The question of what is a Venture Capitalist (“VC”) is one that I get asked somewhat frequently. The question is typically in the form of a very blank stare when I tell someone that I am a Venture Capitalist. Almost everyone has heard of the term Venture Capitalist, although many outside of finance and industries traditionally supported by Venture Capital (notably tech) cannot tell you what a VC does. Generally, my response to the blank stare is to immediately offer that my job is very much like that of the old guy (John Hammond) in the film Jurassic Park.
Being John Hammond
This is intended to be a relatively glib remark, although there is more than a bit of truth in the statement. In Jurassic Park (particularly the book), John Hammond is actually referred to as a Venture Capitalist. For those of you who may have somehow missed Jurassic Park (for shame), John Hammond creates an island off of Costa Rica where he builds a theme park with the main attraction being dinosaurs that his team have cloned from DNA trapped inside prehistoric mosquitos locked in amber. The point is that Hammond did not create the technology, he merely brought together the idea with the financing, the team and with ceaseless enthusiasm drove the project to completion.
Working With Innovators
In my work as a Venture Capitalist, I have the humbling opportunity to work with talented innovators and management teams to bring game changing ideas to the world. As a VC, my job exists at the intersection between empowering the creation and expansion of companies and developing and managing disproportionately attractive risk-adjusted returns for the venture capital fund. Often times, this is best done through ensuring that there is a pure alignment of interest across all of the stakeholders and that when the right things happen – everyone wins.
I have hard venture capitalists described as “people who tell stories through money”. While the financing of the ideas is an integral part of venture capital, insofar as venture capitalists manage Venture Capital funds (private investment funds where investors own a piece of the companies that the venture capitalists invest their money), it is not the end-all-be-all of venture capital. A good venture capitalist is as much a source of information, advice, and occasionally an agent of change, as a source of investment.
Often times entrepreneurs will view VCs as the gatekeeper to limitless wealth. For these naïve founders, they believe that we operate as a sort of club bouncer, and all they have to do is tell a good story and we will shower them with money and invite them into some elite circle of being a “VC backed company”. Unfortunately, this is not actually how VC works. For example, at my firm we do not accept unsolicited proposals for investments. Instead, we seek out great ideas ourselves and also work through our network who connect us with interesting opportunities. I have linked to an article that goes into detail about why we do not accept unsolicited pitches.
I hope that this helps clarify what it is that I do, if you have any specific questions about the work of a venture capitalist, please feel free to reach out to me via the Contact page.