As we are finalizing our year at HBS and thinking about jobs, it is important to stop, relax, take a deep breath and take another look at the LEAD essay we wrote on “our 10-year reunion”. Ten years seems like such a long time, but just as we are finalizing our last cases at HBS, it might come sooner than you think. Aided by Professor Youngme Moon’s words to dare to be different, this article is about finding your way to those non-traditional careers that are harder to find. This week, 3 alumni give advice on what it takes to get into VC portfolio companies & startups. For all you entrepreneurs out there, this is a call to action.
When the financial crisis hit in 2008, the Rock Center reported a record year for the number of teams that applied for the business plan contest. It could be that desperate times require desperate measures, or that the crisis inspired creativity and maybe a bit of courage in people. You often hear that only when things hit rock bottom do we fully utilize our capabilities. So perhaps that is what happened, or maybe not, but the drive to go into entrepreneurship certainly seems to be there among current students.
Coming into HBS, I thought that entrepreneurship meant starting your own business, from scratch, with no money to live on and no income. I thought it meant struggling all by yourself in a room in your house, learning to develop your product and absorbing ups and downs all by yourself. During first year’s TEM course, my view changed drastically, and suddenly the pools of capital seemed bottomless, people could get funding for almost any crazy idea, and did not even need a proven concept. The only thing to watch out for is getting fired by the VCs (remember the Zipcar case?). I still remember the graph of uncertainty vs. likelihood of getting capital and the valuations you will get. The more uncertainty you take away, the higher the likelihood of capital, the higher your valuation. Now, if only it were that easy.
Getting into Entrepreneurship
If you are considering entrepreneurship, you should realize that being entrepreneurial can happen on a spectrum of points in a company’s lifecycle. You could, for example, start from scratch and create your own things, build out your team, try to recruit the right people, etc. You could also join an early-revenue start-up or a developing start-up that has an existing team. To gain domain expertise and build out your network, a late stage start-up could be the right path for you, and even in an IPO-ed company you could find roles in which your day-to-day responsibilities are entrepreneurial. Depending on your personality type, tolerance to ambiguity, and team and process skills, different stages of entrepreneurship will appeal to you. If it helps, this is what in my mind and from my experience the graph above looks like.
Michael (Mike) Gaiss, SVP at Highland Capital, agrees: “Whether a student interested in entrepreneurship should join a start-up or start their own depends on the individual and their capacity to take on risks. When you start your own company or become part of a team that is starting their own company, you will assume a lot of uncertainty in terms of the future but also in terms of funding. In today’s world these companies will most likely be bootstrapped.
Another option is to gain experience and best practices from an existing start-up that is in its early revenue mode. This way, students who don’t yet have domain expertise could build out their knowledge and get valuable experience.
Another option is to look for growth stage companies. These are usually funded through several rounds – it might even be a company that went public – and you can get in and get exposed to a company that’s on a nice trajectory. The benefit of this is that you can walk out of there and be associated with a successful company and also learn a ton about the process and success factors.”
Derrick Lee, VP at Bessemer Partners, comments: “There are no shortcuts to finding companies. Students usually know how to identify VCs that own portfolio companies, but then fail to do more work than that. This is only half the work. You need to be well-prepared when reaching out to VCs.
Students need to think about questions like which sectors interest them the most? If it’s clean-tech, within clean-tech what area and why? Which companies are players in that field? Which investors have invested there? Are any of them alumni? Can I get in touch and get a warm call with companies?” Only a well-prepared student with a compelling story about why he/she wants to be in that sector can make a good impression and get a warm introduction.”
Derrick adds, “When students approach VCs for specific portfolio companies, I would advise them to think about projects that they could do there. Not only should they think about what skills they bring to the table, but also in what way it could be useful to the company.”
Dan Nova, general partner of Highland Capital partners and co-founder of Highland Consumer Fund, says: “If you are inspired to do entrepreneurship, you should do it. Life is not a dress rehearsal. Entrepreneurship is hard work, commitment, intelligence, etc. My advice would be to find a good mentor, or a leader or a founder, who you can learn from especially in the beginning of your career.”
Roles for MBAs
If you decide that some form of entrepreneurship might be the thing for you, there are various roles an MBA could add value in.
Mike says, “If a company is young (under 30-40 employees) and is into mobile product marketing, an MBA is expected to have some kind of domain expertise (usually previous work or research in mobile, or marketing at an internet media company). These companies are either building a product or looking to test the market with the product, and need very specialized skills. Otherwise, it is tough for a small company to see value in what you bring. Your domain expertise could range from horizontal to vertical skills. It could be sales, product marketing (horizontal) or mobile start-up or mobile industry (vertical).
The opportunities broaden as companies start to hit growth stage, product management, product marketing, corporate development, new product lines, new geographical expansion, tend to be areas of interest where MBAs can play an interesting role.”
Dan adds, “If you do decide to start your own start-up, and I have supported starting entrepreneurs [Dan funded Rent the Runway], know that this is a role where you are wearing multiple hats. You don’t need great deep expertise, but you should build out your team and complement yourself.
What I am looking for in entrepreneurs as a VC is:
– Commitment to keeping an open mind as to the direction of the company
– Open and transparent communication
– Knowing that the path to success is never a straight line
– Willingness to learn and network, willing to hand over
– Openness and honesty
– Self-awareness – know your strengths
and your weaknesses. ”
Getting into portfolio companies
There are several ways to get into VC-backed portfolio companies, and they all include networking.
Mike says, “Whether they are young companies or earlier revenue companies, the best way for MBAs to get into those is the HBS alumni network. What I would suggest to everyone is file the different channels of recruiting. For example, at Highland we have a new job network that lists jobs from our portfolio companies as they start up (www.hcp.com/careers). Another way to keep yourself informed is through Venture Fizz, which tracks the local start-up scene.
Another smart thing to do is follow the money. PE Hub wire and Venture Wire report 20 companies every day that raise money. Understand where the money is going, and use these websites to gain understanding and use this to approach those companies. Part of the challenge is to get a warm entrée to these companies. You can do this through alumni, investors or someone you know in the industry.
In terms of growth stage companies, this is interesting for MBAs without clear domain expertise. When these companies raise $20M there would be great roles for corporate development and/or market development type of roles.”
“Another thing to think about is that when you are networking and you know a certain VC invested in a certain company or industry, he is a real source of information. He knows the market and competition, and so while getting into that particular portfolio company might not be a possibility, that VC can potentially help you get in touch or introduce you to other players in that sector,” says Derrick. “Unless you have domain expertise, a later stage start-up makes much more sense. Early stage start-ups and seed-funded start-ups are looking for technical people with specialized knowledge. Later stage can also provide you with the mentorship and guidance that you might want to get early in your career.”
It’s no secret that clean-tech, mobile and ecommerce are hot, but that knowledge alone will not land you the job. If you are interested in a specific domain you should do what you can to become a domain expert in that field, and this includes researching start-ups trying out in that field, networking with investors who have previously invested in that industry and getting to know the people who are willing to share the insights with you.
Mike argues, “There are several hot industries out there. To name a few: Internet digital media, new ad networks for mobile systems, or the whole social graph (social streams and how to use them for CRM). What you see a lot is proliferation of access to data, integration of data from business platforms in the CRM systems and how that works. In clean-tech we see especially energy efficiency on the demand side, and new technologies around battery storage on the supply side. The environment is one that will continue to grow as we need to continue to figure out ways to clean up the planet. This is a little long-term investment, and would allow you to build up domain expertise in something that will be hot in 5 years and will set you apart from others.
As I said before, if you don’t have domain expertise, use a later growth-stage company to build this and use this as access to a job in an early-stage startup. You should look at your career holistically and think how to best position yourself for opportunities that come your way down the road.”
Derrick adds, “In terms of internet, mobile is still hot. It continues to be a capital efficient business, hence its ability to attract capital. Software as a service and clean-tech are still of interest. Life sciences and biomed in particular is interesting; however, it might not be as accessible to MBAs without previous experience. Then there is big interest for cloud computing and expansion into emerging markets.”
Dan agrees, “The internet is definitely shifting to mobile. We are looking for disruptive ecommerce models and also ones that take these trends into account. Other things that excite me are multi-billion dollar markets that can be radically improved by technology. Examples of those are Vistaprint, Netflix, Rent the Runway.the industries that have been around for a long time, but suddenly technology can shake things up and present newer business models.
Follow your passion
Many students want to get into entrepreneurships but don’t know exactly how. They are looking for that one breakthrough idea or that one path that will lead them to victory. But when you look at successful entrepreneurs, there is always one theme that stands out: they followed that passion.
Tamara Obradov is an entrepreneur at heart who is involved in the HBS entrepreneurial community. In order to shine a light on the many ventures of HBS grads and the support of the HBS community towards entrepreneurs, she brings you stories of HBS start-ups in a bi-weekly column. Should you have any ideas or suggestions on HBS entrepreneurs from whom we can learn, do not hesitate to contact her firstname.lastname@example.org.