Venture Capital Careers
Venture capital provides long-term committed capital to businesses, by purchasing shares in growing businesses on behalf of institutional investors. Venture capital investors are tied in to the long-term success of the business, obtaining their return through dividends and by selling their shares in the business once it has reached a point of optimum growth.
Venture capital firms invest at a time long before anyone else is willing to invest. The firm will frequently take a role in overseeing the venture at board level, although they usually steer clear of the day-to-day affairs. They can provide a wealth of information to a new entrepreneur and may make the difference that enables an idea to become a successful business. Many venture capital firms are also equity investors, holding stock in established businesses.
Venture capitalists seek businesses capable of growing rapidly within a short period of time. These businesses must be able to show an advantage in their chosen market and be managed by experienced and ambitious teams. To identify such projects, venture capital investment executives need to have outstanding business management and analytical skills, in order to understand a wide variety of sectors and to accurately assess the risks and prospects of respective start-up ventures and companies seeking to fund growth.
Typical Duties within Venture Capital Careers
A venture capital investment executive is involved in:
- Evaluation of investment opportunities.
- Financial analysis.
- Identification of key areas of risks and opportunities.
- Interaction and co-operation with clients, bankers, advisers and management.
- Deal execution.
- Financial modelling.
He or she will start work early, taking time to read the financial papers and business pages, especially the sections relating to the firm's areas of interest. Reading the trade press, they will note the emergence of any new companies, and check the internal database to see whether any colleagues have already contacted any of them. If not, the executive will call any that are of interest during office hours. Interesting articles are cut out and kept for circulation to colleagues.
There is much communication to be done, responding to emails or voicemails from entrepreneurs, other venture capitalists and personal acquaintances. Networking and keeping an ear to the ground is a vital aspect of this work.
Much time is spent attending meetings with entrepreneurs who want to make their pitch. This means perusing the business plans. A partner of the venture capital firm may also be involved with this. During the presentation, the executive notes the critical issues facing the company, which are addressed through a question and answer session. Throughout the process, the executive assesses whether their firm wishes to work with this team of entrepreneurs or not. If necessary, they will later research the market in more detail, learning more about the company's competitors, the market demand for the product in question, etc.
Would a Career in Venture Capital Suit You?
You will need a strong record of academic achievement in business subjects at the undergraduate level from a leading university, plus good business modelling skills and a strong market awareness of the venture capital environment.
For many positions, you will also need some experience in investment banking, private equity, accountancy or consultancy, or other relevant deal experience in a corporate finance team or accounting environment. Being a self-starter, the ability to work as a team member is essential. You must have strong interpersonal skills, ambition and an entrepreneurial outlook.
This career is an extremely popular one for good reasons. First, you are often the decision-maker, because you have the money. Over the long term, you will certainly become affluent because the job pays well and, providing you perform well, you should eventually gain equity in the firm. This job is at the heart of some of the most interesting industries and all the projects you're involved in are new. Likewise, you have access to some of the best business and analytical minds, not to mention exciting innovators.
However, it takes a longer time to build your wealth, as you won't have the immediate results evident in investment banking, hedge funds, or management consulting. You'll never become an expert or specialist, but will remain more of an all-rounder. Also, because so much of the work involves rejecting projects (99%), you are likely to experience a degree of unpopularity.
Salary and Prospects in a Venture Capital Career
Gaining employment as an analyst or executive with a venture capital firm is no easy business. Few positions are advertised and those that do appear are usually heavily oversubscribed. There is no substitute, in this instance, for solid research into individual companies, networking, and personal approaches.
Building contacts in the industry is the key to finding out about jobs and getting an interview. It helps to have a strong recommendation from someone already respected by the venture capitalist, such as a lawyer, banker, portfolio company, or board director. The other way is to have deep industry experience, a process which inevitably takes a few years. Utilize your research by targeting an industrial niche that is attractive to the venture capitalist in question. Keep an eye on the trade press so that you know what's happening and attend large trade shows.
Once in an executive position, progression is relatively straightforward, providing your record is good. This career does not prepare you well for other professions, because as an all-rounder, you are not an expert with specialist knowledge, and ultimately you grow spoiled for other careers by constantly making decisions without much compromise.
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