I was in your shoes once, looking at venture capital from the outside in and trying to understand what it would take to get a foot in the door. It was a daunting process, and with no set career path in the industry, I defaulted to hustle, reaching out to as many VCs as I could to learn about their paths into the business. Of all the advice I was given in the dozens of meetings, coffees, and quick chats I had, there was a single common thread: get an MBA.
Fast forward to 2015. I’ve held every investment role in a venture capital firm, from analyst (the most junior investment professional on the team) to partner, in established firms and upstarts and have hired many people into the industry over the years. I can tell you that having an MBA is about as valuable as a J.D. — absolutely not a requirement for the job, but, like any advanced training in a related field, it can come in handy from time to time. As a result, an MBA isn’t necessarily viewed as a competitive advantage on the resume of an aspiring venture capital analyst or associate given the opportunity cost to attain it. In other words, there are so many more valuable things you could be doing with your time to better prepare yourself for working in venture capital than getting an MBA.
When you are analyzing a business as a venture investor, they are often very early in their development, so you are trying to understand 1) whether there is an opportunity for it to grow to be 10x, 100x, or 1,000x larger than it is today, and 2) if the business does grow by several orders of magnitude, will it be attractive financially? While this is a massive oversimplification, it is instructive to think of the skills one needs to develop to analyze venture investments in these two categories.
Answering question 1 requires an understanding of a company’s product, the needs of its users, the willingness of its customers to pay for the value it delivers them, and how these factors will evolve over time. To answer question 2, one typically needs to focus on the unit economics of a business — the financial metrics that are directly tied to marginal revenue and cost of individual users and customers — rather than financial statements according to GAAP. The central reason is that young, high growth companies typically invest heavily in product development and engineering ahead of sales and marketing, and so would be financially unattractive if that were the steady state.
An MBA doesn’t focus on helping you develop the skills and experience to answer these questions, and as a result, is no more applicable to your day-to-day work as a member of the investment team at a venture capital firm than a J.D. would be that covers corporate, tax, and contract law. You will certainly be exposed to topics related to venture investment decision making in both degree programs, but neither focuses specifically on equipping you to be a successful venture investor. In fact, most venture capitalists learn what they need from these disciplines, and many others, without having formal training in them.
If you want to work in venture capital, my advice is to focus on experiences that will help you answer question 1. These include time working at a startup in a field you are interested in, reading all you can about specific industries or technologies that intrigue you, or becoming a product expert in something you are passionate about. All of these things would better prepare you for a career in venture capital than spending two years in the hallowed halls of a top tier MBA program.
So if you’re interested in breaking into venture, it’s all about hustle, not Harvard.
Mackey Craven is a partner at OpenView Venture Partners, a Boston-based venture capital firm that invests in expansion-stage software companies. He focuses on investments in cloud computing and data infrastructure. Follow him on Twitter @MackeyCraven.
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