Michael Arrington, editor of the popular tech startup news site, TechCrunch has decided to shift gears and become a venture capitalist (VC).
Debates on journalistic ethics aside, is it that easy to become a VC?
Marc Andreessen, founder of the leading venture firm, Andreessen-Horowitz Ventures, once said, "In California, you need a license to drive a car or buy a gun, but not to be a venture capitalist." Even the local barber has to pass a State Board Exam, and get a license to cut hair. Being a VC calls for two distinct abilities: raise money from institutional investors (called limited partners) and invest it in a portfolio of companies -- the Facebook, Twitter, Zynga's -- to generate obscene returns. Sounds deceptively easy! Not quite. Here are a few characteristics of successful venture capitalists:
Can you raise money? According to the National VC Association (NVCA), venture firms shrunk from over 1023 in 2005 to 791 in 2010. In other words, institutional investors are not handing out money as fast as they once did. Ten years ago, during 1999-2000, venture funds raised $100 billion. In 2010, only 157 venture funds raised $12.3 billion -- the lowest in the past seven years. Despite this apparent slowdown, for best-in-class VCs, raising money is a quick in-and-out 90 day process, while the rest of the wannabees spend 18 months or more raising capital. Institutional investors are being very selective. Venture funds that can demonstrate a compelling strategy are welcome. For the rest, Darwin prevails.
To read the full, original article click on this link: Mahendra Ramsinghani: What Makes a Good Venture Capitalist?
Author:Mahendra Ramsinghani
