What Is an Adventure Capitalist?

The term "adventure capitalist" is colloquially used to describe venture capital (VC) investors who have particularly high risk tolerances. They often become actively involved in the companies they invest in.

Adventure capitalists generally support companies in emerging industries. Although such companies are very unlikely to succeed, the few of them which do succeed can occasionally achieve extraordinary returns for their early investors.

Key Takeaways

  • Adventure capitalists are VC investors known for their high risk tolerances.
  • They generally focus on companies pursuing disruptive technologies or who seek to become pioneers in emerging industries.
  • Adventure capitalists often become personally involved in the companies they invest in, in order to maximize their chances of success.

Understanding Adventure Capitalists

While the field of VC investing is known for its high risk tolerance, adventure capitalists are arguably even more comfortable with risk. The counterpoint to this risk tolerance, however, is that the potential returns enjoyed by adventure capitalists can be exceptionally high. Importantly, adventure capitalists will seek to maximize their chances of success by personally contributing to the management of the companies they invest in.

By way of example, the social media market we are so familiar with today is now worth hundreds of billions of dollars. Yet in the early 2000s, this industry was practically non-existent. In those early years, adventure capitalists who had decided to back companies such as Facebook (FB) would have seemed to be taking an almost reckless level of risk. After all, it is difficult enough to back successful startup companies in established industries, let alone ones in industries that have barely been born.

Yet a typical adventure capitalist may have looked at that situation differently. Where others would have seen the lack of an existing industry in which to grow, an adventure capitalist might have seen the potential for individual companies, such as Facebook, to be the pioneers of that industry, cementing their position as the market leader. In fact, adventure capitalists might be especially drawn to situations where the industry environment itself is rapidly evolving, because of the potential for startups in those industries to benefit from a first-mover's advantage.

Jim Rogers

Adventure Capitalist (2004) is also the title of a book in which author and former Wall Street financier Jim Rogers describes his three-year, 116-country road trip. Rogers retired at age 37 and has also toured the world by motorcycle, setting Guinness Book records for both trips.

Real World Example of an Adventure Capitalist

Emma is a VC investor who is known as an "adventure capitalist" by her peers. She is known for seeking out early-stage companies that are attempting to radically disrupt industries or else become pioneers in new industry sectors.

As part of her investment process, Emma keeps abreast of new technological developments that are within her circle of competence. She relies on a network of academic and professional contacts that can help her keep pace of new innovations. Through her network, she can also support the companies she invests in by connecting them with relevant experts.

Typically, Emma seeks to be in the first round of investors in a company, providing funds even before the company begins its formal fundraising rounds from the VC community. Unlike some VCs who take a more passive and diversified approach, Emma seeks to become involved with the company at the board level, so as to improve their chances of success.

Despite her methodical approach, Emma recognizes that the chances of any individual investment succeeding are extremely small. Nevertheless, she invests with the philosophy that if even a small fraction of her investments succeed, the scale of their success is likely to be so large as to make up for the combined losses of all the other investments.