The job:
What do venture capitalists do? Venture capitalists invest money in startups to help finance the development of new products or services. In return, they receive a stake in each company they help finance. If the startup is successful, the venture capitalists backing it make a profit. So, very simply, a venture capitalist has four basic job functions:
* Find the deals: look for good private start-ups to invest capital
* Winning the deals: convincing entrepreneurs that VC money will bring the most added value to the startup
* Work on the deal: collaborate with entrepreneurs to make the company a great success.
* Capital raising – Capital raising to invest in these companies
Unlike angel investors, who invest between $250,000 and $500,000 in companies to help carry out their business plans and market research, venture capitalists typically invest between $5 million and $50 million. “So they have their skin in the game in terms of ownership,” explains Atul Kapadia, managing director of Infinity Capital, a Palo Alto, California-based venture capital firm. Therefore, the role of a venture capitalist goes far beyond making parent equity investments. “Venture capitalists are active advisers to their portfolio companies on issues ranging from operations to strategy. They support entrepreneurs and management teams during a company’s growth phase through their own efforts and the extension of their network,” explains Anju Ahuja of Chicago. First analysis of the Venture Capital firm. Whether it’s finding and hiring the right talent on short notice, identifying the best bankers for an equipment leasing line, or getting an introduction to the first key client, venture capitalists have the ability to open the first doors for their startup companies. purse.
The successful venture capitalist
Relatively few recruits for a venture capital career come straight out of college. Sure, a BE, MBA, or CPA will provide a useful foundation for venture work. “But if you understand emerging technologies and market fundamentals, if you’re really motivated to help other people succeed, and if you’re intellectually curious about new ideas, you’re well prepared for a career in venture capital,” says Mhatre. Historically, venture capitalists came from operating or financial backgrounds. More recently, people with technical backgrounds plus experience in strategy and corporate development have become active venture capitalists. Each of these backgrounds provides a unique and beneficial perspective, although “it’s becoming increasingly difficult for people with pure financial backgrounds to differentiate themselves and provide the depth in strategic guidance and operational support that entrepreneurs seek,” says Ahuja. This is especially true for early-stage venture capitalists because startups seek business and strategic advice. “People with financial engineering and investment banking are a good fit for later-stage companies,” she adds.
Certain market sectors, such as manufacturing or telecommunications, which absolutely require technical knowledge. In these cases, an engineering degree or technical experience is invaluable. “Domain knowledge is everything in these markets. I spent the last two years of my life understanding the data communications market,” says Kapadia. For markets like e-commerce, a non-technical background is fine as long as the venture capitalist is deeply connected within the industry. “But you also need to understand that a venture capitalist will never know as much as the entrepreneur they’re backing, so business experience is very important. An MBA from a top-tier university or strong on-the-job training would be a huge plus for him.” a venture capitalist,” adds Dev Purkayastha, a 19-year veteran venture capitalist from Southern California who is about to form his latest fund. “Some companies are attractive because of their technology, but most live and die by sales and marketing strategies. Without a strong market focus and unique points of differentiation, the best technologies will never reach their full potential,” says Ahuja. “While a technical background is quite helpful, the ability to refine business models and work on corporate development issues is necessary,” he adds. But, says Mhatre, whether his background is technical or non-technical, “someone with start-up experience, marketing and operations experience, and an MBA degree would be a good fit for a venture capital job.”
In this business, personality is just as important as professional experience. “Above all, the most suitable traits for a VC are good interpersonal skills and a good network. You must be able to co-exist with and lead your entrepreneur while adding positive energy within your partnership,” emphasizes Kapadia. “You have to be passionate about what you do,” agrees Purkayastha. “At the same time, you need to have a bit of detachment to maintain a level of objectivity in tracking your investments,” she adds.
“Ideally, venture capitalists should be extremely open-minded,” says Ahuja. They must balance playing a visionary role alongside identifying processes and methodologies that help young companies grow. “This is a people business. Venture capitalists don’t invest in business plans or concepts, they invest in teams with visions and skills to bring those visions to life,” she explains. As a result, venture capitalists must be able to work with diverse personality types.
Before jumping in, though, VC hopefuls need to be realistic about their expectations of this job. “People sometimes have a glamorous view of this industry,” says Mhatre. Spend some time with a venture capitalist and see what the rigors of day-to-day life are like. “There are some fantastic achievements in this profession, but you also work very hard without immediate feedback,” she adds. Like doctors, the notion of being “on call” is very real… except that venture capitalists are always on call and must always answer to their employers. “Successful venture capitalists tend to be able to multitask and are generally intellectually curious. They also tend to have a lot of energy, whether this is veiled by more casual behavior or not,” Ahuja concludes.
Starting
Pick any major metropolitan newspaper; You’ll be lucky if you see a job listing for a venture capitalist. “This is a mentorship-driven business,” says Mhatre. The way to get a ticket is as untraditional as the profession itself. Some venture capital firms like to hire technical staff as consultants and advisors and that is one way of learning the business. Other venture capital firms have something called an Entrepreneur Residency program. They invite directors, vice presidents or CEOs from different companies to join their company under this program and use the company’s resources to research and assess the market, build networks and seize opportunities. If this proves to be a successful partnership, they often get the job of a venture capitalist. A third way to try to break into the industry is to get an MBA from Stanford or Harvard University, as most venture capitalists are alumni of these two schools. “Work at a new company, get noticed and jump into venture capitalism,” says Mhatre.
getting ahead
To get ahead in this game, “network, network, network,” Mhatre states emphatically. Focus on a specific domain and become an expert in it. “At least one area has to be a standout indicator for you,” says Mhatre. But whatever your path, once you get a ticket, you need to learn by working closely with people who have had experience. Unlike other traditional careers like high-tech engineering or marketing, this profession has a less defined career ladder. Over time, a venture capitalist will progress in terms of level of credibility and responsibility. He or she can join the firm as an associate and eventually progress to become a general partner, managing director, vice president, president, or managing director.
The money in this business is good. “Money is never the issue; it’s about how much value you add and what companies you build,” says Kapadia. If you are good at what you do, there is no discrepancy in how much a technical versus non-technical person can earn in this profession. “Mike Meritz, a journalist by profession, is as successful in venture capital as Vinod Khosla, an engineer,” says Mhatre.
Typically, a venture capitalist gets 2 percent of the total fund to manage. An associate with 2-3 years of market experience before or after an MBA can easily earn $100-$200k, a general partner can net $200-$300k and CEOs can amass over $500k a year. year,” Purkayastha says, cautioning that it’s just a general, rough estimate of compensation. Ahuja, Purkayastha, and Mhatre suggest looking up compensation statistics in the December 1998 issue of the Venture Capital Journal. love of money,” Mhatre says. Ninety to ninety-five percent of compensation is tied to the return on investments your venture pool makes.
hot spots
In the US, Silicon Valley remains the best market for venture capitalists. New York, Boston, Seattle, Atlanta and the Midwest have also started to reach critical mass. “Markets are more conservative on the East Coast and things don’t move as fast as they do in Silicon Valley,” says Mhatre, but stresses that these areas also have good markets. According to the PriceWaterhouseCoopers Money Tree Survey for the second quarter of 1999, Silicon Valley led all regions in total venture investments, with 35 percent of all second-quarter dollars going to Bay Area companies. The highest growth rates by region between the second quarter of 1998 and 1999 were in the New York metropolitan area with growth of 322 percent, New England with 177 percent, and Los Angeles/Orange County with growth of 167 percent. The Southeast alone followed Silicon Valley’s 115 percent growth with a 47 percent increase.
“These different geographic markets tend to have different approaches to the industry. As a result, venture firms in these markets tend to have a perspective that is unique to that region,” says Ahuja.
Like venture capital itself, venture capitalists will be in demand for a long time. “Many people debate the nature of the market activity with the large number of startups, consolidations, mergers and acquisitions. But few will really question the amount of market activity to come,” says Ahuja. “We are so blessed with creativity in this country, that as long as the entrepreneurial spirit is alive and well, the demand for venture capital will be insatiable,” Purkayastha says confidently. So if you’re smart, well-qualified, motivated, resourceful, people-oriented, have nerves of steel and a heart of gold, and can be passionate about success, this could be the career for you. Do you mind capitalizing on this company?