I just listened to a great episode of Stanford Technology Ventures Program’s Entrepreneurship podcast. This one has Kleiner Perkins Caufield & Byers partner Dana Mead explaining what venture capitalists do as an industry, as individuals in their day to day life, and how he decides where to invest.
Mead’s talk is very informative. Here are some of my biggest takeaways. He said VC were originally a small, boutique industry but are now an asset class. The change from 1980 to 2006 has been more than a ten-fold increase. Mead said this was driven by university endowments, Stanford and Yale in particular, putting part of their portfolios into venture capital. Stanford’s Mike McCaffrey and Yale’s Chief Investment Officer David Swensen. He doesn’t go into why this was the case, and I’m curious whether this model of investing produces better long-term returns than other methodologies.
| 1980 | 2006 | |
|---|---|---|
| VC firms | 89 | 798 |
| VC professionals | 1388 | 9257 |
| VC capital raised | $2.1B | $29.9B |
| VC capital under mgmt | $3.7B | $235.8B |
| avg VC capital under mgmt | $29.4M | $175.6M |
Source: Mead’s talk
The other takeaway, which I hope provides insight to some of my friends who are interested in VC, is a breakdown of the common paths to being a VC partner.
| 2-4 yrs practical experience | 10 yrs operating exp | 20+ yrs operating exp |
|---|---|---|
| M.D./PhD | M.D./PhD | M.D./PhD |
| PhD | PhD | PhD |
| MBA | MBA | MBA |
| MS | MS | MS |
| Dir/GM level | CEO/CFO level |
And my last takeaway was Mead’s explanation of what KP VCs do on a daily basis. In order of time spent:
- 10% discovering, evaluating, and investing in new ventures
- 20% networking with talent, other VCs, company execs
- 70% supporting portfolio companies in recruiting, raising money, strategy