Investing in Training Will Yield a Powerful ROI –

Few industries are more closely associated with cutting-edge trends than venture capital. So, it is ironic that the industry relies almost exclusively on a centuries-old model for developing and training its professionals: apprenticeship.

Professionals at venture capital firms learn on the job through interaction with senior partners, peers and company management. While this model can be very successful, learning experiences vary widely, based largely on each firm’s-and each general partner’s-commitment to developing their professionals. The lack of complementary formal training mechanisms stands in contrast to more institutionalized fields such as investment banking and consulting. In such industries, formal programs have long been in place to train new professionals in job-specific skills and to encourage experienced professionals to build upon their existing knowledge through continuing education.

While venture capital firms do not, in almost all cases, have the scale, resources or infrastructure required to implement large-scale structured training initiatives, even minor improvements in professional development can meaningfully impact the growth and performance of professionals at all experience levels.

The venture capital investment world is becoming increasingly competitive. Increases in the number of funds and the amount of capital managed by the industry have resulted in increased competition for quality investment opportunities. As a result, the already slim margin for error in investing is becoming smaller.

The industry has responded to this pressure by evolving in several functional areas. In an effort to increase deal flow, many firms now employ dedicated sourcing professionals. To more effectively perform due diligence on prospective opportunities and to provide greater assistance to portfolio companies, funds are placing more of an emphasis on the use of operating partners and formal executive networks. To better manage fund and portfolio company-level branding and communications, funds are increasingly using public relations firms that specialize in the industry.

Greater investment in the training and development of team members represents a significant additional opportunity to create a competitive advantage and improve performance. Most general partners agree that a fund’s most important asset is its team, and many strive to create environments that promote such development. Fewer, however, invest the time to train professionals in the fundamentals of skills such as security structuring, management assessment, transaction negotiation and legal document analysis. Doing so is time-intensive and often overlooked in favor of addressing more immediate requirements such as portfolio-company issues or new deal opportunities. For this reason, the venture capital industry needs opportunities to complement the existing apprenticeship model.

Recognizing this gap, the New York Private Equity Network (NYPEN) was formed in 2001 with the express purpose of creating educational and networking forums for professionals at venture capital and private equity funds in the New York City metro area. NYPEN’s classes are focused on improving the skills of investors in areas that are highly relevant to the investing process. The response to NYPEN’s events, such as its legal and accounting educational series, has been overwhelming on the part of investors at all levels, reflecting the appetite of professionals in the industry for opportunities to enhance their skills and to reinforce their grasps of key fundamentals. The NVCA’s annual Venture Capital Institute represents another opportunity for applied learning. Firms that support these endeavors and encourage their professionals to attend such classes are strengthening themselves tremendously.

Promoting development and embracing ongoing training raises the level of performance of all professionals within a firm, which, over the long-term, will improve that firm’s ability to generate strong returns. Encouraging professionals to seek out or create forums where practical learning can take place is in the best interest of all firms.

Richard Relyea is President of NYPEN and an Associate at Halyard Capital. He can be reached at richard.relyea@harrisnesbitt.com. Greg Hersly is a co-founder and Director of NYPEN and a Senior Associate at Epic Partners. He can be reached at ghersly@epicpartnersllc.com.