Contrary to conventional wisdom, venture capital firms aren’t run by wealthy financiers who magnanimously fund start-ups, but by professionals who study, analyse and assess capital mobilisation proposals submitted by entrepreneurs

If you believe you have the ability to spot a good business opportunity and aspire to fund the dreams of entrepreneurs who can create jobs and tax revenue streams for public investment, a new career option which merits consideration is private equity, aka venture capital funding.

In the popular imagination, a venture capitalist is a wealthy financier who magnanimously funds start-up companies. However, the contemporary reality is that venture funds are pools of capital, usually limited liability partnership firms which invest in start-ups and growing businesses in expectation of high rates of return within five to seven years. Far from being passive financiers, venture capitalists enable the growth of investee companies through involvement with management, strategic marketing and planning. They are entrepreneurs first and financiers next.

Typically, venture capital (VC) firms raise money from wealthy individuals, corporates, financial institutions, and non-profits to build a corpus which is deployed into start-ups, especially new technology firms and businesses.
VC professionals study, analyse and assess capital mobilisation proposals submitted by entrepreneurs. The aim and objective of VC professionals is to fund high-potential business ventures and killer apps, and exit when funded enterprises receive high valuation and/or go public. For entry into established venture capital firms as a professional, a commerce degree is sufficient, although top-ranked VC firms prefer to recruit MBAs in finance or chartered accountants.

Financially, a career in private equity can be highly rewarding. Young professionals usually start as analysts obliged to do research and administrative work. At this level, compensation packages are normatively Rs.10-15 lakh per year. After a few years experience, or alternatively, with a masters degree or MBA you could start as an associate earning Rs.20-30 lakh annually.

The next step up is to the position of principal who typically manages the ‘deal flow’ and short-lists promising proposals. At this level, annual remuneration packages vary between Rs.30-50 lakh. And at the very top are fund partners — high performers with excellent investment track records of identifying, nurturing, hand-holding and maturing start-ups into high valuation corporates. Partners are the public face of private equity funds whose knowledge, business analysis and trends forecasting skills prompt high networth investors to entrust their savings to their equity funds for steady or spectacular returns. Partners are usually investment superstars who earn crores of rupees by way of salaries and bonuses, with some of them morphing into independent investors and starting their own VC firms.

“Private equity is a highly rewarding profession as there are over 350 private equity funds from around the world investing in India. Remuneration packages are excellent and comparable with foreign banks, and the ‘carry’ offered by most VC firms is an addition. ‘Carry’ is a percentage of the profit made by a fund from investee companies,” says Ashish Chugani, partner and head of private equity at the Mumbai-based Centrum Capital Ltd, a publicly listed company, and chief executive of the Ashmore-Centrum India Special Opportunities Fund, a joint venture between the Ashmore Group, UK — a global giant with assets of over US$ 70 billion under management — and Centrum Capital.

A commerce postgrad of Mumbai’s well-known Sydenham College with an MBA from Duke University’s Fuqua School of Business (USA), Chugani served with Citibank, Mumbai, the Polish-American Mortgage Bank, Warsaw, and Arthur Andersen for almost a decade before entering the private equity business. In 2000, he was inducted as a principal of Antfactory Pvt. Ltd, Mumbai, where he rose to become managing director in 2004. Four years later after brief and unsatisfactory stints with two VC firms, he signed up with Centrum Capital.

“VC firms require professionals with a wide range of skills. Typically we not only provide finance to start-ups and mid-career companies, but also offer support services to investee companies depending on their needs. This can include advice and assistance in operations, marketing and business development, strategy, finance, human resources and technology management. You don’t have to be rich to become a VC professional. Our job is to create value for our funds by identifying, nurturing and maturing promising businesses,” explains Chugani.

According to Chugani this is an exciting as well as a rewarding career option as it provides opportunities for developing entrepreneurship experience and building high value companies without investing your own capital. “For bright, energetic professionals willing to put in long hours to assess business risks and rewards, this is a fast-paced career and can be remarkably successful, because India has huge latent entrepreneurial talent and a massive untapped market for a plethora of goods and services,” he adds.

Way to go!

Excerpted and adapted from 101 Great Careers for the 21st century by Indira Gidwani, 2016