The Role of Research in Venture Capital Investing: The Research Skills Required to Sort through the Markets, Companies, Issues and Individuals Related to a Potential Deal Are Perfectly Suited to the Modern Information Professional

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According to the latest research from the National Venture Capital Association (NVCA 2012), venture capital is responsible for roughly 12 million jobs and $3 trillion in revenue in the United States and accounts for 21 percent of its gross domestic product and 11 percent of its private sector employment. In 2010 alone, venture capitalists invested approximately $22 billion into more than 2,700 companies, 1,001 of which received funding for the first time.

For those who know the term "venture capita!" but aren't entirely sure what it entails, venture capital firms (there are about 460 of them in the United States) raise funds from large, institutional-type investors--think pension funds, endowments and the like--and invest that money in new companies or ideas they believe will become commercially successful. The goal is to have the start-up companies either go public (i.e., sell shares of their stock to the public) or be acquired (bought) by another company so that the venture capital (VC) firm can pay back the institutional investors who provided the "seed" money and also make a little profit for themselves.

Given the unpredictability of the business world, it's no surprise that these investments are essentially high-stakes gambles by VC firms. The NVCA estimates that 40 percent of companies that receive venture capital fail, and a similar share produce only "moderate" returns (NVCA 2012). Only about one in every five investments produces significant profits, and it is these returns that make it possible for the venture capital industry to consistently perform better than the public markets.

While making money is certainly important to venture capitalists, the highest ideal in this particular industry is to drive …