How well educated are Venture Capitalists?

A breakdown of The Forbes Midas List 2020 — Part 1

Venture Capital (VC) is a notoriously difficult industry to “break in” to. Networking, specific knowledge and spontaneous connections play a considerable role in landing a job at a VC fund.

Back in March 2020 when the pandemic was in full-swing, I decided to delve into the recently released Forbes Midas List 2020, which listed the top 100 VCs for the year. I wanted to analyse the background of these leading investors to see if there was any commonality between their experiences. Specifically, I looked at their educational background (this post - part 1) and their career experience (coming soon - part 2).

(Note: I am not currently involved in the VC industry, but long-term this is my aspiration).

What this post is

This brings me on to what this post is. It is simply a snapshot of the current VC industry (in terms of its biggest players), determined by Forbes and Truebridge Capital Partners. It provides a general idea of what it takes to break into the industry and reach the top, by exploring undergraduate education, postgraduate education, pre-VC career experience, geographic location and more.

What this post is not

This is by no means a “How-To” guide to break into VC. This is a list generated from a model designed by Forbes and Truebridge. It is a list of 100 individuals (a minute fraction of total global VCs), and is not representative of all who work in the industry. It should not dishearten anyone (I’m telling myself this too) who wants to work in VC but hasn’t got the resumé of the people on this list. As a final point, this post does not highlight individual names on the list — it is an assessment of the entire sample.

How is the Midas List determined?

For more information on how the rankings in the Midas List are calculated, Forbes explains it here. In short, Forbes and Truebridge aggregate data submitted by VCs, as well as DowJones VentureSource exit data to form a comprehensive model. A company is considered for VC deal attribution if it exited in the last 5 years at a value of $200M+ (but also includes private companies valued at $400M+). The model then ranks “each VCs investment in a qualifying company based on generated deal value, size of exit or private valuation and other key metrics weighted to favour more recent deals, earlier stage investments, and higher investment multiples.” Each VC is then assigned a total deal attribution score which determines their ranking against his or her peers. Whether it is right to rank VCs in this way, and whether we ascribe too much value to an individual VCs skill in “picking” investments is a whole other issue, which Chamath Palihapitiya discussed in 2017.

5 conclusions about VC education

Now let’s get into my findings. As mentioned above, this first post covers VC education, with career experience being assessed in my next post. Data was gathered on each VC in the 2020 list including their undergraduate (UG) education, UG degree country, postgraduate (PG) education, PG degree type and PG degree institution/country. My five main inferences regarding the education of the VCs on The Forbes Midas List 2020 are:

1. 100% of VCs in the list possess an undergraduate degree.

2. VCs on the list attained their UG degrees in the following countries (see Figure 1):

Figure 1: Where did the 2020 Midas List VCs get their undergraduate education?

3. 79% of VCs in the list possess at least one postgraduate degree (with 10% of VCs holding two postgraduate degrees).

4. Of the 79% that possess a postgraduate degree, their degree types are as follows (see Figure 2):

Figure 2: Of the 79 VCs on the 2020 Midas List that have a postgraduate education, what type of degree do they possess?

5. 56% of VCs on the list have an MBA which they received from the following institutions/countries (see Figure 3):

Figure 3: Of the 56 VCs on the 2020 Midas List that have an MBA, which institution/country did they get it from?

(Note: I have generalised the institutions in “India” and “China” here, as I have very little knowledge of business school prestige in those two countries and is less relevant to my personal interest. I’m happy to provide more data in the comments below).

How things might change going forward

2020–21 upended a lot in the world and I believe if we compare the Midas List of 2030 to the list of 2020, a lot will have changed. For example, there has been considerable press recently covering the disillusionment of students at top tier business schools. Students are wondering why they are spending tens of thousands (if not, hundreds of thousands) of dollars, as well as taking 1–2 years out of the workforce, to study online. It is well documented that the main draw of an MBA at one of these institutions is the network one gains access to.

Additionally, investment banking is a well known stepping stone into VC (more on that to come in Part 2 of this post), but young bankers are burning out quicker and leaving their coveted roles due to the current working conditions. This may also cause a longer term shift in the types of VCs we are seeing in the industry.

References

[1] https://www.submitmidasdata.com

[2] https://medium.com/@chamath/a-growing-cancer-forbes-midas-list-54b2744d6271

[3] https://www.bloomberg.com/news/articles/2020-09-17/best-business-schools-mba-students-rethinking-value-of-their-degrees