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Business  18, Jun 2014

3 insights into the mind of a venture capitalist

What is the enigmatic constitution of venture capitalists who guide us to prosperous shores? Are these financial juggernauts incredibly cerebral or outrageously lucky?

While most of us look at venture capitalists as affluent financiers wearing fancy suits and ties, the business world perceives them to be the lords of their realm. Impressing them and living up to their lofty expectations is what keeps our business boats floating in the turbulent market tides.

Firstly, when you hunt for a VC, you need to conduct adequate background research on them to figure out their favoured sectors of investment, their partners and investing history. Secondly, you should have a clear idea about the firm’s priorities towards their investors, as well as their beneficiaries.

But you may still wonder – what is the enigmatic constitution of these venture capitalists who guide us to prosperous shores? Are these financial juggernauts incredibly cerebral or outrageously lucky? If you’re looking to dig deeper into the psyche of VCs, then here are some insights into their minds:

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They are in the business of thinking miles ahead of you
Majority of VCs are professionals who come from finance, investment banking, mergers and acquisitions, and other similar industries. Their expertise in other fields is far from the level of an actual graduate in those fields of study. As a result, it is your obligation to clarify the vision of your organisation and nail the niche marketing factor that your product or service encapsulates.

However, terms like company valuation, investor rights, P/E ratio, and cash flow are second nature to VCs. They can give a fair estimate of your company’s revenue projections even when they’re under the influence of a few tequila shots. Therefore, it is imperative to present your key financial data and keep it fully transparent in order to earn the trust of the VC and get a fair assessment of your business from them.

The strength of their networking web is greater than their financial IQ
The track record of a VC’s success rate is a bigger testament to his/her networking power in the business world, rather than raw intellect. Their relationships with influential entrepreneur, bankers and lawyers give them instant wisdom at their disposal and professional finesse to execute said wisdom at the same time.

You may have noticed how several top performers feature regularly in the portfolios of successful venture capitalists. Their association with champions of different domains buys them a first class ticket to the winner’s lounge too.

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A VC may lose the battle, but can never lose the war
Although VCs are talented veterans with a knack for making winning investments, there are always a number of business failures under every VC’s belt that taint their clean record. However, their disappointments are washed away with ridiculous paychecks, management fees and opulent vacations.

The heavily rewarding 80/20 profit ratio allows VCs to take home a massive chunk of the company earning when their beneficiaries succeed. Even in the face of failure, VCs will still get paid handsomely, minus their bonuses. Therefore, the onus of injecting passion and confidence into your business pitch, and emphasising the value of what’s at stake is on you in order to get their undivided attention.

The author is Country Manager (Singapore) of imoney.sg

The views expressed here are of the author, and e27 may not necessarily subscribe to them

e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested to share your point of view, please send us an email to writers[at]e27[dot]co

Aksvini Kamaran

Aksvini Kamaran

Aksvini Kamaran, works for iMoney.sg, Singapore's one of the leading financial comparison website. With background in Economics and Finance from RMIT University, Aksvini believes financial knowledge is the engine of one's wealth.

  • Daniel Maggs

    “While most of us look at venture capitalists as affluent financiers wearing fancy suits and ties, the business world perceives them to be the lords of their realm…”
    Most VCs don`t wear suits and ties. Perhaps you are thinking of private equity bankers? “Financiers” is a term best reserved for them.

    “…give them instant wisdom at their disposal and professional finesse to execute said wisdom at the same time…Their association with champions of different domains buys them a first class ticket to the winner’s lounge too”

    I`m lost for words. This is appalling journalism! It sounds like the author envisonages VCs living a life of Cristal champagne and limousines.

    “Although VCs are talented veterans with a knack for making winning investments…Their disappointments are washed away with ridiculous paychecks, management fees and opulent vacations”

    Is this a joke? Statistically most VC funds underperform. Only a very very small number have the amount of fees under management and/or make the kind of outsized returns which would enable them to achieve this kind of lifestyle. Think about it – VCs are investing in entrepreneurs at a lower level of risk (diversified investment + management fee, don`t get all of the profits). Consequently, just as there are very few billion $ companies, there are few super rich VCs.

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