The technology boom has exploded in venture capital, with the likes of Lyft, Uber and Snapchat poised to provide their backers with a fat payday at the exit door.
For those hoping to break into venture capital, fintech, cyber security, and the internet of things are among the hottest areas to work in, according to industry experts and VCs contacted by BusinessBecause.
Tech has been among the biggest beneficiaries of the venture capital industry’s recent prosperity, with the number of tech-focused funds surging, such as the €350 million fund recently launched by Lakestar, a firm whose founder was an early backer of Skype and Facebook.
Amid the boom times, sub-sectors have emerged that have drawn increasing amounts of cash from some of the world’s top venture capital firms.
An Accenture study said recently that fintech investment in the Asia Pacific region alone had quadrupled last year, reaching nearly $3.5 billion, led by areas such as payments, the bitcoin blockchain and the cloud. Global fintech investment hit $12.2 billion in 2014.
Examples include Funding Circle, the peer-to-peer lender which raised £97 million from investors including BlackRock and Temasek, and machine learning start-up Sift Science, which raised $23 million from backers such as Y Combinator, the prestigious Silicon Valley fund.
“There are a lot of opportunities in my marketplace to build global businesses,” says Dylan Pearce, a principal at Greycroft Partners in the US, who earned an MBA at Pennsylvania’s Wharton School.
He started his career in investment banking, transitioned to private equity with a focus on tech, and now works with internet companies that Greycroft has backed, such as Yeahka, a Chinese mobile payment service provider.
He illustrates the increasing number of MBA students flocking to venture capital, where the risks are high but pay is lucrative.
“Student interest is representative of the major themes you see in venture investing today — cyber security, employee/consumer engagement solutions, and fintech are some examples,” says Todd Carson, senior associate director for Wharton MBA Career Management.
Cyber security in particular has blossomed, with venture-backed cyber security companies raising a record $1.9 billion in 2014, according to Dow Jones VentureSource.
CrowdStrike for instance, a California-based cyber company, raised $100 million in a round led by Google Capital; Checkmarx, a leader in software application security, raised $84 million from Insight Venture Partners.
Tom Sabel, associate director for the Career Management Center at Stanford Graduate School of Business, says MBA students are savvy: “They’re trying to think about where the wave of next technologies are going to come from.”
Consumer services has blossomed, led by Uber, whose latest funding round, a hearty $1 billion that valued it at $50 billion, or Airbnb, which raised $1.5 billion in the summer at a valation of $25.5 billion. But Tom says the sector is saturated. “It’s harder to pick winners going forward,” he says.
For Jason Heltzer, a Chicago Booth MBA and partner at Origin Ventures, the consumer services segment has been fruitful. The firm was among the first investors in Grubhub, the online food takeaway business, whose $192 million IPO in 2014 would have made its investors a pretty penny.
“Your job as a VC is to produce returns for your investors,” he says.
Ben Thomason at the Career Management Center at Duke’s Fuqua School of Business, however, warns that it takes time to turn risk into reward: “It is important for students to evaluate their intrinsic motivations to pursue this space, because while there have been strong capital investment inflows of late, we all know that can dry up again,” he says.