Why Experience Should Matter More to VCs Than Pedigree
By Eximius Ventures | Posted On : 24/08/2020
Are you from an IIT, IIM, or an Ivy League university? Or from Google, Microsoft, or JPMorgan Chase? Whatever your answer is, you have an idea about the difference such names can make in what lies ahead for you. The same is true when fundraising.
We tend to believe that if a founding team has a stellar past record with similar prestigious institutes, they should easily qualify as the ideal choice of investors. However, the name startups bring to the table is only a good proxy of their potential, not a guarantee.
If you have ever shared your pitch with a startup venture capital firm, you know how competitive it can get. Only a handful of startups make the cut out of thousands. The one thing that helps VCs pick the right ones is seeing a demonstrated ability of the founding team to brave all odds – and that doesn’t always come from world-renowned institutes. The question hinges more on what you did, not where you did it.
While people with pedigree have the benefit of a powerful network and specialised knowledge, relevant experience qualifies as a much stronger testimony to a founder’s capability. Investors are looking for someone who can learn, adapt, advance, and give them a reason to have faith. Between an experienced founder with tenacity & problem-solving skills and a pedigree-backed founder, VCs need to tip the scales in the former’s favour. Here’s why:
Evaluating Leadership Skills
An ideal founder must be able to manage day-to-day tasks while keeping an eye on the horizon. This includes coordinating across business networks, ensuring that the team stays motivated, and more. While some people may hone these qualities during a degree from a prestigious university, the scope remains limited. They may have a long way to go to catch up to a founder who has leadership experience at the workplace.
At the same time, founders around 25 years of age might not have had the time to gain relevant experience. Should they, then, wait to start at a later age? Not necessarily: Kunal Shah, the founder of Freecharge, advises them to, “have a startup during college. Doesn’t matter if successful or how big or small. Worst case scenario it will make them 10x better employees than someone with no exposure to how a business works.”
Similarly, prestigious corporations with 10,000+ employees restrict the kind of exposure that smaller companies or startups provide to their employees. Founders from the latter category have more insight to take a small team to a big market. For instance, Vijay Shekhar Sharma spent a decade leading his startup One97 Communications Ltd., which would ultimately become the parent company of his next startup Paytm.
During graduation, a student finds a host of opportunities in the form of projects and internships, which can vouch for his/her diligence and intelligence. However, the nuances of decision making, management, and finances lie beyond the scope of degrees. On the flip side, quality experience helps distinguish a founder above the rest.
Ashish Shah, the founder of Pepperfry, earned a bachelor’s degree in engineering and a diploma in material management, but he owes much of his functional and commercial expertise to his experience at Baazee.com and eBay Motors. In other words, a team coming from a background that is directly related to their startup’s industry is a step ahead of others. Therefore, VCs can benefit by judging the proficiency of the founding team on the roles that it has fulfilled before.
The parameters of success in academia are not the same when it comes to office spaces. Markets evolve, dynamics shift, competitors change. For financial venture capital funds, it is imperative that the founding team knows the demands of the startup ecosystem.
Similarly, white-collar jobs in skyscrapers may not be ripe with opportunities that can test the endurance of a founding team. Therefore, a team with direct exposure to its industry has the benefit of knowing how to make their way through and withstand the challenges of a startup.
Shilpa Shah, Jaypore’s Co-Founder, worked in marketing before joining an organisation that revolved around handmade products. “This move was a turning point in my career,” she shares with YourStory. “I was empowered to take on more responsibility, be a part of an organisation in growth mode and become instrumental in driving expansion.” Although she faced newer challenges after she founded Jaypore, her workplace experience had equipped her with insights about the industry that allowed her to make it a success.
A founder’s network comes in handy for almost everything from establishing a supply chain to market research. The variety of people that should make a great network may not always be found in a person’s milieu in reputed institutions, with people from, more or less, the same background. However, founders with first-hand experience are in a much more beneficial position to build a valuable network.
Byju Raveendran of Byju’s helped multiple people ace entrance exams to prestigious institutes, yet never went into one. He realised the potential of his teachings early on, and found some of the top executives of the EdTech startup through his on-ground observations.
More importantly, a dependable network is paramount when it comes to fundraising. Being referred to early-stage venture capital firms is the surest way of raising funds as compared to cold-emailing. Therefore, dealing with people across industries gives some founders the edge over others.
Girish Mathrubootham, the founder of Freshworks, has remained connected to his industry ever since his graduation from the University of Madras. In a decade, he went from being Member Technical Staff at one firm to becoming the Vice President of Project Management at another. Now, he values his experience at Zoho (where he worked for 5 years) more than the first funding from Accel Partners.
In an economy which defies predictability, a founder ought to know the relevance of his/her course of action at the present. Relevant experience gives potential founders a vantage point like no other. This is especially true for startups whose team comprises people who graduated 5 or more years ago. So keep at it, brush up your skills and be hungry to learn and adapt for emerging as a dependable founder.
We don’t discount the importance of being educated or working at world-renowned places. However, proven experience in a related industry is the closest and fairest criteria for judging the founding team’s potential when it comes to venture capital investments. A person who does not come from a recognizable background may still have the passion, intellect and determination to succeed. If that compels VCs to believe in him/her, pedigrees should never be a determining factor.
Moreover, there are notable other founders who never went to IIMs or IITs – Practo’s Shashank ND and Abhinav Lal, Nazara’s Nitish Mittersain, BookMyShow’s Ashish Hemrajani, among many others, who have changed the landscape of their respective industries. Their examples show us that success isn’t synonymous with pedigree. You and your experience are enough to make your mark!
Written by Anureet Kaur.
Eximius Ventures is a pre-seed stage investment firm investing in young and dynamic Indian Entrepreneurs with a precedence for female founders. You can reach out to us at firstname.lastname@example.org.