A source once told me that venture capitalists were the most risk-
adverse averse people on the planet. It wasn’t until I understood the fee-plus-carry compensation structure that I believed it.
A venture capitalist, before he or she is anything else, is someone who has taken money from an endowment, institution, university or retirement fund. Venture is a risky business, so those large pools of money naturally gravitate toward firms chocked full of people that seem low risk.
Attending a prestigious university is one of the strongest signals someone likes to color inside the lines: which is a great attribute for running legacy businesses or maintaining a status quo. But as this great critique of elite education in The American Scholar points out, big-name schools do not breed innovators:
Students who get into elite schools are precisely the ones who have best learned to work within the system, so it’s almost impossible for them to see outside it, to see that it’s even there. Long before they got to college, they turned themselves into world-class hoop-jumpers and teacher-pleasers, getting A’s in every class no matter how boring they found the teacher or how pointless the subject, racking up eight or 10 extracurricular activities no matter what else they wanted to do with their time.
It should come as no surprise then that a third of all VCs surveyed in the recent NVCA/Dow Jones Venture Census attended either Harvard, Stanford, UPenn, Duke or MIT.
The NVCA’s take on these findings is somewhat puzzling: “The survey demonstrates that venture capitalists are highly educated with diverse and advanced educational backgrounds,” says President Mark Heesen. “The success of our industry continues to be dependent on attracting the best and brightest professionals with business, science and engineering backgrounds to identify the next big technology — and then bring that concept to life.”
Diverse? I don’t see it from those numbers.
The increasing homogeneity of experience and background among VCs may be encouraging the slow decline of venture capital as an asset class, one stuck in an evolutionary backwater of non-innovators. People from big-name schools may not be equipped to kick an industry out of its sense of entitled complacency.
A prestigious education may be a proxy for a raft of positive characteristics. But it can also signal a willingness to please within the bounds of accepted methodologies and practices. It should not be confused with a proclivity to innovate.