Venture capital

A career in venture capital can be a very exciting one. You are paid to spot the ‘next big thing’ – and if one of your companies does extremely well, you will likely be rewarded accordingly.

What is venture capital?

Venture capital is the domain of unicorns and start-ups wanting to be the next Facebook. And for every start-up that makes it big (or fails), there is a venture capitalist right behind them.

Venture capital is similar to private equity in that it creates a pool of funds from different investors with the purpose of investing in companies. However, unlike private equity, venture capital focuses on start-ups with high growth potential. Venture capital can be a risky game as start-ups have a more unpredictable chance of success, but with every risk comes the possibility of even greater reward.

Venture capital firms typically provide start-ups with funding – from early ‘seed’ funding through to Series, A, B and C. In exchange, venture capitalists hope to translate their equity stake into profit if the start-up goes public or is acquired.

It is common for venture capital firms to limit their start-up investment to up to 50 per cent of the organisation, which means the start-up’s management remains in control. This is unlike private equity, which usually buys the organisation in its entirety and has a greater mandate for change.

The venture capital industry in Australia is relatively small but has seen a resurgence in recent years, particularly following the dot-com bust in the early 2000s.

Australian venture capital firms include AirTree Ventures, Tank Stream Ventures, Blackbird Ventures, Uniseed, Square Peg and Sapien Ventures. Some of Australia’s larger banks also have their own venture capital funds such as NAB Ventures and Westpac’s Reinventure.

What is the graduate experience like in venture capital?

Like private equity, most firms hire on the basis of experience and required skills and do not run graduate programs. As venture capital firms and the industry itself is small, entry into this specialisation is competitive.

Venture capital firms like to recruit successful entrepreneurs or those with a track record working in funded start-ups as they are more able to spot ‘winners’ and play a mentoring role to start-up founders.

Other routes into venture capital may be through management consulting, private equity or investment banking. If a venture capital firm is more specialist in nature, for example, focusing on biotech, health services or information technology, they may seek experienced professionals who can bring expertise from that industry.

At the more junior level at a venture capital firm, you will be expected to do the grunt work to find and assess potential investments. It can sometimes be disheartening as you are constantly seeking to find the flaws in a start-up to determine if it is worth investing into.

At the same time, you will get to meet aspiring entrepreneurs who are passionate about their business and seeing ideas come to life. Finding the ‘hidden gem’ and seeing a start-up succeed is a rewarding experience.

What are your career prospects in venture capital?

A career in venture capital can be a very exciting one. You are paid to spot the ‘next big thing’, and if one of your companies does extremely well, you will likely be rewarded accordingly.

Like hedge funds and private equity, your progression as a venture capitalist relies on your individual performance. A track record of sound investments is the best way for you to rise to the partner level of a venture capital firm.

Venture capital is highly regarded by the rest of the finance industry. Given venture capital firms are considered tough recruiters and expect candidates to have demonstrated experience in a particular area, venture capitalists who decide to transition to another specialisation are usually welcomed with open arms. What you decide to do will depend primarily on your inclination, skill set and experience.

Choose this if you have:

■ A love of building and managing relationships and networks ■ The ability to see the bigger picture and sound judgment ■ Attention to detail and strong analytical skills.

Interested in this specialisation?

Jump to Professional services Page 86