How to become a venture capitalist, or to set up a company that venture capitalists will invest in
If you want to become seriously rich in these technology-driven times, venture capital (VC) may be the place to do it. Look at Jim Breyer of Accel Partners, who personally made around $750m investing in Facebook before it went public, or Rizvi Traverse Management, which made $2bn from its early-stage investment in Twitter. Alternatively, you could set up a company which VCs will invest in - take Nicholas D’Aloisio-Montilla, the teenage son of ex-Morgan Stanley commodities trader Lou Motilla, who sold his app to Yahoo for £20m in March 2013, easily out-earning his father in the process.
How can disaffected bankers gain exposure to venture capital firms? With difficulty is the answer. At yesterday's LSE Alternative Investments Conference, assembled venture capitalists reflected that VC firms hardly ever hire. Harry Briggs of Balderton Capital estimated that there are only 35-30 VC jobs on offer across the whole of Europe each year, London included. Even the largest funds only tend to hire one or two people, said Briggs. And having hired them, they hold onto them for a long time.
"When you go for a job in a VC firm you need to think very hard about whether you will still want to work in that business and with those people in five years," added Martin Mignot of Index Ventures. Venture capital is a long game.
Mignot is an ex-media and telecoms banker from UBS. Balderton formerly worked for McKinsey advising on branding, marketing and portfolio development. Both stressed that finding a job in the venture capital industry is almost impossible. The best way to do it is through word of mouth or networking - there is a distinct venture capital scene which it helps to be part of, both if you want a job and you're trying to pitch your company as an investment opportunity. "There's an investor event on almost every night in London," said Briggs. "Often even more than one."
Setting up a company that attracts the attention of VC investors is equally no easy matter. Briggs said his firm looks at around 1,000 potential investments each year and chooses only five. However, the assembled venture capitalists were in broad agreement about the 'hot sectors' for investment in today. These include:
- Educational technology ("massive disruption coming")
- Cloud computing
- Financial services technology
- Travel meta-search (search engines that dis-intermediate individual travel companies)
The VCs were also keen on Bitcoin. Most said they'd invested in coins on a personal basis, but that the growth from an early stage investment perspective is likely to be in the companies working to make Bitcoin more fungible. Forbes recent list of the top 30 finance professionals under 30 included Fred Ehrsam, a former Goldman Sachs currency trader who founded Coinbase, the ‘PayPal for Bitcoin' and raised $30m in funding. Bitcoin has reportedly engendered 320 start-ups dealing with payment infrastructure in the past year.