What is Venture Capital (VC) Management? Why is it so Sought After?
Venture, as a new business venture, and Capital, meaning the capital investment needed for the new venture, together make the term Venture Capital (VC). Simply put, Venture Capitalists are the people who facilitate new businesses by providing the needed capital to the undertaking for either inception or expansion.
The business ventures that seek out for capital assistance from Venture Capitalists do not have the proposition of attaining public funding. This happens because the companies seeking capitals are start-ups yet to establish their business models or need huge capital for expansion. Either way, they need someone with deep pockets to put their money to lubricate their projects. The answer is Venture Capital firms, which provide money in the capacity as an institution. Venture Capitalists need to possess strong business guile to be able to differentiate the lucrative venture investments from the non-lucrative ones.
Venture Capitalists not only foster businesses, but they also, in a way, foster the innovation of new ideas and prototypes. Sometimes, finding genuine business ideas from a lot can be like finding needle in the haystack, but it is worth the effort. After Venture Capitalists have successfully located a promising business venture that bears results, the investment result can be rewarding.
After Venture Capitalists have stationed their money in a business, their work is generally done. What an easy-breezy life, isn’t it? Well not always. Sometimes, the judgement can go wrong, or the economic climate can go frizzy and business structure can have loop holes. This is why Venture Capitalists have to spend a lot of time in deciding where to invest and considering every aspect of the business they are investing in. It is a well known fact that a large percentage of business receiving Venture Capital funding do not succeed, but then there is one million-dollar idea that compensates for the loss! Thus, Venture Capital industry is full of hopes and optimism.
To keep themselves abreast of latest developments, Venture Capitalists have to keep an updated spreadsheet about the most recent market trends, the competitive range, and a diverse industrial knowledge. So when a new promising young business enters their range, they know what and how to compare it with its competitors and judge its market potential.
Qualification Needed for a Career in Venture Capital Management
Many graduates that are hired by Venture Capital firms possess undergraduate, graduate or doctoral degrees in some technical field, extensive consulting experience in the high-tech sector, or several years of employment at a prominent tech-based company or Investment Bank. These credentials are important to keep in mind, if one is considering starting a career in Venture capital after graduation from business school.
Securing a position in Venture Capital may require spending several years in another financial or functional area, where one can gain experience in a particular industry, hone business skills, and prepare for transition into this highly competitive career field. Most VC funds employ fewer than ten people and work on tight budgets, based on small fees paid by their investors. As a result, these funds hire Associates who are experienced in the Venture Business and bring new members into the firm when current employees leave.
Skills Needed for a Career in Venture Capital Management
Venture Capitalists are practical beings as there is no room for loose ends when large amount of money is involved. Aspiring candidates must learn about practicality and shrewdness in which the businesses world operates. Hard work and determination are other crucial skills that are needed for a Venture Capitalist. Since not every investment reaps results, it takes time and patience to reach to a level of becoming investment proficient. With time, experience and exposure, the skills can be bettered. Remember, investing is a long term game, and more so in Venture Capital.
Venture Capitalists need to be perpetually hungry for knowledge. This knowledge-seeking attitude will take one places and help build professional network. Getting informed about the competitive market will better one’s game. Sometimes, it takes over a decade for professionals to rise to the position of a Venture Capitalist, but the key is to remember that knowledge is important as much as the capital to be invested.
It is popularly believed that good VC’s do not just absorb knowledge, but also reciprocate this process by being good teachers. Being associated with start-ups not only means that VCs are only pouring in their money in there, but they also share their vast knowledge gained over the years. At last, yet not the least, communication skills, persuasion skills, social skills, organizational skills, problem-solving abilities, and most importantly, business acumen will roadmap one’s way to becoming a successful Venture Capitalist.
Hierarchy in Venture Capital Carer Path
There is a reason why everyone wants to get into the top business school from around the world, and if the aim is becoming a Venture Capitalist, then this might be an even stronger reason to get into one. Many candidates graduating from top business schools get entry level positions like Business Analysts, Investment Bankers, or Venture Capital interns, which are good position to start with. Moreover, VC is a lot about growing one’s professional network and getting one’s name noticed. The extensive alumni and peer network of a top B-school generally facilitates this process.
Venture Capital and Private Equity are similar in some respects because both require backgrounds with high level of financial knowledge and general business acumen. However, they differ in other ways. Venture Capital deals with early-stage finance, while private equity focuses on financing the expansion, turnaround and acquisition of established companies from a broader industry base. Entry into Venture Capital or Private Equity generally represents the start of a second career, following a career as an entrepreneur, Manager of a large established company, or Analyst in Investment Banking/Equity Research domains.
Unlike Investment Banking, where transactions are performed for fees, Venture Capital or Private Equity is a business activity done primarily to realize capital appreciation from funds invested. When Venture Capitalists hire new Associates, they demand outstanding achievement and limitless potential from their recruits, who are expected to be well-rounded in Finance, Marketing, Technology, and Corporate Strategy.
Pros of a Career in Venture Capital Management
The pros of a career in Venture Capital are many. Apart from the high status and respect in business circles, especially in entrepreneur ecosystems such as the Silicon Valley, Venture Capitalists enjoy the perks of tremendous autonomy and a flexible work schedule. Most entrepreneurs are always seeking to meet Venture Capitalists and hence the professional network one builds in this career is wide, strong, and qualitative. The opportunity to spend substantial amount of money also stimulates Venture Capitalists’ intellectual interests. Overall, the career as a Venture Capitalist is a highly responsible, respected, and rewarding experience.
Cons of a Career in Venture Capital Management
Largely, there are two aspects that do not go well with a career in Venture Capital. Firstly, getting into this niche industry is extremely difficult. There are no easy entry options apart from internships for young professionals. Also, switching a job from one VC firm to another is very difficult because there are only a handful of VC firms around in any business ecosystem. There is immense pressure of delivery because large amounts are invested in multiple start-ups and the portfolio has to generate results in a reasonable time frame of 5-10 years. The Venture Capitalist has to be able to keep track of all activities in his portfolio start ups and ensure there is no slippage. Finally, having to travel at all times, to visit invested companies and meet prospective investments, Venture Capitalists need to be a travel lover.
Who is a Career in Venture Capital Management good for?
As a VC, you would be looking out for the “next great idea” to invest in. Paying keen attention to detail and solid business acumen could lead you to invest in the right in the right venture. If you like evaluating new ideas, keeping track of all latest developments in the business worlds, have the analytical mindset to look into all aspects of a start-up to evaluate its business potential, Venture Capital can be a great fit with your skills.