The smartest 26 year-olds in the room are going into VC
At the London School of Economics' (LSE) Alternative Investment Conference, Shmuel Chafets, founder and chairman of VC fund Targets Global, said venture capital is becoming young people's career of choice. "Where does the smartest kid in the room go?," he asked. "In the US it has always been to a startup but in Europe they've gone on to be an investment banker or a consultant. That's changed a little now."
Venture capital firms give capital to early stage high growth companies in return for an ownership stake. While banks and private equity funds work with more established companies, VCs are active at the forefront of innovation. Emma Davies, CEO of VC firm Octopus Ventures, says they're making a real difference."We're in the business of backing people creating solutions to the world's problems" she told the assembled students.
Davies people in her team need to demonstrate "the antithesis of groupthink." Good VCs are trend spotters and for this they need to be diverse, because founders themselves are not all middle class men.
She is adamant about the need to "expand the reach to founders of different backgrounds," both culturally and socioeconomically, but maintains that in the current market "it's going to be harder to keep it in the front of our minds."
Some people in VC have come from banking backgrounds. Others started as entrepreneurs or have worked for technology firms. It helps to understand the firms VCs are investing in. In London, VC firms like people who know about fintech. "If I were a betting man, fintech in London is the bet," said Chefs, before adding that there are, "many weird things happening in emerging spaces," and cautioning that relying too heavily on only one can be a mistake.
Simon Tobelem, CEO of venture capital firm ARIE said knowledge of both micro and macro trends is pivotal for VCs: "Read reports of how people see the industry in 10 years and understand what your competitors are doing and why you should be doing the same."
After a few years in venture capital, some young people aspire to set up their own fund. This isn't easy, warned Tobelem: "Investors are presented with the opportunity to invest in firms every day, eight out of ten of those are plain vanilla, same story, same performance, same same same."
To succeed, you'll need to differentiate yourself. "Don’t do whatever everybody is doing just because everybody is doing it," Tobelem cautions. VC is for mavericks.
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