What is Venture Capital?
Money and various other assets are needed to initiate a new business or expand a small business on the ground. Organisations need money to rent or purchase new space, supplies, equipment and other expenses. There are certain conventional areas from which such money can be arranged like personal savings or bank loans. Now the business tactics have come a long way. For long term perspectives, many business investors seek to invest their capital in such businesses.
These investments are referred to as venture capital investments and the people who make such investments are referred to as Venture Capitalists. Such investments could be quite dicey. People still opt for these because they give quality returns if invested in the proper venture.
The returns are directly dependent on the growth of the company. So it is always advisable to look for the potential of the organisation to grow before investing. The market is expanding at an exponential rate. In the past, venture capitalists were considered to be typically wealthy. There was also a common assumption that they could easily afford losses in supporting young and unproven companies. But now the time has changed drastically. Today there are countless options for such venture capital investors to invest their money in. The successful ones are those who know the right place to put their money. Here are few of the steps to achieve a high return on investment capital as a venture capitalist.
Tips to Become a Successful Venture Capitalist?
1. Plan and Manage Venture Funding Effectively:
If you wish to be a reliable venture capitalist, your first step should be to manage the funds properly and effectively. To invest in a business venture or a start-up, you need to have funds. If you are not the traditional wealthy venture capitalist, your other option would be to arrange fund investment from different sources. Do a thorough research. Try to identify the different sources from where you can gather the required funds.
The usual and reliable options to arrange funds are sources like private investors, loans or angel investors etc. They lend money at a certain interest rate. You should be convinced that the business you are investing capital in will offer better returns and it is worth investing in it. Opt for the funds only when you are thoroughly convinced about this fact.
2. Gain Relevant Experience as Venture Capitalist:
Work always goes in hand with a learning curve and it takes some time to learn the tools and techniques of the venture business. Knowledge and experience can count a lot when you try to make money through the venture business. With experience, you gain insight that tells you which businesses could be profitable and worth investing money on. Even though few of the investors have been doing venture business from the very beginning, you can gain knowledge of the basics through experience. If you wish to be successful, timely updating of tools matters a lot. Individuals who fail to stay up to date with technology fail miserably with time and advancement.
3. Maintain a Strong Business Network:
Many venture capitalists tend to ignore this insignificant step as they regard it as irrelevant. But good networking with the existing entrepreneurs and businessmen always counts. To make quality decisions, you need to be connected to the best entrepreneurs and potential organisations.
Businessmen who have stayed in the industry for a long period are aware of upcoming businesses. They can also tell you which businesses or startups are worth investing on. Their knowledge and industry expertise will help you make good investments that turn profitable. Make sure you maintain contact with all the big businessmen around.
4. Work on your Decision-Making Skills:
A venture capitalist must possess good decision-making skills. To cater high returns, you need to consistently pick winners. Market these days has tonnes of deals and offers, but it takes special decisive power to separate chaff out of wheat. So you need to make sure you have superior decision-making skills and you know how to make the right decisions at the right time.
Good decision-making skills do not come to you in a day. You need to possess the right knowledge and experience to make the best decisions. For this you need to do a lot of intensive research in your field. Read through business journals. Try to understand exactly how the different businesses work and perform. It will help you identify the best ventures to invest in.
5. Listening is the Key:
Being a great listener is one of the key characteristics to get in touch with current business scenarios and market strategies. This helps in re-evaluating the organisations and entrepreneurs before working with them. When you listen to different businessmen and entrepreneurs, you get an idea what is the present market scenario. You will also know exactly how the different businesses are performing.
It will help you create some theories regarding the best investments and profit gainers. Listening only gives you part of the information. The rest of the information you can gain by research on the internet, media and magazines.
6. Optimising Negotiations is Vital:
Whenever it comes to making any investment, one should be able to negotiate for the portfolio. To ensure great returns, you should able to negotiate at the lowest optimal price. If you want to attain success as a venture capitalist, good negotiation skills should be inborn. If you are not a good negotiator, you cannot succeed in the field of venture capitalism.
While you are training yourself, take efforts to furnish your negotiating skills. Be a part of all negotiations you come across. If you happen to get an opportunity to see negotiators at work, do not miss this opportunity. When you see negotiations happen and close, you get an idea how to negotiate. You know where to stay obstinate and where to be a bit lenient. Such knowledge will help you when you make negotiations for different ventures.
Venture capitalists succeed only if they possess knowledge about the current trend in business. There have been cases of failures in this field because they invested in the wrong businesses and eventually failed miserably. So, learn, research and work to become a venture capitalist because there is really no easy way to success.