Venture capitalist. It sounds glamorous and looks even better on a business card. For many in the business field, it’s an ideal job. Make your own schedule, control large amounts of capital, and earn a nice chunk of change for yourself. Indeed, many venture capitalists, or VCs, get paid an annual two per cent of any deal they make, plus 20 per cent of the profit. At a nationwide total of $2.259 trillion in deals made in 2015, that’s more than $45 million dollars paid to venture capitalists before profit sharing.
Before you search for the perfect ways to spend the fortune you’ll amass as a venture capitalist, keep in mind that this is an incredibly hard field to break into. Forbes contributor John Greathouse likens your chances of becoming a VC to that of becoming a professional baseball player.
But I can just start my own firm. You sure can. Unfortunately, you’ll probably need to be your own first investor, too. The harsh truth is that without the right experience and groundwork, investors won’t be knocking on your door to hand you checks anytime soon. Just like you couldn’t walk into Rogers Centre with a baseball glove and a bat expecting to play pro ball, you can’t just walk into a boardroom with a chequebook. Pro ball players practice their sports most of their lives; if you want to become a successful, fortune-building venture capitalist, you’ll need to train, too.
Not to worry: We’ve taken a look at what some of the experts have to say about how to become a venture capitalist.
Is Venture Capitalism for You?
How do you know if venture capitalism is the right choice for you? As a VC, your job will be high-pressure, stressful, and fast-paced. Many VCs are married to their jobs. So much rides on not only making a successful deal, but in making any venture you fund a success so you—and your investors—get paid. And, unlike playing baseball, you’re going to have to wear far more than one hat.
What Kinds of Skills and Backgrounds do Venture Capitalists Have?
- Networkers
- Private investigators
- Market analyzers
- Dare devils
- Entrepreneurs and mentors
- Investors
Venture capitalists are:
- Networkers. Business is definitely about who you know. You need a list of contacts who like you (and probably owe you one) to succeed.
- Private investigators. Will you spend your days following around potential business associates? No, but you will need to have an idea of who they are and how effective their leadership will be in a potential venture.
- Market analyzers. Just like you want to know everything about your potential business partners, you’ll want to know everything about the business itself and the market so you understand the risks.
- Daredevils. Venture capital is a numbers game. It’s also a game of chance. You can investigate and analyze all you want, but at some point you have to pull that trigger—and you can never be sure if you have a bulls-eye or a total miss until it’s too late.
- Entrepreneurs and mentors. One way to mitigate risk in an investment is to have a direct say in decisions made at the top of that company. Expect to sit on executive boards and share your experience and connections to help guide the venture in a successful direction.
- Investors. Once you make your fortune, you’ll probably want to invest some of your own cash into especially lucrative deals.
The Path(s) to Becoming a Venture Capitalist
In a career with so many necessary skills, you need a track record of good professional experience. The kind of experience many VCs have varies as much as business itself varies. You will, however, need business experience of some sort. Guy Kawasaki puts high importance on both a sales background and industry-specific experience. Here are some possible paths to becoming a successful venture capitalist.
Banker
The job of a VC involves evaluating the possible success of pouring money into a business, whether that’s a startup or an established business ready to grow their offerings. If that sounds a whole lot like the job of a financial consultant or loan officer for business, you’re right. If you’re looking at working mostly with established businesses, banking is a great way to get the experience you’ll need to help late-stage companies optimize their investments, capital, tax breaks, and more.
Entrepreneur/Business Owner
If you want to work mostly with startups, however, there’s no better way to learn the ropes than to dive right in and start your own business. You’ll have inside knowledge of what it takes to run a successful company, and quite likely how to run a failing company: Since many startups fail, plan on starting a few companies to build a track record of overall success. Chances are, you’ll even get the chance to go through the process of obtaining venture capital, giving you a view of both sides of the business.
10 Rules for Becoming a Venture Capitalist
- Determine if this is really what you want to do
- Take Guy Kawasaki’s Venture Capital Aptitude Test: http://guykawasaki.com/the_venture_cap
- Make sure you have real world experience
- Start a company or have a role at an early-stage startup
- Work for a big corporation in a relevant role
- Join a bank or a consulting firm
- Consider going to business school
- It still won’t be easy to get a job
- Network like crazy
- Build your reputation
- Start a blog
- Set up a website
- Maintain a social media presence
- Have passion for great products
- Know your tech
- Use the products you’re going to be investing in
- Network in a helpful way
- Make helpful introductions
- Hook up startups and help VCs get their job done
- Teach and be generous with your time
- Never stop learning
- Be Informed
- Stay hungry, stay humble
Angel Investor
Don’t have much experience? If you have a stack of your own cash burning a hole in your pocket, become an angel investor. You’ll go through the process of vetting potential investments, evaluating their risks, and dealing with business owners.
Work Your Way Up the Ladder
Will a venture capital firm hire you to handle investments if you don’t have a track record of successful deals? No way, but they may hire you as a technical advisor or an assistant. These gigs aren’t as glamorous, but you’ll have the chance to learn about firm life from the inside. Plus, you might become friends with some of the firm’s already successful VCs. Impress them, and you may develop a willing mentor and advocate.
Be a Driving Force
Small-business owners are always looking for useful connections, advice, and help with, well, just about everything. John Greathouse recommends diving into your local business ecosystem. Start making a name there as a go-to source for it all. Do it for free. Use the connections you build to level up to larger and larger business eco systems until VC firms start to notice.
Finding Your Path
Chances are, no single path will rocket you toward success. The best strategy is to combine several of these paths to round out your experience and make you even more appealing to established firms. Will that take years, or perhaps decades? Yes, it will. Venture capital just isn’t one of those careers you “fall into” unless you’re falling from an already successful business career. As venture capitalist Guy Kawasaki says, “You should become a venture capitalist after you’ve had the shitake kicked out of you.” Be a VC later in life, not at the start of your career.
Which brings us to…
To MBA or Not to MBA?
Did you notice that none of the paths above mention getting your MBA? While many VCs have an MBA, technically, there are no rules that require a venture capitalist to have a degree. You don’t even need a high school diploma. But that doesn’t mean you shouldn’t finish high school or get an advanced degree.
Estimated Salary Ranges for Venture Capitalists
- Analyst: $80,000-$150,000
- Associate: $130,000-$250,000
- Vice Presidents: $200,000-$250,000, plus up to a $1 million carry bonus
- Principal/Junior Managing Director: $500,000-$700,000, plus a $1-$2 million carry bonus
- Managing Directors/Partners: $1 million, plus a $3-9 million carry bonus
So many young MBA students look to venture capital as a career after they graduate. Unfortunately, even getting straight A’s at an ivy-league business school isn’t enough to get your foot in the door of this career. It can, however, help you tackle other milestones that will. In business school, you will:
- Build your network
You’ll meet other business students, professors, mentors, and professionals, many of whom are either in the business world now, or will be. Plus, you may be surprised at how much having the same alma mater smooths the way for future networking conversations. - Prepare for successful entrepreneurship
In B-school, you’ll get hands-on experience on running your own business, giving you a leg-up if you decide to go the entrepreneurship route after you graduate. - Learn how to juggle hard work with schmoozing
Business is all about networking, schmoozing, and connecting. It’s also all about hard work, data analysis, and showing up to work on time looking fresh and well rested. Business school will give you your first taste of juggling both.
Does becoming a venture capitalist still sound glamorous? Probably not. But that doesn’t mean it’s not a great career with plenty of rewards and the opportunity to make your fortune. It’s just not something most people achieve while young.
So relax. Enjoy business school, creating your own startup, or your banking job. Every role you have lands you one step closer, so soak it all up and learn from the process. You have a long road ahead of you.
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