NVCA: Mentoring Is More Important than Ever –

Last year there were more than 8,000 ambassadors for our industry. That is more than double the number of professionals since 1996 and a far cry from the number of VCs when I started in 1977.

As an industry we need to be attuned to the new and necessary skills young VCs need. How we act and respond to our portfolio companies, limited partners and entrepreneurs is a reflection on the venture capital industry and will be scrutinized more during this down cycle than during the prior boom.

Educating young VCs on how best to handle difficult situations such as down rounds, company downsizing and liquidations is essential to the long-term reputation of your firm and our industry. Those of us who have weathered several business cycles should make every attempt to proactively work with younger partners to provide guidance in dealing professionally and ethically with the difficult issues many firms face today.

Hands On

Mentoring requires a hands-on approach, and that requires time, which is in especially short supply today. Organizations like the National Venture Capital Association, National Association of Small Business Investment Companies (NASBIC), the Kauffman Center, and many MBA programs address these industry-wide needs, and they can supplement internal efforts. In the coming months the NVCA will co-host several programs designed to meet the professional development needs of young venture capitalists. The programs will be held in Boston in June, in Silicon Valley this fall, at the Venture Capital Institute (VCI) in September and at the NVCA annual meeting next May.

More than 3,300 venture capitalists have participated in the VCI during its 27-year history. VCI now offers two distinct programs for venture capitalists. Designed for professionals who have less than four years experience, the original institute offers an intensive five-day curriculum that teaches fundamental skills, timely techniques and sound practices. The VCI Graduate (VCI-G) program recognizes the importance of continuing professional development. VCI-G’s 2 1/2-day curriculum explores a different topic annually in an in-depth manner, drawing on the experience of the students and highly accomplished faculty. The 2002 VCI-G program focused on the issues surrounding “managing your portfolio” and specifically addressed many issues faced in a down market.

The Kauffman Fellows Program is an educational program designed to educate and train future venture capitalists and future leaders of high-growth companies. Fellows spend most of their time in experiential hands-on learning at selected venture capital firms throughout the United States, under the guidance of seasoned industry mentors. Throughout the program, Kauffman fellows engage in all phases of venture investing, including deal prospecting, terms negotiation, due diligence and management and exit of portfolio companies. Kauffman fellows come together several times a year for customized learning programs designed to complement their day-to-day experience.

Stiff Competition

The Venture Capital Investment Competition (VCIC) brings real startup companies and venture capitalists together with venture capital-minded MBA students for a uniquely powerful learning experience. Teams of MBA students are placed in the role of venture capital firms deciding among various investment opportunities. The investment opportunities are real companies seeking venture capital. The student teams analyze each company in the same way a venture capitalist would: by reviewing the business plan, listening to the company presentation, engaging in question-and-answer sessions with the company management team and performing additional due diligence on the company. The VCIC was founded by Kenan-Flagler in 1998 and recently expanded to include regional competitions around the United States in hot entrepreneurial regions such as Boston, Austin, Atlanta, Los Angeles and Washington, D.C.

Survival Mode

Ensuring survival and success of our portfolio companies is obviously our top priority. It requires dealing with a plethora of difficulties that are unlikely to be addressed in a class or seminar. Thus, it is of fundamental importance that we approach our daily operations with a focus towards mentoring. We should take our corporate governance role seriously as issues continue to emerge in the post-Enron/dot-com-bust environment.

If we fail to act properly in our board roles, the public relations tide and following public policy could undermine the appropriate levels of control now enjoyed by boards of directors and shift towards increased government regulation. Internal mentoring programs take a high level of commitment by both senior and junior partners, but they will payoff in spades for the portfolio companies, your firm and our industry.

Craig C. Taylor is a general partner at Alloy Ventures in Palo Alto, Calif. and has been an active venture capitalist for 25 years. He is a member of the board of the National Venture Capital Association and chairs the NVCA Education Committee. He also serves on the Board of Advisors of the MIT/Stanford Venture Laboratory and the Stanford Office of Technology Licensing GAP Fund.