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Venture capital is a term used in the finance industry to describe money that is invested in a relatively high-risk project, typically a new or growing business. Rather than investing in publicly traded companies or broader funds, venture capitalists devote financial resources to a single enterprise that they believe has a lot of long-term potential. While a degree in finances or business can support a career as a venture capitalist, formal education is not necessarily required to participate or succeed in the field.
What Does a Venture Capitalist Actually Do?
Basically, venture capitalist investors use research, knowledge and honed instincts to find companies that they think has the potential to become seriously successful. They invest assets from clients into the company, which usually gives them a large share of the company and some control over its decision-making process. All professional investors lose money on some of their investments, so the key to success is to make more for clients than you lose over the course of months or years.
Preparing for a Career as a Venture Capitalist
Students who are interested in a career as a venture capitalist can follow one of two common paths towards their goal. Some successful investors build their own wealth through entrepreneurship, often by founding and selling multiple successful companies, before focusing on investing in the ideas of others. Many professional gain entry the field by seeking employment with partnerships or firms that focus on entrepreneurial investment.
Students who want to join a successful firm often pursue a master’s degree in business focusing on finances and technology. They may also have to seek employment at banks or other financial institutions to build their resume before joining a high-profile venture capitalist firm.
Venture Capitalists vs. Angel Investor
The terms “venture capitalist” and “angel investor” can be used interchangeably in some circumstances, but some experts distinguish them according to the source of their capital. Typically, a professional venture capitalist primarily invests third-party funds, while angel investors use their own wealth to fund a young company. Both types of investment carry their own risks, although angel investors have a larger degree of personal financial risk.
Becoming a Venture Capitalist
Seeking employment with an investment firm or company is considered to be the most reliable path towards a career in investment, but there is a lot of competition due to a relatively small amount of employers. Venture capitalist firms rely heavily on networking, which makes it essential for interested individuals to build their list of personal contacts and develop a strong professional reputation.
Related Resource: 10 Great Online Resources for Master’s in Finance Students
There is no surefire way to proceed with a career in venture capitalism, but many industry experts have revealed their personal views on the subject, according to Forbes. Networking is always near the top of the list, as is consistent exposure to entrepreneurs and other investors. It’s always a good idea for any professional interested in starting a career in venture capital to keep a close eye on local startups and stay active in as many entrepreneurial communities as possible.
