Venture capital has become an increasingly popular investment option in recent years, fueled by a wave of innovation and disruption in technology and emerging markets.
However, breaking into this high-stakes industry can be a daunting task, especially given the current market conditions. With competition for funding at an all-time high and market volatility on the rise, it’s more important than ever to have a deep understanding of the industry and the key factors that can lead to success.
Our team at Insignia Ventures Academy has put together five essential factors to consider before diving into the world of venture capital. From developing a sound investment strategy to building a strong network, we’ll cover insights that can help you navigate the challenges and capitalise on the opportunities of this fast-paced industry.
Whether you’re a finance professional, a tech enthusiast, or an entrepreneur, read on to learn more about what it takes to break into venture capital in today’s ever-changing market.
Experience is important
But it’s a balancing act of being open to new ideas and data versus leveraging on your own past experience.
Having a solid background can give you a better understanding of the industry, the players as well as the trends. However, it’s important not to be too rigid in your thinking because the VC world is constantly changing.
Also Read: The secret sauce of de-risking early-stage venture capital
It’s essential for you to stay flexible and open to new ideas and perspectives. This means taking in differing opinions and perspectives, as well as being updated on the latest trends, and being willing to take calculated risks that can help you in the long run.
Network can be a sourcing alpha that is unique to every individual investor
But developing a quality network requires intention.
A strong network can give you access to valuable deals, potential investments, or partnerships that would otherwise not be possible. In order for investors to grow their network, they need to be proactive in building and maintaining the relationships they’ve gained with other investors, founders, and industry experts. This involves being open to sharing your expertise and making time for others by offering help and support to those in the industry.
As the famous saying goes, it’s quality over quantity. It shouldn’t matter the number of connections you have. What matters is how these connections can benefit both parties. Investors should focus on developing relationships with other individuals who share the same values and investment strategies, which brings us to our next point.
Investment strategy alignment to experience is important
But formulating an investment thesis (or investment worldview) is not a one-and-done affair.
There needs to be a constant revisiting of investment strategy and evaluation of past decisions. The more systematic and disciplined the approach, the better.
Aligning your strategy with your experience can help you make informed decisions based on your past. Past successes and failures can be a helpful baseline for your decisions, but it’s necessary to remember that the investment thesis should not be set in stone, rather they should be revisited and updated on a regular basis.
This is because the industry is constantly changing, and so it’s best for an investment thesis to change along to ensure that you don’t fall back. This will involve analysing your investment performance, identifying areas of improvement, as well as adjust your approach to invest accordingly.
As mentioned before, the more systematic and disciplined the approach, the better. This is because you’ll stay more on track and make more informed decisions. By re-analysing and revisiting your investment thesis, you are improving your chances of finding those fund returners and reducing the chances of making costly mistakes.
It’s a long-term, uncertain game
But it’s not just about waiting for returns.
It goes beyond making the investment. It’s important to position yourself as someone whose values go beyond the investment. Venture capital is a high-risk, high-reward industry. When investing in startups, there is always a high chance of failure. Startups won’t be profitable right off the bat. It can actually take years for them to mature and generate returns. Being an investor, it’s key to have patience and a long-term outlook on these companies.
Also Read: 5 lessons from 5 years in venture capital
However, this doesn’t mean that once investors have invested, they just have to wait for the returns. It’s quite the opposite. Investors are expected to actively keep up with the portfolio’s company’s status and growth, as well as identify any potential areas of improvement. So while patience is important, it’s also important not to just sit back and watch.
Collaboration is not just about making connections
But actually doing the little things to show your value to your network.
Collaboration goes beyond coming up to someone, introducing yourself, and exchanging contacts. It’s more important to maintain the relationship by proving your value. This can be done by facilitating valuable introductions.
For example, if you think that an industry expert can be of great help to a startup, you might want to introduce them to each other. Providing relevant insights to these startup founders will, in return, grow their company, which then increases the investor’s return. It’s the little things that are done to help other individuals in the industry that will solidify your relationship with others.
Final thoughts
The public perception of venture capital often revolves around the idea that it is an exclusive club for the wealthy, only interested in making a quick profit. However, as the five key points highlighted above demonstrate, the reality of venture capital is far more complex.
Venture capital is a dynamic and constantly evolving industry that requires a deep understanding of both the market and the companies being invested in. At its core, venture capital is about creating value and helping to build successful businesses, not just making money. As such, those who are willing to stay flexible and open to new ideas can find great success in this exciting field.
If you’re keen on improving yourself and learning about investing from a VC’s point of view, there might just be a program for you. For fully immersive and experiential learning on SEA’s VC scene, check out Insignia Venture Academy’s VC Accelerator course, where you can take in knowledge from the hours of content and live sessions, as well as the practical learnings of what it’s like in a VC – learning VC by doing VC.
Aside from the VC Accelerator course, IVA has also newly launched the VC Launchpad program. Adapted from the content of the VC Accelerator, the program was designed for a light but still substantive exposure to the world of venture capital in Southeast Asia.
It is especially for professionals who are on the go or are starting from square one and want a teaser before diving into an experiential 12-week program. The VC Launchpad course is a fully online, self-paced course where you can develop your early-stage investment acumen with an extensive amount of content and practice.
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