Seeding a Start-up Culture

About a week ago, James Kwak penned a very thoughtful post titled Why Do Harvard Kids Head to Wall Street? He provided a series of perfectly rational reasons as to why this happens, e.g., the job is billed as a good launch-pad for the future, recruiters make it easy, the money, etc. Whether he has all the right reasons is neither here nor there: he is asking the wrong question. The right question is: how do you lure the best and brightest into game-changing areas such as start-ups and social enterprises that can effect hundreds of millions of people or more?

One of the issues with making it easy to get into start-ups and similar enterprises is that persistence, focus and energy are often good screens for success in these fields. If you make things too easy it can lead to adverse selection. However, there are many things that can be done to change the calculus, some of which are already being done in Silicon Valley and Boston but less so in New York City. I know several venture capitalists in the Bay area who teach at Stanford and Berkeley, in the Business school as well as the Computer Science (CS) and Electrical Engineering (EE) departments. They use their positions as vehicles for identifying top students, building relationships that ultimately result in ideas getting funded or students placed in promising start-ups. The students are steeped in not only start-up lore, but myriad perspectives on the challenges and opportunities of start-ups as told by experienced Founder/CEOs. I can assure you that these discussions are a lot more interesting, colorful and compelling than presentations on the worlds of Wall Street or consultancy. My friends Larry Lenihan at FirstMark and Ed Zimmerman of Lowenstein Sandler both do this. They are not enough. And we need more technical lecturers as well.

The venture capital and start-up industries need to do a much better job selling, serving to funnel desirable candidates on the basis of excitement, impact and long-term rewards as opposed to (perceived) stability, basic training and short-term cash. Yes, it would be great if NYC’s great universities did a better job of this at an institutional level, but I’m not suggesting we wait around for sclerotic bureaucracies to change. I’m talking about a grass-roots effort on the part of local venture investors and successful start-up executives to get into the classrooms and onto campus to re-orient talented students away from the money culture and towards the building culture. Alter their utility functions through education and exposure and get them early.

I think many equate start-up enterprises with uncertainty and fear, and only appropriate for those with massive risk tolerances. This is bad marketing, plain and simple. Yes, doing a pre-revenue start-up is gut-wrenching, all encompassing and horrifying at times, but it is also mind-bogglingly stimulating, exciting and requiring all of a young person’s skills and abilities. There is not a job on Wall Street or at a top consulting firm that gives a young technologist or business person the exposure and responsibility of a start-up, even one that has received venture investment. There are early-stage companies all along the risk continuum, any of which can offer up great experiences for the right people. And every student that goes into these companies or or starts their own is part of creating something, and contributing to the engine of growth that can help the US and other Western nations fight against the weight of their aging populations and economic malaise. And the skills obtained while working at a start-up are applicable to a wide range of future opportunities, whether at another start-up, one’s own start-up or more established enterprises.

And once the ball gets rolling it becomes a virtuous cycle, with this enlarged crop of entrepreneurs and start-up athletes having an increasing number of successes, and subsequently investing in others start-ups and their own new businesses. This is part of what has made the SF/Silicon Valley community so vibrant, the recycling of capital from successful entrepreneurs into the businesses of others as well as their own. And so it goes…

But it is hard to escape the fact that education and re-orientation has to start in the universities. Because by the time these talented students get seduced by the fancy conference rooms and the cash, it is difficult to bring them back. And each year a talented student gives to old-line money businesses is a year taken away from building something truly great and seeding the start-up culture. Is changing culture easy? No. Can it be done with the work of all interested constituencies – universities, Governments, venture firms and start-up businesses? Absolutely. Let’s get to it.

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About Roger Ehrenberg 94 Articles

Roger is an active early-stage investor, having seeded or invested in over 20 companies in asset management, financial technology and digital media since 2004. Prior to his venture days Roger spent 18 years on Wall Street in M&A, Derivatives and proprietary trading.

Throughout his career he has held numerous executive positions, including:

President and CEO of DB Advisors LLC, a wholly-owned subsidiary of Deutsche Bank AG. His 130-person team managed over $6 billion in capital through a twenty-strategy hedge fund platform with offices in New York, London and Hong Kong.

Managing Director and Co-head of Deutsche Bank’s Global Strategic Equity Transactions Group. In 2000, his team won Institutional Investor magazine’s “Derivatives Deal of the Year” award.

As an Investment Banker and Managing Director at Citibank, he held a variety of roles and responsibilities in the Global Derivatives, Capital Markets, Mergers & Acquisitions and Capital Structuring groups.

Roger sits on the Boards of BlogTalkRadio; Buddy Media; Clear Asset Management; Global Bay Mobile Technologies and Monitor110. He is currently Managing Partner of IA Capital Partners, LLC.

He holds an MBA in Finance, Accounting and Management from Columbia Business School and a BBA in Finance, Economics and Organizational Psychology from the University of Michigan.

Visit: Information Arbitrage

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