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How to Become Venture Capitalist?

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Venture Capitalist

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 Experience

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.

Smart Networking

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.

Conclusion

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.

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5 COMMENTS

  1. The importance of venture capitalists came into limelight due to the exponential rise in the number of startups in India. Some really well known VC of India include Helion Venture Partners, Accel Partners etc. Thanks to these firms, India has well known booming and successful e-commerce sectors like Snapdeal, Flipkart, Myntra etc. The complexity of the business and the risk taking ability of these VC are commendable especially when it comes to pouring thousands of dollars in the new firms.

  2. To become a venture capitalist can be quite an interesting challenge. However, the success to a large extent depends on choosing the right kind of business and a proper company. If you are a little careful and keep eyes and ears open, the chances to lose as a venture capitalist dwindles but certainly luck also does its part.

  3. A nice article which gives an insight about venture capitalists. Venture capitalists usually come at the second stage after Angel investors. Venture capitalists have lots of money and contacts. So, to become a venture capitalist, you must have good knowledge of business maths, good social skills to bind people and enough resources. It is indeed risky but profitable if you invest carefully with proper study.

  4. Wonderful and exciting job to be in. Just the right education and relevant experience can do the trick for you.But, above all this requires talent and hard working wisdom to work hand in hand.And the awe-inspiring results will automatically drive you from there to the path of glory.

  5. If you have the funds, good support and an excellent education, it seems like venture capitalism is a better choice than Angel investment.
    You get a higher ROI and faster. And you can put all your education to use while other people support and help you with the finer details. I think the best thing about it is that you don’t have to continually come up with your won ideas – you can choose from the ideas that people bring to you 🙂

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