CAreers in Venture CApital
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Venture capital involves providing funds to businesses that have long-term growth potential. Venture capital firms bring expertise, credibility, and assistance with exiting investments through means such as IPOs or acquisitions. A typical venture capital firm pools funds from limited partners and invests those funds across multiple startups to diversify risks. Qualified individuals can pursue careers in venture capital through various paths such as working in startups, consulting firms, investment banks, or directly at venture capital firms where they apply skills like industry expertise, deal sourcing, operational experience, and investor relations. The presentation provides an overview of the venture capital industry and career paths.
![A Typical Venture Capital Firm
Limited
Partner
(“LP”) 1
LP 2 LP 3 LP 4 LP …
LP n
Venture Capital Fund [pool of investor (LP) funds]
General
Partners,
Investment
& Governance
Teams
Investee 1
Investee 2 Investee 3
Investee n
Investee 4 Investee …
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CAreers in Venture CApital
- 1. CAreers in Venture CApital DEEPAK NATRAJ, B COM (HONS), ACA 6 October 2014, Prepared for the ICAI - Bangalore Branch
- 2. Purpose of the Presentation • Provide an overview to help you take a learned decision on pursuing a career in venture capital • Provide leads to help you seek out your journey into venture capital, should you so decide A FEW CAVEATS BEFORE WE BEGIN … • This presentation is not complete without the speaker’s commentary, which is not included is part of this slide-deck - reach out to the presenter for any clarifications • The presentation does not make any representations of any kind • The views expressed are purely the personal opinions of the presenter • All original content and analysis in “CAreers in Venture CApital" is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License 2
- 3. Covered… • What is Venture Capital (or “VC”) ? • A Typical VC Firm - “Into the Matrix” • Some Leads & Sources of Data • Contacts of the Presenter 3
- 4. Venture Capital Investments • Total VC investments in 2013 was $48.50b in 5,752 rounds, of which 68.2% was in the US across 3,480 rounds1 • In the same period, the amount invested in India was $1.8b across 222 rounds (of which angel rounds were 19 and incubator rounds were 18) accounting for 3.7% (in $ terms) of global VC investments1 • Since 2006, total venture funding in India is ~$10.0b1 • The aggregate private equity invested in India is expected to be $12.0b as of 20142 • Bangalore accounts for over 41% of the estimated ~3,400 start-ups in India3 4
- 5. Venture Capital… • Funds • Expertise • Credibility • Exit Assistance VC Inputs Long-term • Emphasis on Value • Focus • Risk & Governance • 5
- 6. What is Venture Capital? • Funds given by investors to businesses based on a perception of long-term growth potential • Bring expertise in terms of knowledge and networks to facilitate optimum use business resources. Examples include recruitment assistance, access to marketing & vendor networks, technical knowledge and experienced managerial talent through entrepreneurs-in-residence • Businesses need long-term funds with little on-going overhead such as interest payments and covenant management • Bring focus on core business drivers that create sustainable value for all investors including founders and employees • Institute risk mitigation and governance to ensure value capture in the business • Help realise the value created in the business by facilitating “exits” 6
- 7. Where To Deploy Venture Capital? • Education • Life Sciences • Artificial Intelligence • Robotics and UAVs • Nanotechnology • Entertainment • Technology 7 • Innovation & disruption • Business model disruption • Performance optimisation • Behavioural change • Brands & image creation
- 8. A Typical Venture Capital Firm Limited Partner (“LP”) 1 LP 2 LP 3 LP 4 LP … LP n Venture Capital Fund [pool of investor (LP) funds] General Partners, Investment & Governance Teams Investee 1 Investee 2 Investee 3 Investee n Investee 4 Investee … 8
- 9. Why Should VC Succeed? • Disbursed investment de-risks using a portfolio approach • Win disproportionately on multiple small bets absorbing failures • Top-of-food chain so attracts the best talent • Strong ability to catch trends and enter them early • Hands-on approach to investing/active approach • Interests better aligned to create value upside for investors 9
- 10. A Skill Profile of a VC Firm The typical skills requirements in a VC firm : Industry &/ Technical Expertise Deal Sourcing &/ Engagement Operational Expertise Investment Exposure Deployable Capital Investor Engagement Limited Partner ☑️ ☑️ General Partner ☑️ ☑️ ☑️ ☑️ ☑️ ☑️ Execution Team ☑️ ☑️ ☑️ ☑️ Governance & Reporting Team ☑️ ☑️ ☑️ ☑️ ☑️ Entrepreneurs In Residence ☑️ ☑️ ☑️ Venture Partner ☑️ ☑️ 10
- 11. Alternate Approaches to VC Investing Not all VC investing happens only in VC firms • Venture/Investment arms of companies • M&A Teams in large companies • Family offices • Proprietary investing 11
- 12. Alternate Paths into a Career in VC Different paths, one goal … • Corporate exposure : strong technical skills and operating experience at various levels of management • Consulting firms : transaction advisory and support services • Investment banks : deal management skills • Analyst firms : deep research skills • Accounting, legal and compliance firms : deal execution and on-going fund management capabilities • Start-up exposure : doing your own or working from an early stage in a start-up - “the battle from the trenches” 12 Operational experience is increasingly considered as essential
- 13. Regulatory Framework for VC Investing Regulatory framework set out by SEBI closely oversees VC firm activities4 • Raising capital - how much, from whom and where from • Deploying funds - when & where to invest and the limitations • Providing returns on capital - taxation, fees and profit share (Carried Interest) • Engaging with investors - reporting and governance & “taxes” 13
- 14. Q & A
- 15. Some Interesting Leads • http://www.investopedia.com/terms/v/venturecapital.asp - what is venture capital ? • http://www.forbes.com/sites/johngreathouse/2012/09/18/pssst-heres-how-to-become-a-venture-capitalist/ - tips on getting into the industry • http://venturebeat.com/2013/08/13/so-you-want-to-be-a-venture-capitalist/ - more tips on how to enter the VC industry • http://www.slideshare.net/mashable/startup-success-by-the-numbers - data on start-up success • http://pando.com/ - interviews with leading valley based VCs and founders of start-ups • http://money.howstuffworks.com/question398.htm - how does venture capital work ? • http://indiavca.org - Indian Private Equity & Venture Capital Association • http://www.dealcurry.com - focus on deals done in India - M&A, VC, PE etc. 15
- 16. Some Interesting Leads • http://www.indianmba.com/faculty_column/fc159/fc159.html - article on VC in India • http://www.slideshare.net/NeerajChaturvedi2/current-scenario-of-venture-capital - well written and researched paper on VC firms in India - EXCELLENT TEST PREPARATION MATERIAL • VC firm websites - Accel, Andreesen Horowitz, Aarin Capital, Sequoia, Bessemer Ventures etc. • Read the papers - Economic Times, Financial Times, The Wall Street Journal, Business Insider, Tech Crunch • Gather expertise on the subject in which you want to specialise - read, read, read (does not preclude working in that sector too) • Other suggested reading : • Think Fast, Think Slow - Daniel Kahneman • Signal and Noise - Nate SIlver • Future Files - Richard Watson • and so much more… 16
- 17. Sources 1. Ernst & Young : Global Venture Capital Insights and Trends 2014 2. http://articles.economictimes.indiatimes.com/2014-09-28/news/54400438_1_equity-ivca-mauritius 3. http://articles.economictimes.indiatimes.com/2013-03-29/news/38125651_1_bowei-gai-mohandas-pai- sundi-natarajan and India Start-Up Report, Commerce & Industries Department - Government of Karnataka, India 4. Securities Exchange Board of India (“SEBI”) : Securities And Exchange Board Of India (Alternative Investment Funds) Regulations, 2012 and other related directives 17
- 18. Best Wishes
- 19. Thank You • Deepak Natraj, B.Com(Hons), Chartered Accountant email : (o) deepak@aarincapital.com & (p) dn.datum@gmail.com also available at (o) http://aarincapital.com/deepak.html & (p) http://in.linkedin.com/in/deepaknatraj