A Star Venture Capitalist in the Making

So, You Want to Become a Venture Capitalist?

In this article, Edward Mofrad shares his views on what it takes to become a successful venture capitalist.

Throngs of talented graduates and experienced candidates that could be potential stars shy away from venture capital as a career. Why? At the outset it looks like very hard work: research, insight, being part of close-knit networks, having contacts, knocking on doors—complete with having doors shut in your face—all that with no guaranteed or even likely results. At the other end of the spectrum, there are those who are seemingly addicted to this nature of work; they are a natural at it, and consider it not just a career but a purpose in life. This latter group envisions/has experienced past the initial struggles and onto the relish for wealth, the thrill of running one’s own destiny (no one telling them what to do/where to go, how far to go, etc.), the pure joy of planting a twig and watching it grow, and enticement for the mind. But are they what the industry needs?

While there are no clear-cut indicators of who will turn out to be a successful venture capitalist (VC), there are certain virtues to consciously consider, if you are thinking about it at any level:

1. Be keen to the news and trends in the world. One needs to have a sense of what new needs are born; what remains unfilled in the ever-altering universe around you. Does the candidate across from the managing director have those skills? And you can’t stop there, either! One needs to have intuition; be prepared to forecast what is going to be needed in the future.
2. Patience. Be patient: nothing good comes easy or fast! The successful VC has persistence and doesn’t quit; if you do, the competitor that didn’t quit “wins!” At the same time, common sense is indispensable. There is no sense in throwing good money (or time or energy, for that matter) after bad. When it is evident you took the wrong path, cut your losses and don’t waste precious resources missing out on the next big opportunity, which is always around the corner!
3. Do unto others as you want done to you! Remember the basic values of fairness and honesty. Guess what? It shows anyway—in your deeds and results—when you don’t display the highest qualities of these virtues. In a trade where your name and your reputation mean everything, you don’t want to be described by any undesirable attributes!

Again, while those VC practitioners at the top of their game don’t display universal traits, there are some common patterns that are worthy of notice:

1. They have an infinite appetite for success. Nothing seems able to break their resolve. They are pertinacious toward their goal, and short-term discomforts don’t derail them.
2. They possess an entrepreneurial mindset, looking at their business—and life in general—from that perspective. They understand that in order to sell their ideas and accomplish good work, they need to create real value for the buyer. For them, the call is more than just “do enough to succeed”; rather, they want to do well (create value) for their community and the world at large. At the same time, they bypass the small, the irrelevant, the day-to-day, and concentrate on the big picture instead.
3. They bring expertise into the field. They are good at something, and then at everything else! They are specialists, and at the same time, generalists! If they don’t know something that is relevant—the lack of knowledge thereof could stand in their way to success—they learn it, and learn it quickly—sufficient to be able to present themselves in a meaningful way.
4. Successful VC practitioners think quickly on their feet, make fast decisions—as rapidly as the circumstances warrant—and then move on. Their sense of intuition is precise and on the dot more often than not! When a decision turns out not to have been the greatest, they don’t fret and moan about it, but accept it and move on to the next game. That is not to say they make spontaneous, arbitrary decisions. They put their attention where attention is warranted; time is money and they recognize that the attractiveness of a sector changes quickly. For bigger decisions, they practice good judgment, do their due diligence, and consult with those who are in the know. However, they don’t freeze when snap decisions are required, but have a keen sense of awareness regarding their environment, leading them to mostly ‘right’ choices of action.
5. They have an innate ability to juggle several difficult situations simultaneously without losing order of importance, all while maintaining control, a contagious enthusiasm, and a sense of humor about it all!
6. More on their magical decision-making powers: venture capitalists’ choices seem to be comprised of the right blend of facts and emotions. Their decisions possess leadership quality: they portray confidence and optimism. VC’s technical talents aside, they display great people-skills. They have a nose to smell where there are business opportunities, and make determinations accordingly.
7. While they are master planners (some instances instinctively know their schedule for the week and month ahead), they know that events of various importance arise at a moment’s notice and are therefore flexible to juggle their schedules around (i.e., there is nothing wrong with a polite/timely phone call or e-mail saying, “I’m sorry, at the time we scheduled this event, I didn’t realize there was another important matter to tend to; could we please reschedule?”)
8. On a more personal side, VCs demonstrate a degree of ego, arrogance, and, yes, even narcissism! They don’t seem to have patience for ‘nonsense’ or incompetence, they want everything done right the first time (you may even call them perfectionists!), and may come across as rude and/or conceited! They can be a bit like “Doc Martin.”
9. VCs don’t waste time! They realize that at any given moment, any amount of capital invested is in an inverse relationship with time: the longer their funds are sitting without producing returns, the lesser chance they can call themselves winners in this game.
10. Finally, there seems to be a common element of luck associated with successful entrepreneurs; they simply seem to be at the right place at the right time, say the correct thing at the correct time, hit a nerve, and have the instantaneous intuition of doing just what it takes!

Aspiring VCs should have no illusions: to make it in this business requires nothing short of back-breaking work, which also entails developing and maintaining a strong network in the industries one focuses on and remaining current. Once you get in and are good at it, though, you will belong to a very small club and if your investments succeed, you will be called a successful venture capitalist.

In the words of some experts, VC is a business of apprenticeship. Be prepared to spend years learning, another number of years experimenting with, and just as many years applying the knowledge that you have learned (including learning from mistakes!), so that you can reap the rewards in the final years of your career!

Ed Mofrad, CPA, CVA, MBA, is principal of Mofrad Financial Solutions, a Los Angeles, CA-based tax, valuation and accounting firm. He can be reached at (213) 388-8400 or by e-mail at ed@mofradfinancial.com.