Venture Capitalist is someone who creates a fund using third party finances and invest them in the new company. Third party includes wealthy individuals, companies, pension funds, etc. that have money and wish to invest. The end objective is for the start-up to either “go public” or be bought by another company
Become Venture Capitalist
There are two ways to enter the venture capital industry. One way is entrepreneurship, individuals who have an experience of running successful businesses can efficiently assess the start-up’s capabilities, value proposition and the size and market opportunity. Drawing upon their operational experiences, these individuals can take the company from its seeding to the exit stage successfully.
Other way to enter the industry is investment banking. Individuals gain experience in financial engineering, financial syndicates creation, IPO and Mergers &Acquisitions which can be helpful in assessing financial health as well as when the time comes in developing an exit strategy for the start up. Money raised by selling of the stakes at a higher price forms to be returns to the investors.
All parties have proportional ownership over of the fund, but it is the Venture capitalist who decides which business the fund should be invested in, usually the ones that are considered too risky for investment by banks and capital market. The Venture capitalist is the general partner, while the third parties i.e. the pension funds, insurance companies, etc. are limited partners.
After acquiring an understanding of who is a venture capitalist and what are his primary roles, one can become venture capitalist by following steps:
Acquiring the right education
To become a venture capitalist, one must be able to select fruitful opportunities for the start-up and steer the firm at different stages towards its growth. An understanding of business skills is mandatory.
Acquiring some real time experience in the domain first helps in knowing about the various processes involved in running a company and bring in lots of business contacts which could be of great help later. A short stint can help one become a successful venture capitalist.
Understanding the Maths
Venture capitalists have two sources of making money- Management Fees and Return on Investment (also known as carry). Venture capitalists are involved in activities like financial analysis, investment opportunities evaluation, mapping risks and opportunities and financial modelling. Hence to become a venture capitalist one should know the math behind it.
The entire industry depends on networking. Make contact with venture capitalist present in your area. As mentioned earlier, having a relevant experience helps a lot as it gives an opportunity to come across who’s who of the industries.
Getting a job as the venture capitalist is a herculean, but if one possesses the right traits and an inclination, one is bound to succeed. With a determined mind, set focus, talent, skills, experience and passion, one can certainly become a notable venture capitalist in no time.Perseverance is the key.
Recommended Read :
- How to Invest in a Start Up?
- How Can I Become An Angel Investor?
- How Risky is to Become An Angel Investor?
- Risks Involved in Start Up Investing
- What is Venture Capital?
- How to Get Venture Capital Funds for Start Ups?
- Angel Investor vs Venture Capital vs Private Equity
- Pros and Cons of Venture Debt
- What is Venture Debt Financing?