Venture Capitalist Career Information
What a Venture Capitalist does
A layman's depiction of a venture capitalist is that of a wealthy financier who wants to fund start-up companies. In truth, venture capital firms are pools of capital, typically organized as a limited partnership that invest in companies that present the opportunity for a high rate of return within 5-7 years.
These firms have two principal functions. Firstly, they raise money from various wealthy individuals, corporate organisations and financial institutions like banks and other sources like non-profit funds to build up a corpus fund. Secondly, this fund is utilized by the firms to finance start-up organisations. If you wish to become a venture capitalist, you should be aware of these facts.
If you intend to become a venture capitalist, you should also be aware of the fact that the start-up organisations are generally in a very innovative business field. Or, many of such start-up organisations come up with very innovative ideas in an existing business field or industry. Venture capital firms generally finance newer businesses. For example: dotcoms, biotechnology firms and the likes.
As a venture capitalist, your main job will be to analyse the venture proposals submitted by entrepreneurs. The proposal, which comes to you as a business plan has:
• Description of the product or service that the business intends to make and deliver
• Market needs and how the product or service proposes to fulfill the need
• Details of how the product will be produced and delivered
• Manpower and systems needed by the business
• How the business will be established over a period of time
• Cost to establish the business
• Sales and profits that the business will generate over a period of time
• Profitability and long-term viability of the business
As a venture capitalist, your first job will be to analyse different aspects of the business plan such as:
• Whether there is really a need for the venture in the market
• Production and delivery process
• The financial and commercial feasibility of the business
After the preliminary analysis you will have to seek clarification from the entrepreneur about various aspects of the business. As a venture capitalist you will ask for a presentation and discuss a number of issues regarding the viability of the business. You will also look into the educational and professional background of the venture capitalist, the profile of the management team that will establish the business and the ability of the entrepreneur to attract and retain talented people in the team.
If as a venture capitalist, you are satisfied with the business's viability and the ability of the management, you will also plan out how you will give them the money and analyse what will be your firm's return on the money. Generally, a venture capital firm gives the money in the form of equity. The firm becomes an investor in the equity of the company.
That means the firm will become a joint owner of the company in which they are investing money. Of course, the firm does not become a life long owner. It generally exits from the business at an opportune time.
Your aim as a venture capitalist will be to earn maximum possible return on the money you invest in the business.As a venture capitalist, you will have to earn a surplus on the corpus fund of your firm. You will try to see that the cost of developing and maintaining the corpus fund is minimum. And at the same time, you will have to ensure that the returns on your investments are more than the cost of the corpus fund.
The venture capitalist firm also makes plans to exit from the business at an opportune time. So, you will have to carefully decide and plan, when and how you can exit so that you earn the maximum returns on your money.
A combination of a degree in Engineering from IIT and then a management degree from a premier institute will be enviable. Add to this a few years of experience in the financial sector and you are a good contender for a job. Experience in a successful start-up organisation, is another criterion for a good position.
You can get a job in:
• Indian or foreign Venture capital firms
• Venture capital branches of financial service companies like an investment bank
• Venture capital wings of commercial banks
In a venture capital firm, you generally join as an Analyst or as an Assistant Consultant at the entry level. You will move on to become a Consultant and then a Senior Consultant. If you have a few years of experience in your pocket, then you will be offered a job as an Associate Consultant or Associate depending on the years and quality of experience. An Associate consultant becomes a Partner or Managing Partner.
In an investment bank or a commercial bank, your career progress will be different. But it will always depend on your performance. Joining as an Analyst, you can move on to become a Vice President within 6-7 years.
Though the opportunities sound very high profile and lucrative, the number of inputs in the firms is limited. It is because, typically, a venture capitalist firm or a venture capitalist capital wing of a bank is run by 10-12 people or even less. And most of the firms take experienced people. Entry-level opportunities are very few.
And though, many foreign venture capitalist firms are setting up shops in India, each firm is having 3-4 people at the most. So, overall opportunities are little.
However you move very fast in your career after you find a placement. There are enormous opportunities for the right person. But however small in number, opportunities are increasing. With the sunset in the dotcom business, there are two new sunrises - Biotechnology and telecommunication technology.
Abilities & Traits Required
• Very strong reasoning ability
• A critical outlook, an ability to see beyond the clutter of words
• An entrepreneurial mindset
• Excellent communication skills
• Excellent organising abilities
• An ability to keep yourself abreast of the latest in social and economic news
• An eye for details
• Excellent numerical abilities
• Strong leadership abilities and ability to take initiatives
• Hard working
The job is very complex and demanding. It will never be a dull 9-5 job. Analysing a business plan is a long and tedious process. Deciding on the investment takes longer. So, you will have to work 12 hours on most of the days.
It is also a high-risk business. You will be responsible for making the right investment decisions. Any lapse on your part may put your job on the line. Alternatively, you will be rewarded if you make the right decisions and earn profits for the firm.
You will need to have an MBA or equivalent degree or diploma in management to get into this field. Also, CA and people with a degree in finance with some experience have an edge.
People with some experience in a start-up organization or very good managerial experience in a particular industry have good prospects in this field. Few years of experience in equity research and financial analysis can get you a good break.
• An entry-level job will pay you Rs 450000 – 700000 p.a on Indian shores
• A dollar salary will range from US $ 4800 - 6000 a month
• If you join after a few years of experience in other financial/industry job, you will get about Rs 600000 - 1800000 p.a
• Senior level VC earn about Rs 2000000 - 10000000 p.a