I was invited this morning by the MIT Graduate Students Council (GSC) to speak to a group of grad students. Here are some thoughts I shared with them:
- MBA students at some point in their life make a list of career options and decide judiciously which ones to rank high on their list (e.g. Investment banking, consulting, VC/PE, startup, GM role in a big corporate). How come grad (MS/Ph.D) students don’t make such a list. Why are grad students given just two choices: (1) do a post-doc or (2) get a job as researcher in industry. Grad students, esp at MIT, should be given a fair chance to consider entrepreneurship as a career. And by that I mean, the entrepreneurs’ journey should be demystified for them. They should be guided on how startups get formed and developed. What roles founders play in a startup’s success and how are they compensated. And then let them choose if it is right for them or not.
- Here are a few things you should definitely look for when deciding whether to take that leap into an entrepreneurial venture or not (my 2 cents worth): (1) Is the team truly kickass; (2) is the idea a BIG one; (3) is the technology disruptive but practical; and (4) are you truly jazzed up about it!
- Its a myth that startups don’t pay much. Startup founders may not make much money (or nothing at all) while they are still looking for funding…but once you get funding, you typically get paid at market rate or not too much below it. A typical Ph.D CTO gets paid anything from $100K-$200K. Your ownership in company as a founder is separate and you may even get additional options on defined milestones as bonus. Let’s compare: an assistant professor typically makes less than that, a scientist at a large corporate entity would make similar to that, and while a non-technical profession like management consulting you might pay more (e.g. $150K-$200K starting salary), upside is limited. If you want to have a shot at becoming a millionaire in a few years, there are not many ways better than starting your own company.
- There is a misconception that technical founders don’t share in the upside. Not true. Of course there is a chance your startup might fail (…but hey, you still get a salary while the company stays funded). But if your startup is even a modest success, no matter what the dilution might be for everyone else, key employees’ options are often bumped up by the Board to ensure they have a reason to stick around until the eventual success. You will make a decent amount if the company does reasonably well, and a lot if it takes off like a rocket. While a startup exit may not be large enough for you to retire on it, but its probably higher than annual bonus wearing a white lab coat at Pfizer or P&G (nothing against those jobs). And think about how awesome your resume looks post startup.
- Should I become a VC because they make a lot of money? Well, investors do get a handsome salary, but they don’t make as much money as you might believe. AT least not until they have some big successes. Even then, they get paid out after several years. Don’t confuse a VC fund getting 25% of your enterprise sale value (assuming they owned 25% of your company) with that particular VC guy taking home millions.
- If you really want a VC career, don’t try to over-manufacture your way into it. First and foremost, you probably should not look for a VC position as your first job out of school. It is hard to climb your way to a partnership from the bottom of the totem pole. Just look around and see how many top VCs went into the business straight from school. Most good VCs have demonstrated street cred – they have built businesses, they have empathy for the entrepreneurs’ journey, and they can speak to the experience of a CEO or CTO. For when you do consider a VC career, try to highlight something that truly differentiates you and gives you a huge leg up on everyone else. Be passionate about startups – but how can you really be if you have no idea what they are like? Start a company, consult to startups, have an opinion on the industry and trends, build a network in the entrepreneur community, show killer instincts and insights! With all due respect, being the president of VC/PE club or having taken entrepreneurial finance class during Ph.D doesn’t really set you apart.
- How did I justify to myself that a startup risk was worth it for me? Three things helped me: 1a) I fell in love with the idea and thought it could really change a multibillion dollar industry, (2) I had seen other MIT students start companies and I asked myself ‘why not me’?, and (3) I got comfortable with the fact that with an MIT degree and a half-decent intellect, I could probably always get a job to afford my monthly rent and food. Once that fear of being homeless was gone, risk taking seemed easier.
- Will I stay a VC forever? No idea. If I see a startup idea that I fall in love with AND where I can add meaningful value as an operator, don’t be surprised if you see me jumping ship to the other side.