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Venture Capital’s Brain Drain

March 10, 2008

This year I made two New Year resolutions:

  • Execute on an eating plan that would allow me to achieve a sustainable and healthy body weight.
  • Use LinkedIn as a tool to reconnect with my 800+ contacts over the course of 12 months (3.5 people per day).

The ‘eating plan’ has been going well, and I have managed to lose around 15lbs so far this year.  The ‘reconnection plan’ has been going well, but it will take me around 18 months to reach my goal of 800+ connections (I am averaging 2.5 people per day).  Many of my older contacts are/were venture capitalists and the conversations I have been having are similar; around 25% have left the venture capital business altogether.

Local VC departures include Guy Hoffman who left TL Ventures a while back and is now running a startup called USHomeTeam, Ram Velidi who is leaving Sevin Rosen and looking for opportuntities and Ed Olkkola from Austin Ventures who is now running Belo Interactive’s business development efforts.  What is going on?  The reason is simple, more and more venture capital firms are moving into private equity ~ big, complex deals that require lots of money and even more analysis.  Guys like Guy, Ed and Ram who are good at working with startups aren’t interested in the number crunching private equity requires.  Their ’soft skills’ and high EQ (emotional IQ) that produces 10x returns in venture capital, isn’t as useful in the private equity realm.

The most interesting aspect of this trend is the fact that so many really smart people are now available to join startups.  Venture capital’s ‘brain-drain’ offers entrepreneurs a treasure trove of former VC partners interested in helping them execute on their ideas.  Bringing on someone like Ram could offer a startup a ‘jump start’ that could mean the difference between failure and success.

Written by Alexander Muse · Filed Under Blog, Venture Capital 

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