Venture capital firms exist to turn small businesses into large corporations and make a profit doing so. To achieve this, they need plenty of experts, such as venture capital analysts. A venture capital analyst is a professional who researches and analyses the market to find out which startups (and early-stage companies) have the most potential and are worth the attention of their firm.
With such an important role, an aspiring venture capital professional must gain specific skills before beginning their career. Let’s explore these skills in detail.
Expertise in Research and Due Diligence
As a venture capital analyst, you will be required to carry out meticulous research on target companies. You must be able to grasp how they operate, their technologies and the viability of their target market. Why is such information crucial?
The results from your research will inform your firm on whether or not to invest in a particular startup company. It provides key details, such as potential risks, ensuring they know exactly what they are getting themselves into. That is why you need expert research skills as a venture capital analyst.
Excellent Networking Skills
To pursue a career in VC, you must also be an excellent networker. That requires more than just meeting new people and having a short chat with them. It means creating meaningful and productive relationships that will serve the company in the present and future.
Having excellent networking abilities makes you an invaluable asset for any venture capital firm. It helps you establish a reputation as a sharp and reliable professional. As a result, it opens doors to hot deals and insights that may not be available to others in your position.
As a venture capital expert, there are various ways to strengthen these networks, including:
- Attending industry conference
- Joining professional associations
- Leveraging social media
Remember, you don’t have to start big. Familiarise yourself with one or two people who can introduce you to other individuals, and the network grows.
Proficiency in Negotiation and Deal Making
Someone might ask, ‘I’m just an analyst; why do I need to be a good negotiator and deal maker?’
It’s true. As a venture capital analyst, you may not always lead negotiations. However, you need to be proficient in deal-making in order to identify good ones that can benefit the firm. Secondly, understanding the fundamental dynamics puts you in a better position to support partners in making these deals. That could really help with advancing your career into more senior roles as a venture capital professional.
Supporting partners to make deals can involve a wide array of duties. For example, you could be asked to prepare valuation models and comparables to give them a clearer picture of what they are negotiating for. Sometimes, you can have a relatively lesser role, such as providing negotiation support materials like market research summaries, to help them secure better deals.
Regardless of the degree of your involvement, having the know-how makes you an indispensable contributor to the whole deal-making process.
Challenges of Working as a Venture Capital Analyst
Like any other career, working as a venture capital analyst has its own set of challenges. Just as learning the essential skills is key to preparing yourself mentally and professionally for what lies ahead, understanding these challenges is also crucial.
Intense Competition
One of the biggest challenges you will face as a venture capital analyst is intense competition. The industry is highly desirable, offering the potential for high earnings to successful individuals.
As such, it attracts a lot of top talents from thousands of consulting firms, universities and even investment financial institutions. However, the number of entry-level roles (such as a venture capital analyst) is minimal. This imbalance between ‘supply and demand’ makes it one of the most competitive career paths today.
With such intense competition, breaking in can be highly challenging. However, there is always a way in. For example, you can start by differentiating yourself from the rest. A good way to achieve this is by developing a unique value proposition, such as focusing on a specific startup ecosystem, like AI or healthcare.
Build strong networks and gain relevant experience. That way, other professionals will always know who to go to when they need to approach a startup in such spaces.
Long Feedback Loops
Venture capital is a long game. This means that it may take years before you can see the success of your work. While that may not necessarily be an issue, it can be a challenge for various reasons.
For example, it limits the learning opportunities. Since results are far apart, it can be challenging to know what you did wrong, leading to a series of mistakes before realisation. Additionally, the delayed validation might also hinder your career growth because many senior individuals may want to see tangible results before considering you for a position or promotion.
Conclusion
To increase your chances of success as a venture capital analyst, you need to be an excellent researcher, negotiator and networker. Learning these skills ensures you are not only good at your job but also prepares you for some of the challenges you might encounter, especially in the early days of your career.
