Predicting a Future in Venture Capital


Two years ago, I was a postdoctoral scientist at Mill Hill in London, UK. I was also contemplating a change from my life at the bench in molecular biology. I was particularly interested in getting involved in the commercialization of some of the exciting research I was reading about, but didn't know much about what options might be available. It would have been helpful to have a crystal ball to determine whether I could make the transition into venture capital and, if so, whether I would enjoy it. Without the benefit of a crystal ball, I am lucky to have embarked on a fun and exciting career, and would like to share some of my experiences with others who may be considering venture capital as a career choice.

How does the venture capital industry work?

Venture capital involves investment in companies in order to provide a significant return to investors. It is generally regarded as a higher risk investment than listed stocks, as the companies are often less mature, but it also delivers a higher return than most other investment classes.

A venture capital fund generally obtains its capital from superannuation funds and institutional investors. The life of the fund is generally around 10 years, during which time the investors will be called upon to commit an agreed amount of money, which can then be invested by the venture capital team in appropriate investments. Staff salaries are paid out of a management fee and those staff members are generally entitled to a small share of the returns if the fund performs well. This share is known as "carry."

Venture capital fund staff are responsible for making a series of investments in appropriate companies, helping those companies to achieve their full potential through advice that includes commercial strategy and assisting with contact networks. The process of evaluating new investments involves due diligence, that is, an analysis of the likelihood that a company will succeed, usually through analysis of a range of issues including intellectual property, competitors, management teams, financial structure, and others. The venture capitalist team needs to be good at ensuring that a company has the potential to be a big success, before negotiating favourable terms for an investment. Once the venture capital team has invested, it has an ongoing responsibility to help the companies grow and develop, so that when it comes time to realise its investment, generally within 5 years, it can sell its share of the business for a significant gain.

How can I make the transition from scientist to investor?

I actually made the transition fairly directly. After deciding that I wanted to get into commercializing Australian science, I decided to attend a conference on Financing Biotechnology in Sydney. This turned out to be a fantastic move for me. Not only did I learn a lot more about the challenges to be faced by emerging biotechnology companies, I also met a number of people who were already involved in the area. Through that conference, I met the managing director of a company I am now associated with, who offered to arrange an interview with a venture capital group associated with his organization. I attended the interview the following day and ended up starting with the team a few months (and interviews) later.

While I was lucky to get the break that I did, my attendance at the conference demonstrated that I was committed to getting a job in the industry and enabled me to meet people that could help me succeed with that goal.

There are a number of other ways to make the transition into venture capital, including ones which provide the added benefit of providing some business experience along the way. Some have made the transition through MBAs or business degrees, while others have entered venture capital after getting some experience in a start-up company. My impression is that business training is not as highly regarded in the industry as business experience, although both are clearly useful.

An alternative route is through management consulting. While this can be an interesting career choice on its own, it also provides formal business training, a lot of practical experience in a variety of businesses, and also gives you a strategic outlook for assisting investee companies achieve their growth aspirations.

I think more than anything you have to have made the decision that you are going to take a leap of faith and really throw yourself into the search for a job that you love and feel passionate about.

Will I have any regrets?

As I contemplated leaving the lab, many of my scientific colleagues expressed concerns that my decision would prove to be irreversible. It is not a question that I have considered much since, as I think the hardest part about leaving the laboratory was making the decision to do so, and I love my new job. That being said, I do think it would be possible to move back into a traditional research career, despite the discontinuity in publication record, although it might involve a sideways rather than upwards step. However, even a little venture capital experience opens up myriad other career choices, any of which seem a more likely option for someone like me who has already decided that a lab-based career isn't ideal for them. For instance, there are positions in business development at the big accounting houses, where the role is to help companies find new capital and government funding. There are also positions in start-up companies or even in patent law, where a bit of commercial experience only adds to the value of your scientific experience.

While I would still go for the crystal ball every time if I could, I hope that my experiences may be of some benefit to those contemplating a career in venture capital.

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