Friday, April 01, 2005

Venture Capital: Some preliminary research.

My workload has taken off this week, and promises to stay up there through the summer, because I've started to work on an internal startup project in the firm. For one, I won't feel guilty of being in a lame duck kinda role, and for another it'll be fun working in a really small team bootstrapped with limited resources. In fact, tuesday was an all-nighter - my first non-essay related one in a while. A few months of this, and I'll be prime for the b-school workload :-)

So, the other thing I've been doing for a bit every other evening as a little side project is rudimentary data gathering about VC's. You know, basic stuff about partners/associates in a firm, their educational backgrounds/experience/MBAs etc. Started out as curiosity, but it's gotten very interesting. I guess I could find this information all collected someplace, but compiling it myself has been quite an eye-opener. There are things I would not have noticed just by looking at a spreadsheet. For anyone interested, here are my preliminary impressions.

I started with the list of Top 100 VC firms as compiled by . Hop over to the websites, check out the Teams/People/Partners sections and put stuff into an excel spreadsheet. Simple as that. Laughable, maybe, but whatever. Over the next month or so, I'd like to get to the whole list. The data I've collected so far covers 12 firms: Accel Partners, Kleiner Perkins, Bessemer, Redpoint, Walden, Mobius, Battery, Draper Fisher Jurveston, Mayfield, Bay Partners, Alloy Ventures, and Sequoia. I know, it's a pretty small data set, so these are nothing more than first impressions. Read on if you find this kind of thing interesting.

The first question I searched an answer for was if an MBA is a requirement for a top-drawer VC job. The raw numbers suggest that the answer is a 'Not necessarily'. From my data set,

VCs with an MBA : 62%
VCs with no MBA : 38%

But, to put these numbers in context, the pool of MBA's in the workplace is a smaller set of people when compared to 'everyone else'. Does seem to me that an MBA is definitely an advantage.

The next question, then, is if where one gets an MBA matters?

Dude, this blows my mind. I've always been told that Harvard and Stanford are the best schools for a career in VC. Guess what? As far as the principals of these 12 firms are concerned, they are not just the best schools, they are THE schools. Consider this. Among those with MBA's, here is where they graduated(from a total of 13 schools):

Harvard : 39%
Stanford : 36%
Wharton : 4%
Next 10 : 21%

75% of these guys went to either Harvard or Stanford ! It is actually quite fascinating to read bios of partner after partner at a firm and find that he (oh, it is a he. this industry is still predominantly male) went to one of these schools. As an interesting aside, among the 'next 10', U.of.Santa Clara MBA's share top honors with Columbia, Sloan, Anderson and Haas with 3 each ! And Chicago GSB ? Zero.

Sticking with the MBA grads, the next question I was looking for an answer was the career paths these guys took to get from b-school to big-money-vc-land.

This is interesting stuff. I broke down the most recent pre-VC experience to three main categories: Entrepreneurship, VC/IB, and Operations. Ent is the set of people who started a company, or in cases were actively involved in a startup company. The VC/IB is a broad bracket comprising, among other things, VC, PE, IB(predominantly M&A), Hedge funds etc. I've used Operations as a catch-all for industry experience.

Ent.VC /IBOps
Harvard10.5 %39.5 %50 %
Stanford42.9 %28.6 %28.6 %
All MBAs23.7 %38.1 %38.1 %
Non-MBAs41.7 %18.3 %40.0 %
While this does not accurately account for people's varied experiences, it does seem like there is no one dominant path to get there. Among the general MBA population, a financial or operations career can equally get one to Sand Hill Road (or its equivalents). However, among those without MBA's a finance career seems not to be that much of a feeder. I think this can be accounted for by the fact that MBAs are predominant in that industry to begin with. While on this topic, another number that is very interesting is the number of people with Management Consulting backgrounds. 35% of those with MBA's and an even higher 43% of those without had a stint at the McK, Bain, and BAH's of the world.

What I find interesting is the distribution among HBS and Stanford grads. The numbers speak for themselves in this case. (as a bracketed aside, US news just ranked HBS #4 for entrepreneurship & Stanford #6. hmm.)

Numbers are definitely fun to look at. Question: Which of the three career paths would you expect a Haas graduate to follow to get to a VC role? How about an Anderson grad? Seems like all 3 Anderson grads went straight to a VC job after b-school ! And all 3 Haas grads were in finance-related jobs before their current gigs !

There are a few non-quantitative observations I made that I think are much more interesting than any of the above. VC firms are all not the same. Not even close. They are so different in their composition of people that I think one needs to take a closer look before they approach these firms, be it for a job or funding.

Accel Partners' Silicon Valley office, Kleiner Perkins Caufield & Byers, and Draper Fisher Jurveston are EXCLUSIVELY Harvard/Stanford shops. In fact, the only people who don't have MBA's at these firms are the likes of Bill Joy and Ray Lane. I'm guessing if you don't have one of these degrees, it's probably going to be a slog to have a shot at these firms. Then there is a firm like Walden VC that has principals who graduated from a diversity of schools as well as those without MBA's. On the other end of the spectrum is Sequoia Capital that has many more principals without MBA's than with.

Looking at work experience, Redpoint Ventures seems to be made up exclusively of principals with prior VC experience, whereas Bessemer's NYC office seems to have a liking for those with PE background. Accel's London office is all about folks with senior level industy experience, while Battery Ventures seems to have a much more diverse career background collection.

And, if one wants to go the entrepreneur route to VC, it might help to consider that 38% of these folks started companies that were funded by the VC's that they ended up becoming partners at ! A question that must come to mind is if there are differences in VC firms when it comes to such hiring - and the answer seems like a qualified Yes. The numbers suggest that Sequoia Capital is by far the best place for that.

Again, a disclaimer that this is a completely non-scientific dabbling-in-my-spare-time kinda deal. Please don't take BW-boards-style offense to any mention of your school (or lack thereof) :-)

Finally, you know how everyone tells you that grades don't matter at b-school. Well, if you are considering a career in VC, you may want to pay no heed to that. The top 5% of the graduating class at HBS is bestowed the Baker Scholar tag, and the top 10% at Stanford the Arjay Miller Scholar. But, in my list, 13% of all HBS grads were Baker Scholars, and 23% of all Stanford's Arjay Miller Scholars !


Blogger Sarah Tavel said...

I know this post is very very old, but I just came across it. Really great analysis - thank you for taking the time to write it up. Hope everything is going well for you (and your bootstrapped startup!).

12 August, 2007 08:38  
Anonymous Uzo said...

I have been reviewing VC firms for the last 2 weeks and I have to say this analysis is quite spot on. I must say, it is good to have this compiled on a page or so. Well done!!

19 July, 2008 12:58  

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