We hear a lot about venture capital and the tremendous returns they produce but what exactly do venture capitalists do? To help demystify the profession, the Johns Hopkins Private Equity and Venture Capital Club invited Nick Superina who is a Partner at QuestMark Partners, a Baltimore based expansion-stage venture capital firm with close to US $1 billion under management with interests in technology and healthcare. Our topic was titled “Behind the Scenes of a Venture Capitalist” and it was held at the Carey Business School on Apr 27, 2016.
Venture capital is an investment in private, mostly earlier-stage companies with the potential for rapid growth and value creation. Nick described the structure and economics of a venture capital firm and the value add that they bring in terms of experience, connections, access to further capital and credibility. A startup has to navigate the different stages of financing starting with seed capital and moving towards the alphabetical soup of series funding. There are different investors that focus on different stages but there has been a blurring of investing stages as venture capital firms expand their fund offerings and focus. QuestMark focuses on the expansion stage financing (Series C/D) where the business model has been proven, the management team has been established and there is a need for capital to execute the market expansion strategy.
One of the most recent blockbuster exit for QuestMark Partners was Virtustream, industry leader and innovator for running mission-critical enterprise applications in the cloud. QuestMark invested in Virtustream in 2012 and the company was acquired by EMC in May 2015 for US$1 billion.
Nick shared that the decision making process in venture capital is as much an art as it is a science. Most venture capitalists employ a robust and standardized due diligence process but they still rely to a significant extent on their gut and experience. Companies that seem to be a sure-win today may not have seemed so great when first evaluated. Inevitably, venture capitalists sometimes miss great opportunities and QuestMark is no different.
Nick also walked through several case studies on investments made and passed by QuestMark Partners and challenged the audience to make a call on whether or not to invest in a selection of portfolio companies. In addition, a valuation exercise was conducted and Nick discussed how a company’s worth is often framed as a multiple of revenue or profitability. However, he was quick to point out that venture valuations are often not tied to current operating numbers.
Lastly, Nick shared some of the possible paths to becoming a venture capitalist. The common paths are through investment banking, consulting and business school, but there is increasing demand from the profession to have individuals who have subject matter expertise in their own fields. Other alternative paths into venture capital include working at a corporate venture capital such as General Electric and Intel, and working at the commercialization office of a University such as Johns Hopkins Technology Ventures.
The Johns Hopkins University Private Equity and Venture Capital club is among the most active of the School’s clubs. We provide a forum for students, alumni, faculty, staff and industry professionals interested in all aspects and stages of Private Equity and Venture Capital, and help them develop the skills and knowledge necessary to build careers in these sectors. Visit our website and sign up for our mailing list.