Deciding if a career in venture capital is right for you can be a difficult decision. Venture capital is arguably one of the ideal career paths for young, ambitious professionals with a passion for entrepreneurship. The industry attracts top talent from both economics and business schools who are trying to change the world. It offers competitive salaries, stock options, and the potential to work with America's hottest startups. Venture capital may be able to fill your need to stay connected with entrepreneurial ventures (although, as you'll see below, it isn't the only option). But before you jump headfirst into the exciting world of start-ups and venture capital firms, make sure that this career path is right for you.
Venture capital has come a long way over the past decade
Venture capital has come a long way over the past decade. While it's still seen by some as a risky business, the experiences of the investors themselves have improved dramatically. They're getting more and more sophisticated as they learn how to evaluate companies, how to evaluate their own work, and how to make money in the venture world. The success stories like LinkedIn, Twitter, and Zynga have led others to believe that VCs can be an incredibly lucrative career path. But there are still a lot of naysayers out there who think that VC is a bubble about to burst—and it's even been blamed for the current state of unemployment in Silicon Valley. In reality, though, it's not a terribly risky job at all. Venture investing is a very high-risk job—if you don't pick good investments you're not going to do well—but the rewards from some of these investments are astronomical. This means that people who get into venture capital as early as possible have an opportunity to turn around millions of dollars in their careers.
The landscape of venture capital has changed
The landscape of venture capital has changed dramatically. Venture capital has always been a relatively tiny industry within the world of finance and business, but even though it's still small, it's grown considerably from less than $1 billion in investments in 1965 to over $100 billion today.
Along with an increase in the amount of funding, there's been a change in the type and breadth of companies receiving capital. The classic venture capital model was to invest in early-stage technology companies that were thought to have huge potential for growth. However, as the number of startups and successful exits have exploded, so have the kinds of companies that now receive VC funding—retail, biotechnology, restaurants, transportation, healthcare—you name it. This is partly because there are simply more companies (and entrepreneurs) out there than ever before—in large part due to the increase in technology that's made it easier to start a company—and also because VCs have realized they can make money not only from huge exits, but also from smaller exits at reasonable multiples.
There is no one-size-fits-all formula for success in venture capital
In general, VC is suited for people who thrive on the challenge of finding and supporting great entrepreneurs, have the ability to work in a fast-paced environment, and can easily adapt to change. It's also helpful to have a strong passion for technology, business and/or finance. However, there is no one-size-fits-all formula for success in venture capital.
If you're contemplating a career in venture capital but aren't sure if it would be a good fit, consider these questions:
Do you enjoy working with entrepreneurs? Are you comfortable being the "bad guy" when necessary?
Venture capitalists spend a lot of time working with entrepreneurs at the earliest stages of them building their companies. The relationship between an entrepreneur and his or her investors is one of the most important ones they'll have as they start their businesses. It's critical that they feel like they're on the same team with their VCs and trust them implicitly. If you want to be a VC but don't enjoy interacting with people or are uncomfortable being assertive when necessary, it probably isn't right for you.
Are you highly analytical? Do you enjoy learning about new industries?
VCs need to be able to quickly grasp unfamiliar topics and understand complex business models.
The answer to "is a career in venture capital right for you" will depend heavily on your interests, skills, and talents. You might want to do something completely different if you were to enter the venture capital world. Some people might get the wrong idea thinking that being a VC means you're getting rich quick by investing in new companies but it's not always like that. It's very hard work, responsibility is great and the pressure just to make a portfolio of investments successful can be burdensome on some. This is also why most people think that VC firms don't take much risk or chances since they mostly take part in follow-on rounds or seed rounds instead of making an investment during an initial round. It's a misconception that there are no risks involved but this is actually true when it comes to bets made by investors - if they back the right players however then risks are manageable.