How to Become a Venture Capitalist: The Well Kept Secrets
For an entrepreneur, becoming a venture capitalist (VC) is a great opportunity with multiple benefits. Besides controlling huge amounts of capital and having a flexible work schedule, funding a startup that eventually goes on to succeed is truly gratifying.
According to , venture capitalism is a microscopic industry and the odds of becoming a venture capitalist are similar to those of becoming a professional baseball player. Thus, market entry is difficult.
In this article, you will understand how to become a venture capitalist.
Who is a venture capitalist?
A venture capitalist is a professional investor who supports startups by providing third-party capital.
He or she invests in promising startups with the expectation of large returns in the future.
Typically, they go beyond just investing in startups. They also act as mentors, leaders, and advisors to the startups that they fund, helping them in every step of the way.
How to become a venture capitalist?
The two most common paths towards becoming a venture capitalist are serial entrepreneurship and investment banking.
However, some venture capitalists have also formerly been financial advisors, business experts, even academics.
Now we will get into the details of how to become a venture capitalist with these 5 tried and tested methods.
5 definite ways of becoming a venture capitalist
1. Educate yourself
How to become a venture capitalist? READ.
You can always read your way into becoming a venture capitalist. There are many books by experts in the field that will give you all the information you need.
Although it’s not mandatory to have a college degree or a high-school diploma, formal education is always a bonus. It teaches you the basics and helps you build a good network.
According to Investopedia , 50% of venture capitalists have an MBA degree, and 60% of them have graduated from either Harvard or Stanford University.
2. Find a venture capitalist mentor
If you want to become a venture capitalist and are serious about it, you need to find a mentor. A good mentor can provide you with the best introduction to the venture capital world.
Besides the basics of running a business, a successful venture capitalist will also teach you how to pick winning startups.
You can also opt for on-the-job mentoring by joining a venture capitalist firm as a technical advisor or an assistant.
If you make it clear to your bosses that you plan to become a venture capitalist, they are likely to help you learn the ropes. Another way to do this is by interning at a venture capitalist firm.
3. Explore entrepreneurship
The best way to become a venture capitalist is through experience. An entrepreneur knows startups and the challenges that come with them.
Therefore, they have the knowledge required to advise new entrepreneurs on how to navigate the waters.
4. Take up investment banking
Working for a tech-oriented bank that regularly funds startups will also give you the knowledge you need on how to become a venture capitalist.
A good understanding of bank processes is a great advantage to get you started.
5. Become an angel investor
Instead of diving into venture capitalism, you can first test the waters as an angel investor.
The only difference between angel investors and venture capitalists is that angel investors invest their own capital, whereas venture capitalists work through a firm.
To become an angel investor, all you need is a good bank balance and the ability to identify a promising startup. Moreover, becoming an angel investor helps you understand if venture capitalism is the right career for you.
If you’re successful, it also demonstrates that you have the skill to identify promising ventures and help them become successful.
What does it take to become a venture capitalist?
You may have the skills and knowledge to be a venture capitalist, but in order to be a successful one, you need to possess the following qualities:
As a venture capitalist, it’s your job to select the right startups to invest in.
Since businesses in their early stages are unlikely to have concrete numbers, your intuition plays a major role.
Once you’ve identified a promising business, it doesn’t stop there. You need to check the founders’ backgrounds thoroughly and ensure that they’re honest and credible.
In-depth industry research is also recommended. This involves doing market research, talking to leaders in the industry, and working out financial models to predict the future of the startup.
As a venture capitalist, you will be forced to say “no” to most businesses that ask you for funds.
The reasons for this could range from issues with the founders to the fact that the venture lacks potential.
If you want to become a venture capitalist, you need to ask yourself if you’re okay with crushing the dreams of most people who come to you.
No matter how much you investigate and analyze, there’s always risk involved. The venture where you invested your time and money may fail.
There’s also a chance that a startup that you refused may succeed. As a venture capitalist, you need to be comfortable with the risks involved.
Once you’ve decided to fund a venture, you need to hammer out the finances.
How much money do the founders want? What do future finances look like? What will your returns be?
All this requires serious negotiation skills.
Since venture capitalism is a small industry, it’s all about who you know in the industry.
You need to know people who like you and want you to succeed.
Want to know more about how to become a venture capitalist?
Read the full article here.