How to Become a Venture Capitalist

Unlike becoming a lawyer, astronaut, or dentist, getting a job in venture capital firm is not about nailing a clear-cut requirements checklist. However, here’s how most venture capitalists recommend for people who want to break into the field.

Do a thorough research

If you want to break into venture, research funds and look for their recruiting, retaining, and promotion track records. It is not a bad sign if a firm is just starting to employ new talent. It’s important to know the commitments of resources the firm is willing to make in order to enhance its employee skills.

Connect with alumni

Make it a point to tap into your alumni network, with the aim of becoming familiar with venture capital. If you cultivate these relationships for a long time, they, in turn, led you to more relationships. Eventually, it will be easier for you to get a job in venture capital firm.

Know the source of the money

Reach out to limited partners (LPs) and people that invest in VCs. Knowing LPs can provide crucial insights that can help you better understand the venture firms. “Who are the individuals investing in the firm? This is the questions to answers before approaching the VCs.

Other things you need to do to become a venture capitalist include talking to associates and analysts, getting into a venture-backed startup, starting your own fund.

References

https://www.fastcompany.com/40589896/how-to-get-a-job-in-venture-capital

https://www.investopedia.com/articles/personal-finance/091415/howto-guide-being-venture-capitalist.asp

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When to Raise Venture Capital

The prospect of raising substantial amount of money from investors can be very exciting especially to first time entrepreneurs. But entrepreneurs should know that they can save themselves a lot of time and headache if they understand that some types of business do not need venture capital fund.

The probability of raising capital successfully is low. Therefore, some entrepreneurs will spend years trying to pitch investors only to realize later their businesses are not realty fundable.

Investors need to at least know that every single investment they make is likely to return 10 times their money or more. That is the reason many venture capital firms want entrepreneurs who pitches them to be thinking big. Therefore, if you are not thinking big outcomes and big market, venture capital is not right for you.

Typical life of venture funds is 7-10 years. VCs need to get return of their investment in no more than 10 years. They get their money back if a company is sold, or go public. That mean, if you are not interested in selling your business to someone else, don’t go looking for early stage investor to fund you.

In summary, only go for venture capital if you need to spend substantial amount of money to start your business. It is important for you to be honest with yourself about what you want, because you can build a successful company in more than one way.

References

https://www.forbes.com/sites/sergeirevzin/2018/06/30/how-to-know-if-you-should-try-to-raise-venture-capital/3/#1efefd61438b

https://www.entrepreneur.com/article/248377

Global Venture Capitalism Trends

Venture capitalism is a booming industry. But what trends are currently on top of success? What strategies would effectively market your business? Here are some tips you can follow to ensure your company’s productivity.

Reengineer Services:

Businesses that offer services instead of products will show you the path towards opportunities. Innovate a unique company that would offer people the same5-star feedback.

Global Initiative:

Business to customer type of market builds your audience. This could be through social media or blogs. But finding ways to participate on global issues exposes you to enormous opportunities to grow.

Utilize Blockchain:

Using blockchain to revolutionize your company is one effective way to secure swift, accurate and transparent monetary transactions online.

Design Practical Hardware:

Connect on the deeper level with consumers. Prioritize their happiness with you service. Design hard wares that minimize production expenses without sacrificing customer’s satisfaction.

Reference: https://www.inc.com/murray-newlands/7-top-trends-in-venture-capital.html

What Start-ups Should Know About Venture Capital Financing

Startups seeking funding often turn to venture capital firms. VC can provide capital; introductions to potential customers, strategic assistance; employees and partners; and much more.

To obtain or close venture capital financings is not easy. Startups will be better prepared to get venture capital financing if they know the process, the potential issues that might arise, and the anticipated deal terms. Today, we will provide a general overview of VC financings.

Typically, venture capitalists focus their investment efforts using the following criteria: specific industry sectors (digital media, mobile, biotech etc.), stage of company (early-stage seed, Series A rounds, later stage rounds etc.), and geography. Therefore, before approaching a VC firm, try to learn whether its focus aligns with your business, stage of development, and geography.

Startups should also know that VC firms receive many unsolicited emails. Almost all unsolicited emails are ignored. In order to get a VC’s attention, have a warm introduction through a trusted entrepreneur, colleague, or a lawyer friendly to the VC.

Finally, it is important for startups to know that the venture process can be time consuming. Getting meeting with a VC can take weeks; then more conversations and meetings follow; followed by a presentation to all partners; followed by negotiations and issuance of negotiation sheets, and finally negotiations and drafting by lawyers on both sides of many legal documents.

References

https://www.forbes.com/sites/allbusiness/2018/03/29/a-guide-to-venture-capital-financings-for-startups/#599110bf51c9

https://www.entrepreneur.com/article/286321

The Pros and Cons of ICO Funding Compared to Venture Capital Funding

Previously for startups looking to raise capital, terms like Seed Funding, Series A, B, C, Seed Funding were common. Today, there is a disrupter in the global finance industry that is powered by blockchain. Therefore, startups have another option of raising funds through what is known as an Initial Coin Offering (ICO). Last year, blockchain startups raised over $1B through traditional Venture Capital, and a more than $5.6B through ICO capital.

Traditional venture capital is highly regulated. Companies, products and services are vetted and go through a procedure, industry contacts, advisors and networks. For startups raising funds, it usually means giving investor a big portion of the business. For investors, venture capital model is one of the safest ways to invest in the risky sectors.

On the other hand, Initial Coin Offering provides the best way to raise capital fast from anywhere around the world. The model allows company founders to retain more control of the business. However, ICO remains highly unregulated and there are many cases of fraud where some companies are only interested in raising money. Although ICO has the potential to change how startups raise capital, it has its own drawbacks.

Since both venture capitals finding and ICO have shortcomings, the ideal funding mechanism would be a marriage between the two, increased due diligence, safer investment, more control for founders and higher returns.

References

https://irishtechnews.ie/the-pros-and-cons-of-venture-capital-vs-ico-funding/

https://medium.crypto20.com/vc-vs-ico-an-insiders-perspective-5d497099e9b4

Venture Capital Firms Focusing on Technology for Children

With technology catering to every individual, startups focusing on services and products geared toward children have seen an increasing amount of VC interest over the last several years. Since the baby and kids tech space is still in a budding and evolving category, a few VCs have made many investments into the space.

500 Startups is the most active venture capital firm in children technology. The firm has particular interest in Ed tech startups, with over 50 percent baby and kids tech startups in its portfolio operating in the area of education and childhood learning, such as startups Lingokids and Mystery Science.

The size of funding rounds that venture capital firms focusing on technology for children have participated in varies. New Enterprise Associates boasts participation in deals with the highest average deal size, at about $10.8 million per disclosed deal. On the other hand, seed-focused fund 500 Startups focus on rounds with the lowest average deal size, at about $1.5 million per deal

Some venture capital firms have a mission-oriented focus and finance startups in specific areas, rather than across software and tech more broadly. BBG Ventures only funds startups that have at least one female founder; Newschools Venture Fund backs education-related startups; and Forerunner Ventures backs startups in the commerce and consumer products sector

References

https://www.cbinsights.com/research/baby-kid-tech-startups-vc-investors/

How to Become a Venture Capitalist Without Money

Many people want to become venture capitalists. Startup veterans and newly minted MBAs want to get into the investing game in large numbers. Unfortunately, VC jobs available in any given year are so few that it makes the prospect unlikely for most.

If you want to be a venture capitalist, just get started. You can do a VC job without a dollar to your name. You also don’t need a list of specific credentials on your CV, a specific degree, or a lot of family funds to do the job of a VC.

The job of venture capitalists can be broken down into four different tasks: Sourcing deal, diligence, negotiation, and financing. Sourcing deals involves finding entrepreneurs and identifying the most interesting startups. If you can find these people, you are on your way to becoming a VC. Diligence is the process where one looks into the background of the entrepreneurs to see if they are honest and credible. After due diligence, the next step is hammering out finances through negotiation.

Unless you can fund the startup alone, you will need to find some investors who are willing to take a risk. Although this sounds hard, you should know that money chase opportunity. If you can find compelling startups and give reasons why the market is attractive, there are plenty of firms or angels out there who will be willing to work with you.

References

https://techcrunch.com/2015/09/19/how-to-be-a-vc-without-any-capital/

https://lendedu.com/blog/how-to-be-a-venture-capitalist-without-the-millionaires-price-tag