Venture capitalists read various business publications every day, including The Wall Street Journal, the Financial Times, and others, before starting their day. Investing in venture capital tends to involve subscribing to trade journals and papers that are specific to the industry involved. Breakfast often includes all this information.
Meetings fill up the rest of a venture capitalist’s day. There are many participants in these meetings, including other partners and/or members of the venture capital firm, senior executives in an existing portfolio company, contacts in the fields they specialize in, and budding entrepreneurs seeking venture capital.
Firm-wide portfolio investments might be discussed in an early morning meeting, for example. In the due diligence process, the due diligence team explains the pros and cons of investing in the company. The next day, there may be a vote around the table on whether or not to add the company to the portfolio.
A portfolio company may be the subject of an afternoon meeting. The top venture capital firms visit the company on a regular basis to determine how the company is running and whether its investment is being used effectively. After the meeting, the venture capitalist is responsible for taking notes on the meeting and sharing them with the rest of the firm.
In the evening, a group of budding entrepreneurs who are seeking funding for their venture will be meeting with you for dinner after you spend much of the afternoon writing up that report and reviewing other market news. An emerging company’s potential is assessed by the venture capital professional, and whether further meetings are necessary.
In the evening, when the venture capitalist finally goes home for the night, he or she may take along the due diligence report on the company that will be voted on the following morning, giving them yet another opportunity to review all the key characteristics before the morning meeting.
The Venture Capital Industry Trends
In the beginning, venture capital funds were used to start an industry. Georges Doriot contributed actively to the success of the startup through his participating philosophy. The entrepreneur was provided counsel, funding, and connections.
As a result of an amendment to the SBIC Act in 1958, novice investors gained access to the program where they invested little more than money. The increase in funding levels for the industry was accompanied by a corresponding increase in the numbers for failed small businesses.
Since then, the VC industry has developed a consensus around Doriot’s original philosophy of providing advice and support to entrepreneurs.
Venture capital: Why is it important?
A capitalist economy is built on innovation and entrepreneurship. A new business, however, is frequently a high-risk and high-cost venture. The risk of failure is therefore spread by seeking external capital. The potential dollar invested in a new company is rewarded with an equity stake and voting rights in return for taking on this risk. Entrepreneurial capital, therefore, enables startups to launch and founders to realize their dreams.
Investing in Venture Capital: How Risky Is It?
Early investors have a high risk of losing their money on new companies, which means they often don’t make it. Three or four startups out of every ten fail completely, according to a common rule of thumb. The other three or four are either losing money or just returning the original investment, while one or two are producing substantial returns.