careers in venture capital
TRANSCRIPT
CAreers in Venture CApital
DEEPAK NATRAJ, B COM (HONS), ACA
6 October 2014, Prepared for the ICAI - Bangalore Branch
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
Covered…
• What is Venture Capital (or “VC”) ?
• A Typical VC Firm - “Into the Matrix”
• Some Leads & Sources of Data
• Contacts of the Presenter
3
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 investments
1
• 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
Venture Capital…
• Funds • Expertise • Credibility • Exit Assistance
VC Inputs
• Long-term• Emphasis on Value• Focus•Risk & Governance
5
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
Where To Deploy Venture Capital?
• Education
• Life Sciences
• Artificial Intelligence
• Robotics and UAVs
• Nanotechnology
• Entertainment
• Technology7
• Innovation & disruption
• Business model disruption
• Performance optimisation
• Behavioural change
• Brands & image creation
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
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
A Skill Profile of a VC FirmThe 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
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
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
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
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
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
Sources1. 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
Thank You
• Deepak Natraj, B.Com(Hons), Chartered Accountant
email : (o) [email protected] & (p) [email protected]
also available at
(o) http://aarincapital.com/deepak.html &
(p) http://in.linkedin.com/in/deepaknatraj