Your first step should be to identify all possible areas in which you might be able to start a venture capital career. These include:
- Private partnerships and small, incorporated entities (prestigious and sexy, they give the industry its reputation)
- Corporate venture programs or divisions of major corporations (Intel Capital, the VC unit of Intel Corp., has invested over $1 billion.)
- Affiliates of investment banks (J.P. Morgan Chase has a notable VC division)
- Venture leasing companies (they take equity in return for a lower rate on leased equipment or real estate)
- Direct investment activity by insurance companies, pension funds or investment advisory firms
- SBICs (Small Business Investment Corporations). These are privately capitalized venture capital firms, which are eligible to receive federal loans to augment the private funds invested in them. SBICs are privately managed, but are licensed and regulated by the Small Business Administration.
- Funds of Funds (fund structures that primarily invest as limited partners in multiple venture funds) can be a good stepping-stone
- Hedge Funds with established venture capital teams
The next step involves developing the required skill set for a venture capitalist. Some of the skills mentioned here are not required of those in junior positions, but you will be evaluated on your ability to develop these skills over time.
Schmoozing: Schmooze everyone in sight to find deals first or to latch onto hot companies. Schmoozing also comes in handy when you're doing due diligence on a company and its market --you must find the sources of information you need and then extract the appropriate information. A good network is a big success factor in any industry, but this is doubly true for venture capital. Building a big Rolodex either in a geographic region or an industry is a must.
Consulting: You need to be able to give superior strategic advice to your portfolio companies in areas such as hiring and firing, technical strategy, sales execution, distribution, growth strategy, and product mix. Your advice is one of the big "value-added" features of having a venture firm as an investor. Previous work experience as a consultant can't hurt, but is often not enough by itself.
Financial knack: A venture capitalist advises an entrepreneur on financial strategy. This requires corporate finance knowledge. A deep knowledge of accounting and hands-on experience with mergers and acquisitions are of particular value. The VC works with I-bankers when an IPO rolls around and manages large amounts of money. Excel is, as always, your friend.
Industry expertise: Because you will invest in the cutting-edge companies of whatever industry you are focused on (telecom, software, biotech, consumer products, retail, health service, etc) you need to be a player in that industry to get credibility. You need to know the other hot companies, top managers, the industry history and lore, and the latest rumors and trends. This kind of knowledge is necessary to give superior advice in competitive positioning, alliances and partnerships, and executive hiring.
Good judgment: Either you're born with it or you learn it by trial and error. Either way, it's necessary for savvy investment decisions.
Venture capital is an extremely competitive field, and aspiring venture capitalists have their work cut out for them. But it's not impossible to get hired in this dynamic area.