need financial rigor. The fit tends to break at the early stage, where the banker toolkit has the least to work on. That is also where many junior venture seats sit, which is why we think targeting matters as much as effort. For a straight comparison of the two careers, see investment banking vs venture capital.

What transfers from investment banking to venture capital

Financial modeling, valuation and comps, used constantly at growth-stage funds and in every returns analysis.
Process stamina: running a data room, coordinating counsel, holding a closing date.
Reading legal documents quickly, which speeds up term sheet and stock purchase agreement review.
Preparation as a default habit, and the polish that comes with client work.
Sector coverage, where your group lines up with a fund's focus in software, healthcare, fintech or consumer.

What you may need to unlearn

The valuation toolkit. In the Gompers, Gornall, Kaplan and Strebulaev survey of 885 institutional venture capitalists at 681 firms, only 22 percent used net present value methods at all. Nine percent used no financial metrics whatsoever, rising to 17 percent among early-stage investors.

What they do use is blunt: 63 percent cite a cash-on-cash multiple and 42 percent an IRR, with an average required multiple of 5.5x and an average required IRR of 31 percent. In our view, a three-statement model rarely answers an early-stage question. It can end up writing down assumptions you have no evidence for yet.

Diligence built for mature cash flows. Banking diligence mostly verifies a history. Venture diligence mostly tests a hypothesis about a future. The same survey found VCs spend an average of 118 hours on due diligence per closed deal and make about 10 reference calls, and a large part of that is talking to customers and former colleagues rather than reconciling financials.

The advisor's distance. A pitch book presents options and lets the client choose. An investment memo picks one and says what would have to go wrong. Interviewers are likely to notice the difference.

Sourcing was not your job. In the same survey, about 30 percent of deals were proactively self-generated and another 30 percent came through professional networks, against roughly 10 percent inbound from company management. Bankers mostly execute deals someone else found. Many venture firms pay juniors to find them, which is why we describe early-stage venture as hunting rather than gathering.

But growth funds need exactly what I know

Some do. At a growth or multi-stage fund, the company has revenue, the round has comps, and a banker can be productive in week one. If that is your target seat, the unlearning here matters less.

But many junior venture seats sit at earlier stages, and even at a growth fund the question underneath the model is about people and markets. The model tells you what the price implies. It doesn't tell you whether this team is the one to deliver it. We'd still build the judgment muscle, whichever stage you target.

Building judgment about teams and markets

This is the skill that replaces what you unlearn, and in our view it is the one bankers most often underinvest in. The survey found 95 percent of firms name the management team as an important factor in selecting investments and 47 percent name it the single most important factor, and 96 percent cite the team when explaining their successes. Little in a banking analyst's job builds a view on people.

So build it the way an investor does. Meet founders while you are still at the bank and write down, before the outcome is known, whether you think they will succeed and why. Go back six months later and check. That loop, repeated thirty or so times, is our working definition of "judgment", and it is a version of it you can actually present in an interview.

A useful first move: rebuild one financing as a memo, with no comps

One exercise we like: take a seed or Series A round announced in the last year in a sector you covered. Reconstruct the case as it stood the week before the round, using only what was knowable then: the product, the team's history, the customers you can reach, the market structure. Then write two pages that end in invest or pass, with the three things that would have to be true and the one that would kill it. Leave out the comps page and the DCF.

In our view this is one of the most useful artifacts a banker can carry into an interview, because it shows the thing your resume might seem to argue against. The venture capital investment memo guide shows the format, and the venture capital case study interview guide covers how the same exercise shows up live.

Compensation, briefly

Many people who make the move take a cash cut for several years. Venture5's 2025 Venture Capital Salary Survey of 700-plus professionals at 50-plus firms puts median base salary at about $130K for associates and $150K for senior associates, against $285K to $500K in total compensation for banking associates per Mergers and Inquisitions. That survey publishes base salary rather than total compensation, so treat bonus and carry as firm-specific.

Carta's Fund Economics Report 2025 reports that the median GP takes 20 percent of fund profits in carried interest, split across a small partnership and paid years later. The venture capital salary guide has the detail.

When to move from investment banking to venture capital

After the analyst program (year 2 or 3). Probably the most common window. You have the training and a clean exit story, and firms hiring pre-MBA associates often look for this profile. The risk is that you have no network outside the bank.

After promotion to associate. You are more expensive and more senior than most VC associate roles, which narrows the target list to growth funds and larger multi-stage firms with senior associate or VP openings.

Via an MBA. Some firms recruit post-MBA associates and principals, and the two years buy you time to build a founder network, join a student fund and intern at a VC. The cost is tuition and two years of income. Our MBA to venture capital guide weighs it.

Whichever window you pick, start about 12 months early. Venture hiring tends to be slow and referral-driven. The venture capital recruiting timeline guide maps a typical year.

What VC hiring managers look for in an investment banker

A thesis with names in it. Not "I like B2B software" but "vertical AI for insurance brokers, and here are six companies."
Evidence of sourcing: a tracker, warm founder relationships, or a company you flagged to a friend at a fund.
A memo that reaches a decision and states what would have to go wrong.
Fluency with venture instruments: SAFEs, convertible notes, preferred terms, option pools, pro rata.
A believable reason. "Better hours" can read as a red flag; "I want to back companies before the outcome is known" usually reads better.
Calibration. A view on people that you have tested against reality and been wrong about at least once.
Modeling accuracy, which they tend to assume you have and may check anyway.
Founder empathy from friends, side projects or a small angel check.

Building an investing record while still in banking

The hardest part for a banker is proving investment judgment without having been allowed to invest. Structured programs that put you inside a real process can help with that.

1752vc's Venture Fellow program is one of them: eight weeks, taught live and online, where the material is real pitch materials and diligence on companies currently raising rather than filings and comparable transactions. In our view that is useful re-training for a banker, because the question moves from what the numbers support to what would have to be true about a team and a market for this to work. Sessions are virtual and applications are reviewed on a rolling basis, which makes it easier to fit around a banking schedule.

Our take

Bankers make good venture investors when they treat the move as a change of craft, not a lateral hire. Keep the stamina, keep the rigor, and put most of your prep into the two things banking rarely asked of you: finding deals and judging people.

Banking taught you to explain the price.

Venture asks you to bet on the people.

Key takeaways

Banking gives you modeling and process stamina; in our view the harder work is unlearning a diligence style built for mature cash flows.
Only 22 percent of the 885 VCs in the Gompers survey used net present value methods, and 9 percent used no financial metrics at all, which suggests the discounting toolkit is not what most early-stage firms are buying.
Sourcing and judgment about people are two skills banking rarely builds, and it helps if both are visible before you interview.
A high-value artifact is a two-page memo that rebuilds a real financing with no comps and ends in a decision.
A cash cut is common: per Venture5, median VC associate base salary is about $130K against $285K to $500K total for banking associates.

Frequently asked questions

Can you go from investment banking to venture capital?

Yes, and it is one of the more common entry paths, especially into growth-stage and multi-stage funds where financial rigor is used daily. Early-stage funds are more selective, because sourcing and judgment about founders matter more than modeling when a company has no revenue to model.

How long should you work in investment banking before moving to VC?

Many moves happen after two to three years as an analyst or shortly after promotion to associate. Leaving earlier can leave you without a complete training story; staying longer can make you more expensive than most VC associate seats. It usually helps to start building a thesis and a founder network at least a year before you leave.

What skills from investment banking transfer to VC?

Financial modeling, valuation, process management, fast reading of legal documents and disciplined preparation all transfer, particularly at growth-stage funds. The gaps are deal sourcing, judging founders rather than transactions, working without comparables, and writing a memo that ends in a recommendation rather than a set of options.

Do venture capitalists use DCF valuation?

Mostly not at the early stage, according to survey data. In the Gompers, Gornall, Kaplan and Strebulaev survey of 885 VCs, only 22 percent used net present value methods, while 63 percent used a cash-on-cash multiple and 42 percent an IRR. Average required returns were 5.5x and 31 percent, applied to a story rather than a forecast.

Do you take a pay cut going from banking to venture capital?

Usually, at least at first. Venture5's 2025 survey puts median VC associate base salary at about $130K and senior associate at $150K, while Mergers and Inquisitions puts banking associate total compensation at $285K to $500K. Carried interest is the long-term offset, but it concentrates at principal and partner and pays years later.

Sources

Disclaimer: This guide is for general education only and is not legal, tax or investment advice. Laws, market data and program terms change, so it may not reflect the latest developments or fit your situation. Treat it as a starting point, not a source of truth, and talk to a qualified lawyer, accountant or financial adviser before you make decisions.