Getting From HBS into Venture Capital

With well-known alumni such as John Doerr and Jeff Walker, Harvard Business School has long been thought of as the breeding ground for future venture capital and LBO stars. In a recent study of prominent Venture Capitalists (VC’s) with MBA’s, 36% earned their MBA from HBS while Stanford came in a distant second with 20%, and Wharton third at 7%.

The HBS classes of 2002 and 2003 look set to continue this tradition. Of the more than 1,750 MBA current students, more than 200 have previously worked at a private equity or venture capital firm prior to business school. It’s safe to say that many HBS students would jump at the opportunity of a position at a premier firm such as Bain Capital, Bessemer Venture Partners, or Texas Pacific Group.

Although an MBA is not necessary to be a successful in the industry (only 68% of VC’s have an MBA), it certainly does not hurt. Many VC’s argue that the value of an MBA education is in the building of a network of contacts that become useful later on in one’s career. Also, the CEO-perspective that is cultivated through the MBA program is a clear advantage.

So what is it about venture capital that makes it one of the most desirable careers by so many HBS students?

The reasons are obvious: high intellectual stimulation, considerable financial gain, significant freedom and autonomy, and the thrill of building new and exciting companies. Students often describe venture capital as a crossroads where the financial acumen of investment banking, the strategic problem solving of consulting, and the grass roots enthusiasm of entrepreneurship all meet to form a job where you will certainly be one of the most popular alumni at your 10 year HBS reunion!
However, does HBS adequately prepare us with the skills necessary to land a job and eventually be successful in venture capital? We have certainly developed a variety of skills here at HBS by taking a healthily dosage of finance, strategy, and general management courses. Surprisingly, most successful VC’s will agree that the mastery of the “soft skills” is far more important than knowledge of finance or technology.
The human capital attributes that are most often considered very important to VC’s are (1) listening skills, (2) ability to recruit talented management, (3) qualitative skills, (4) coaching/counseling/advising, and (5) communication/persuasion skills. Meanwhile, less important skills include (1) accounting knowledge, (2) technology expertise, and (3) quantitative analysis.

Sounds easy, right? Then Why Is The Industry So Hard To Get Into?

After record-breaking years in 1999 and 2000, venture capital is going through an even more significant correction than that of investment banking and consulting. Many venture capital firms have lost substantial amounts of capital investing in now busted Internet, telecommunications, and software companies. Some are ceasing all investing activities to focus on their portfolio companies. Others are returning capital back to their Limited Partners and liquidating the fund.

As one VC described to me during my networked job search, “After any good party is usually a very bad hangover, and trust me, in venture capital, we really partied hard.” However, if one believes in any modern economy’s need for venture financing as a vehicle that stimulates innovation, VC continues to be an industry with great upside growth potential.

As many first year students have found out, most venture capital firms do not recruit people directly from business school-even HBS. On-campus recruiting and executive search firms are only involved in finding an initial VC placement in less than 6% of the cases. The best way to get into the industry is to develop a deep understanding of how the venture community operates and to build relationships with contacts in the industry. Informal networks are the most widely used method to connect people with jobs in the venture capital industry.

Sounds like a pretty grim situation; is there any hope?

There is. This Sunday, February 3, the HBS Venture Capital and Principal Investment Club will host its Annual Principal Investment Conference. For those interested in learning about this industry in a highly interactive setting, the Principal Investment Conference is an unparalleled opportunity.

The conference will feature more than 50 prominent professionals in LBO or venture capital from well-known firms such as Bain Capital, Polaris Ventures, Hummer Winblad Venture Partners, Charles Rivers Ventures, Oxford Bioscience Partners and many more. An expected student to professional ratio of 8:1 will allow attendees to interact on a personal level with many of the professionals.

In addition to the networking opportunity, the conference will provide a significant learning experience with 12 different panel discussions and keynote addresses by two of the most highly regarded professionals in the LBO and Venture Capital industry: Mike Nunnelly, Managing Director at Bain Capital, and Ted Dintersmith, General Partner at Charles River Ventures.