How To Be A VC Without Any Capital

One of the most frequent questions I get as a VC is how to become a VC.

Newly minted MBAs and startup veterans alike want to get into the investing game in increasingly large numbers. Unfortunately, there are so few VC jobs available in any given year it makes the prospect unlikely for most.

If you want to be a VC, my advice is to just get started; you can do the job of a VC without a dollar to your name. Seriously, you don’t need a specific degree, a list of specific credentials on your CV, or scads of family money to do the job of a venture capitalist. I’d wager that almost anyone reading this post has the raw cognitive capabilities to do the work. Read more: click image or title.

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How to Be A Venture Capitalist, Minus the Capital: The job of a VC can be broken down into four distinct tasks:   (1) Sourcing Deals: Finding entrepreneurs at the earliest stages is a critical skill. It helps to have the imprimatur of a top-flight VC firm behind you, but fund affiliation isn’t a requirement.   – One way to source deals is to find meetups for emerging technologies and identify the most interesting and industrious attendees. Tim O’Reilly calls these people “Alpha geeks.” Chris Dixon has said that what hackers do in their garages for fun turns out to be what everyone does a decade later. If you can find groups of these people, you’re well on your way to your first investment. (2) Diligence: Another key aspect of the VC job is doing due diligence. This is the process where you look into the background of the founders to see if they’re credible and honest.  It also means doing a deep dive in the industry. Calling potential customers. Getting feedback from key opinion leaders. Creating a thesis for an emerging market. Working out financial models. Predicting how the market might develop.  It might be awkward to call around on individuals, but you can easily trawl for market information and craft all of this data into a compelling presentation.

(3) Negotiation: Once you’re sold on the founders and have found enough evidence to suggest the business will succeed, the next step is hammering out finances. How much money does this founder want/need? What kind of valuation would they accept? You’re not going to finalize things at this stage, but roughing out a basic set of terms is pretty straightforward.   “Money will chase opportunity.”  Note: It’s absolutely critical that you remain 100 percent honest during this entire process. If you represent to startups that you work for a VC firm, or suggest any relationship that isn’t recognized by the VC, you’ll instantly be blackballed. Likewise, don’t make claims about being on the team when talking to the VCs. Clearly explain what you’re doing to all parties. When in doubt, disclose. Your reputation is in the balance.

(4) Financing: Now you might be thinking this is where my crazy notion of being an independent VC will fall apart. Unless you can bankroll the company independently, you’ll need to find some monied investors who are willing to take a risk, right?  This sounds hard, but money will chase opportunity. If you can find compelling companies, explain why the market is attractive, why this team is equipped to dominate that market and present a framework for a deal, there will be plenty of angels or firms willing to cut a check or, at least, take a meeting.  You’ll want to be on the radar of these folks before asking them to look at any of  your “deals,” but after a couple of high-quality intros, they’ll be eager to hear from you.

Much more to read and understand in the article before you attempt this being a VC without the Capital, but I can professionally tell you that it is a worthwhile read.

See on Scoop.itCrowd Funding, Micro-funding, New Approach for Investors – Alternatives to Wall Street


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