VC backgrounds

There was a TechCrunch article his week entitled Who is a VC? It’s written by Richard Kerby, a Vice President at venture firm Venrock. The article sheds light on the demographic, work, and educational backgrounds of over 1,500 VC’s independent of their position (partner, principal, or associate).

The first findings of the report are about demographic diversity, or the lack thereof, in venture capital. The report finds that 74% of VC’s are white and 23% are Asian. This means that only 3% of VC’s are from other ethnic groups.

In addition, the report finds that 89% of VC’s are male and only 11% are female.

Combined, these findings show that non-whites, non-Asians, and females are heavily underrepresented in the VC industry. This lack of demographic diversity has received a lot of attention over the last few months and drawing attention to a problem is the first step to addressing it. I hope that we see more demographic diversity in VC in the future.

However, I found the second part of the report equally interesting. Specifically, the report finds that 72% of VC’s don’t have an engineering degree and 59% of them don’t have operating experience. Some leading examples include Michael Moritz, Bill Gurley, and Peter Fenton. From the fact that VC’s invest in tech startups, in the absence of these findings, many people could have assumed that the people making these investments have startup experience and tech training. This is not the case.

I believe that the reason why an engineering background isn’t required to be a VC is because VC’s are responsible for identifying the engineering talent that can build a tech business. This requires understanding the technical infrastructure that a startup needs to be successful. It doesn’t require building the engineering organization and infrastructure yourself.

And the reason why operating experience isn’t a prerequisite to be a VC is because the skills required to identify promising tech startups are different than the skills required to successfully run a tech startup. At the risk of overgeneralizing, the first requires that you be good at evaluating people and performing extensive research and systematic thinking before taking action whereas the second requires that you be good at motivating people and enjoy taking action at least as much as you enjoy performing research and thinking.