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Venture capitalists help fledgling companies get off the ground by injecting funds in the early stages of development, supporting growth until the business is ready to go public. Internet giants Facebook and Google may never have been dreamt of had it not been for venture capital. Airbnb, Uber, and Twitter needed funding from VC firms to make it past their seed stages; thousands of other major brands are now household names because venture capitalists smartly invested their resources to help sustain and accelerate those businesses. Venture capital is one of the most important foundations of new business innovation today, and working in the field is as rewarding as it is challenging.
Former Binary Capital co-founder Justin Caldbeck, who was also a Managing Director at Lightspeed Venture Partners and Bain Capital Ventures, has some tips about working in VC and how to excel in that field. Here are five big takeaways from Caldbeck.
5 Tips for Working in Venture Capital
Develop Outstanding Communication Skills
As expert communicators, venture capitalists rely heavily on their ability to listen and convey information in a thorough and precise manner, says Caldbeck. Scouting requires VCs to catch even the most minute details about the business and the founder so that they can determine if the company is a good fit. Diligence often includes talking with references who may communicate both spoken and unspoken information, and VCs need to be able to pick up the nuances so they know which questions to ask next. VCs then prepare clear and concise presentations to report findings to others in the firm before making decisions. Finally, supporting businesses in the portfolio means paying attention to that business’s needs and responding accordingly – all requiring stellar communication.
Make Relationships a Priority
A robust network is just as important as a robust portfolio in venture capital, according to Caldbeck. Having access to a diverse group of people with different experiences will be crucial. The people in a VC’s network can provide expert advice and may be important resources when they are looking for ways to help portfolio businesses grow. Strong relationships must be nurtured, which takes time and effort, but they are an excellent source of support and can make the job even more rewarding.
The best early stage venture capitalists make investments that often leave others scratching their heads. What makes for a great early stage investment is a calculated risk that what the company is trying to build which seems improbable at the time can ultimately become the foundation a large standalone company and that the team is the right team to build it at that point in time.
Gain as Much Experience as Possible
Most VCs have several years of experience across the board in business, says Caldbeck. Many have a background in entrepreneurship, and they deeply understand the process of getting a new company up and running. Venture capitalists may also get their start by simply assisting other VCs, and using their time to share their ideas for unique portfolios and explaining why they are interesting. If the aspiring VC has talent in identifying high quality companies before others, they should share those companies with others in the industry as “sourcing” is an incredibly highly valued skill in Venture Capital.
Learn From Failure
Every successful venture capitalist has failed at some point in their career. That is the nature of making a profession out of supporting startups, most of which will inevitably fail. The thing that separates those who win from those who lose is their ability to face the mistakes they made, learn from them, and keep moving forward. The best and most successful VCs may have made plenty of blunders, but they can rise above with patience, perseverance, and insight.
Starting a new business requires a great deal of flexibility, according to Caldbeck. There are often more unknowns than knowns, and entrepreneurs must be ready to change direction on a dime. While the expertise of a venture capitalist brings to light some of the potential pitfalls ahead, nothing is ever guaranteed. Markets can adjust without warning, creating the need for new strategies. Venture capitalists must, therefore, be prepared to change course as landscapes shift.
Be Prepared and Be Patient!
Venture capitalists spend a lifetime honing their vast skill set. They are experts in all areas of business, and they can provide the resources necessary for innovative startups to excel. Getting into venture capital as a newcomer takes patience and perseverance. It is essential to work on a wide range of skills and assets to be successful. While this list is not all-encompassing, keeping the above tips in mind will set you well on your way to finding your place in venture capital.