The venture capital industry plays a crucial role in the investment community and presents many opportunities to build a financial career. There are venture capital employment avenues in both large financial companies as well as independent, smaller venture capital firms. The best way to determine whether a future in venture capital is for you is to understand how venture capital investing fits into the overall financial picture. Read on to learn more about this fast-paced and enterprising career.

Venture Capital Vs. Private & Public Equity Investing
In the investment community, there is more than one way to hold a stake in a company, and just as there are various means of investing, there are different business structures built around each investment model. Three of the most common types of investing are public equity, private equity and venture capital.

Much of the investment industry focuses on investing in shares of public companies that are listed on exchanges like the New York Stock Exchange (NYSE) or Nasdaq. The investment vehicles that typically operate under this model are mutual and institutional funds, as well as exchange-traded funds (ETFs). In these cases, many shares of ownership in public companies are held by individual investors through the funds themselves. (To read more about ETFs, check out our Exchange-Traded Funds feature.)

In private equity and venture capital, however, larger ownership stakes of each company are sold to fewer investors. These chunks of ownership are sold to investors through independent limited partnerships that are established by venture capital firms. One important difference between venture capital and private equity, however, is that venture capital tends to focus on emerging companies that seek funding to establish a business, while private equity tends to fund larger, more established companies that are seeking an equity infusion or a chance for company founders to transfer some of their stake in the company. (For more on this subject, read Cashing In On The Venture Capital Cycle.)

Qualifications Of Venture Capitalists
Since venture capital tends to invest larger dollar amounts in fewer companies, due diligence - background research into each company - is very important. Many venture capital professionals have had prior investment experience, often as equity research analysts. Venture capital professionals also tend to concentrate in a particular industry. A venture capitalist that specializes in healthcare, for example, may have had prior experience as a healthcare industry analyst. (For more on equity research, see The Changing Role of Equity Research.)

Such experience is not required, however, and often a formal education can make up for a lack of prior analyst experience. Having an undergraduate degree in computer science is a great background for an information technology venture capitalist. Similarly, having an undergraduate biology degree is a positive foundation for a venture capitalist that specializes in biotechnology.

A general business background is also a strong foundational building block for a career in venture capital, and pursuing a Masters in Business Administration degree is arguably the most solid entry card into any financial field. If you are currently an undergraduate or graduate business student, it is advisable to look into venture capital internships where you can learn about various industry specialties from the front lines. (Find out more in Should You Head Back To Business School?)

If you have an idea about which venture capital industry you may want to specialize in, look into taking some classes in that field of study. Even a college graduate who is in an unrelated professional field may want to think about taking classes in a venture capital field that holds interest for him or her. If your schedule does not allow you to travel to a classroom, consider an online class. All of these options add weight to a resume being reviewed by a venture capital firm.

A Day In The Life
Like most professionals in the financial industry, the Venture Capitalist tends to start his or her day with a copy of the Wall Street Journal, The Financial Times and other respected daily publications. Venture capitalists that specialize in an industry tend to also subscribe to the trade journals and papers that are specific to that industry. All of this information is often digested each day along with a morning coffee and bagel.

For the venture capital professional, most of the rest of the day is filled with meetings. These meetings have a wide variety of participants including other partners and/or members of his or her venture capital firm, executives in an existing portfolio company, contacts within the field of specialty and budding entrepreneurs seeking venture capital.

At an early morning meeting, for example, there may be a firm-wide discussion of a potential portfolio investment. The due diligence team will present the pros and cons of investing in the company. An "around the table" vote may be scheduled for the next day as to whether or not to add the company to the portfolio.

An afternoon meeting may be held with a current portfolio company. These visits are maintained on a regular basis in order to determine how smoothly the company is running and whether the investment made by the venture capital firm is being utilized wisely. The venture capitalist is responsible for taking evaluative notes during and after the meeting and circulating the conclusions among the rest of the firm.

After spending much of the afternoon writing up that report and reviewing other market news, there may be an early dinner meeting with a group of budding entrepreneurs who are seeking funding for their venture. The venture capital professional gets a sense of what type of potential the emerging company has, and determines whether further meetings with the venture capital firm are warranted. After that dinner meeting, when the venture capitalist finally heads home for the night, he or she may take along the due diligence report on the company that will be voted on the next day, giving them one more chance to review all the essential facts and figures before the morning meeting.

Concluding Thoughts
Venture capital professionals get the chance to evaluate and invest in early-stage companies that may have fantastic opportunities for growth. It is an extremely competitive industry, sought after by ivy-league grads as well as seasoned investment professionals, but offering great rewards to those willing to put in the time and effort.

Related Articles
  1. Fundamental Analysis

    The 3 Best Investments When Bull Markets Slow Down

    Find out why no bull market lasts forever, and why investors should shift their assets away from growth and toward dividends when stocks slow down.
  2. Mutual Funds & ETFs

    Top 3 PIMCO Funds for Retirement Diversification in 2016

    Explore analyses of the top three PIMCO funds for 2016 and learn how these funds can be used to create a diversified retirement portfolio.
  3. Professionals

    Is A Stockbroker Career For You?

    Becoming a stockbroker requires a broad skill set and the willingness to put in long hours. But the rewards can be enormous.
  4. Mutual Funds & ETFs

    The 4 Best Lord Abbett Mutual Funds

    Discover the four best mutual funds administered and managed by Lord, Abbett & Co., LLC that offer investors a wide variety of investment strategies.
  5. Professionals

    Buy-Side vs Sell-Side Analysts

    Both sell-side and buy-side analysts on Wall Street spend much of their day researching companies in a relentless effort to pick the winners.
  6. Professionals

    Broker Or Trader: Which Career Is Right For You?

    Both brokers and traders buy and sell securities, but there are some subtle differences between the two careers.
  7. Entrepreneurship

    10 Characteristics Of Successful Entrepreneurs

    Do you have the qualities of a successful entrepreneur? Those who do tend to share these 10 traits.
  8. Mutual Funds & ETFs

    The 3 Best Vanguard Funds for Value Investors in 2016

    Find out which of Vanguard's value funds are the best for building a solid core-satellite value investing strategy for your portfolio.
  9. Investing

    5 Up and Coming Social Media Startups

    Although the days of Facebook's dominance aren't close to being over, here are some new creative platforms gaining traction on the worldwide web.
  10. Investing Basics

    5 Questions First Time Investors Should Ask in 2016

    Learn five of the most important questions you need to ask if you are a new investor planning on starting an investment program in 2016.
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  3. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
  4. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>
  5. Are UTMA accounts escheatable?

    Like most financial assets held by institutions such as banks and investment firms, UTMA accounts can be escheated by state ... Read Full Answer >>
  6. What are the dormancy and escheatment rules for stock accounts?

    While the specific dormancy and escheatment rules for stock accounts vary by state, all states provide for the escheatment ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center