The most powerful person in the World is not really an elected public servant! It will most probably be a person from Finance, probably a Private Equity Banker or an Investment Banker or a Venture Capitalist! It may be tough to believe, but this is the harsh reality of life. An elected official may control the largest army in the World, but it is the VC who controls the companies that make and sells guns to those armies. A Head of a state may control the economic levers of an economy, but it is the VC who owns major stakes in large business corporations, that ultimately have a huge impact on the economy.
A Venture Capitalist is someone who wants to multiply his money at a rapid pace and is willing to take huge risks for it. Investing in traditional investment options like Govt bonds, stocks, tax-free bonds, etc. give a very low rate of return as compared to investing in businesses that are growing very fast or are poised to grow very fast. Startups or SMEs are able to provide a great return on the investment made by the investors. As their sales increase so does their share value and hence, this allows a small investment in an early stage company to give a great 10 to 20 fold RoI. This is the reason why the Indian startup sector is attracting a lot of interest and funding from investors world over.
Venture Capitalists are continuously on the lookout for small early-stage companies that can grow fast and multiply their funds. They accept that over 95% of their funds will have to be written off due to losses/ company going bankrupt. However, they know that this 5% which is not written off, gives them returns large enough to not just cover their previous losses but large enough to also get a decent return on the investment. Over the years, VCs become adept at spotting good opportunities and they are able to reduce their win-lose ratio from 5:95 to 95:5. This is what then gives them the strength to buy more stocks in established companies or SMEs, which are performing well.
These companies are cash cows that pay out handsome dividends every year and in some cases, VCs are able to earn back their entire investments through the dividends earned. Over the years, VCs are able to gain a substantial ownership of companies, they have a huge amount of funds at their disposal and a lot of influence due to the large size of these corporations that they control. This gives them a sizeable influence over the economies of many countries and thus, making them extremely influential.
Imagine being the boss of a company that holds a significant number of shares in multiple companies such as Pepsi, Coke, Unilever, P&G, Boeing, Microsoft, Loreal, Zara, Dassault, Lockheed Martin, IBM, Apple, Walmart, Amazon, Facebook, etc. This would give you a say in the way a company would be run, a say in how the markets would thus be shaped due to the dominant position of these companies in their markets. Any decision on your part would directly have a bearing on millions of employees, consumers, and vendors across the World.
Warren Buffet invests directly in publicly listed companies. Even though he does not regularly invest in private companies, he fits the exact description mentioned above. One needs to accumulate knowledge that equals a few lifetimes in order to reach a position like this.
The best way to do this is to keep reading, learning, and networking. People who are able to network well, are the ones who are able to get the best deals for themselves. This is how one can excel as a Venture Capitalist. BSE Institute Ltd (BIL) offers a short-term course on Venture Capital & Private Equity Finance to help working professionals and students build their careers in this field. You can learn more here.
Imagining all of the above may look like a tough task for most of us, but the journey of 1000 miles begins with one single step. At the end of the day, it is only your will to win that will get you this.