Adjusting for Risk

Andrew Yang’s most recent Huffington Post article digs into how we get more of our most talented young people to embark on the high-risk, high-reward path to entrepreneurship and building businesses.

Check out the article below and subscribe to Andrew’s articles on the Huffington Post here!


Originally published by Huffington Post

Occasionally a company is born that creates immense value, generating hundreds of jobs and even transforming multiple communities. At Venture for America, we are looking to find the people who are capable of helping found or build these companies.

One reason why entrepreneurs are admired is that they often take on a degree of risk in launching a new business. There’s reputational risk; your name is on the line to your friends and family who know what you’re doing (and they really should know). Then there’s financial risk; at a minimum you’re devoting time with uncertain reward, and presumably forgoing some form of income and/or putting your own money in to get the business off the ground. If a business doesn’t achieve its goals, the founder(s) often experience significant personal consequences.

How do we increase the odds of individuals taking on the challenges of starting a new business?

One of the quandaries is that many of the people who would have the most to offer as a founder or inventor have other appealing options. Let’s say that you were to line up 100 brilliant 21-year-olds that might have the potential to start a company someday. You tell them, “Okay, you have two choices. You can commit to being an entrepreneur. There’s a 10 percent chance that you become extraordinarily successful, wealthy and create hundreds of jobs. There’s a 30 percent chance that you’re a modest success. And there’s a 60 percent chance that you toil in obscurity for years and have some good stories to tell. Alternatively, you can commit to a high-paying career at a well-regarded company, and there’s a 95 percent chance you’ll succeed by most conventional standards.”

What would the 100 brilliant 21-year olds do? Most of them would probably opt for the latter path, because they only have one outcome to consider — their own. They have one life to live, and with the first option, both the chances of failure and the consequences may come across as unacceptably high. These individuals have often been successful at whatever they’ve put their minds to up to this point, which may make taking on risks unappealing. Plus, their parents may have invested considerable resources getting them to this point, increasing the pressure to ensure a return.

What would happen if you were to line up the same 100 21-year olds and give them the same choice, but with this change: “You will all sign a contract that if you become an extraordinarily successful entrepreneur, you will share the financial and reputational rewards with the other 99 people here in this room by hiring as many of them for your venture as you can.” Would this change anything? Now, each person’s downside would be significantly reduced as long as someone in the cohort does extremely well. Taking on the risky path could become a much more reasonable bet for each as a result of the collective understanding.

One way to get more of our most talented young people to embark on the higher-risk, higher-reward path is to create a community and network. It might be a lot easier to take risks if you’re part of a group who will look out for one another.

Professional Services as a Training Ground

Recently, Huffington Post and Business Insider published an article by Andrew Yang on the “Professional Services as a Training Ground.” In the article, Andrew explores the pros and cons to the post-grad “Plan” many college seniors have, which is to spend a few years at a larger firm before leaving and joining a smaller company.

You can check out the article below, and if you would like to subscribe to Andrew Yang’s articles on the Huffington Post, you can do so here.


“Professional Services as a Training Ground” by Andrew Yang

One of the most frequent narratives I encounter in achievement-minded college seniors is a (very reasonable) plan to spend several years advancing professionally and getting trained (and paid) by an investment bank or consulting firm or law firm. Then, the thought process goes, one can set out to do something else with some exposure and experience under one’s belt. This mindset is reinforced by the intense recruitment culture at many schools.

I subscribed to a version of this mindset when I graduated from Brown back in the day. In my case, I went to law school thinking I’d practice law for a few years (and pay down my law school debt) before lining up another opportunity. I wound up working at the firm for less than six months before leaving to co-found a start-up.

My sense is that there are plusses and minuses to ‘the Plan.’ There are some immensely constructive things to be said about spending 2 – 3 years in professional services after graduating from college:

    1. Training. Professional service firms are designed to train large groups of recruits annually, and they do so very successfully. You will emerge with a set of skills that can be applied in other contexts (e.g., Excel modeling if you’re a financial analyst, Powerpoint if you’re a consultant, editing if you’re a lawyer). You also often develop domain expertise (e.g. you’ll work in a particular industry and so you become conversant with the firms in that field, etc.).

    2. High-level work product. If you spend time at a bank/consulting firm/law firm, you will become excellent at producing world-class work. Every model/report/presentation/contract needs to be sophisticated, professional, and error-free, in large part because that’s one of the core value propositions of your organization. The people above you will push you to become more rigorous and disciplined, and your work product will improve across the board as a result.

    3. Socialized professionally. After a couple of years in a professional setting you’ll get used to dressing presentably, preparing for meetings, speaking appropriately, showing up on time, writing professional correspondence, etc. You can speak corporate. You also become accustomed to working very long hours. These attributes are transferable to and helpful in many other contexts.

    4. Learn how large organizations work. If you work for a top professional service provider that is hired by big companies, you will grow to understand how successful corporations make decisions, organize themselves, adopt policies and procedures, purchase from suppliers, etc. You will also learn to be process-driven, which is necessary for most large organizations to function properly.*

    5. Confidence. If you spend a couple of years at a big-name firm, it gives you an acute sense of the sort of people that populate and succeed in these environments. They’re your friends and colleagues (and you, for as long as you’re there). Emerging from a firm gives you a sense that you’ve worked among some of the best in a field, and that you’re as capable as anyone else.

    6. Credentialing. Similarly, your experience at a big firm is a great signal to prospective employers and partners. It will give you a source of credibility with clients, investors, and anyone else you deal with for the rest of your career.

    7. Network. You will almost always leave a professional services environment with a few noteworthy friends and relationships. These contacts can prove to be extremely valuable both personally and professionally.

    8. Motivation (sometimes). Some people who come out of these firms are ideally motivated and hungry. They’ve seen the other side, and now they want to accomplish something and make a mark. They’re not afraid to work hard, and they’re determined to achieve something significant outside of their old context.

It’s a pretty impressive list, to be sure. It’s no wonder that so many recent graduates find these options so compelling. So what are the drawbacks, if any? After going to law school, practicing law briefly, working in start-ups for over a decade, running a GMAT prep company for 5+ years, and seeing any number of personal career paths play out, here are some potential considerations: 

    1. Different Process/Output. In professional service environments, the output is almost always analytical (e.g., a set of valuations for a company, a series of cost-cutting recommendations). Sometimes, an analysis can take months to generate, with a half-dozen people working on it for hundreds of hours. In the start-up setting and in most companies, the output is action-oriented. You need to be getting things done and making decisions, often with limited information. You need to hire people, devise and improve a product, get customers and drum up business, market yourself and the company, learn how to manage and lead a team (when they’re not all either analysts or support staff), allocate scarce resources, etc. For most companies, the value is in the execution. You pick a path and find out if you’re right in real-time, and then change approaches accordingly. Mistakes are acceptable if they’re the result of moving forward. You develop judgment and instincts around execution that are very different than what is sometimes jokingly called ‘analysis paralysis.’ It’s the difference between examining a company and operating it.

    2. Switching Costs. Much has been made about how companies struggle to innovate and challenge themselves if they have a business that is successful.** People function the same way. If you’re a young professional making $100k producing spreadsheets/analyses/recommendations, it’s extraordinarily difficult to then switch to doing something else where you’re starting from scratch. I’ve seen many people leave to try their hand in another arena (e.g., writing, starting a business, etc.) and get discouraged with their lack of pay or quick success, particularly when they’re competing with people who have been engaged in the new activity for years.

    3. Difficulty Identifying Opportunities. Contrary to popular belief, exciting companies are not generally reaching out to banking analysts/junior consultants/corporate lawyers with great opportunities. Start-ups, for example, often hire out of personal networks and people who are actively engaged in the start-up community. Headhunters are eager to place you at another investment bank/consulting firm/law firm, but they’re virtually always industry-specific (it’d be a tougher sell for them to try and help people switch, plus the commission would be smaller). This is exacerbated by the fact that, for many professionals, this is the first time they’ve had to engage in a conventional job search (most were recruited directly out of school). Many of them struggle. Sometimes people will find a promising opportunity, but often they grope unsuccessfully. Many wind up giving up and applying to business school.***

    4. Narrowed Focus and Competency. Professional service providers often become very good at their particular discipline at the expense of other capacities. The skills developed in finance/consulting/law are valuable in certain contexts, but most businesses revolve around some other central activity (e.g. retail, energy, tech, entertainment/media, etc.). Many professionals become specialized in certain types of roles (e.g., the number-cruncher/analyst/lawyer) and don’t have the chance to develop in ways that would make them more central to building or driving a business.

    5. Value Creation vs. Optimization. By the time a company can hire an investment bank or consulting firm, it generally has already reached a certain stage of development. You’re seeing mature organizations that are trying to do a deal (buy another company, go public, etc.) or optimize. Consequently, your exposure is well past the stages where much of the value gets created. You have limited exposure to what makes small organizations grow and succeed, as well as minimal experience executing with limited resources.

    6. Commitment/time-frame. The nature of professional services is that you’re typically working on a deal or a client engagement that lasts a brief period and then ends. You’re used to relationships measured in weeks or months (or even days, in the trading context). You’re also used to colleagues coming and going very quickly (e.g., the attrition rate at one top-tier consulting firm is 30% a year, one reason they’re always hiring). Companies, in contrast, typically rely upon long-term relationships to function well. They require a significant commitment, where the time frame is measured in years, not weeks or months. Turnover is detrimental to developing a good management team. Building up the value of one’s equity and relationships takes time.

    7. Relationship with Work. As a professional service provider who is changing clients or transactions every period, it’s hard to become emotionally invested in your work. It’s like trying to care about a car you know you’re renting. Your clients are themselves big companies, and your interaction with them will often be limited to the occasional meeting with a senior executive or a manager. You’re there as a transaction cost because someone wants to get something done. You’re grease on a wheel. Your main motivation is to avoid looking bad to your superiors who may not expect you to stick around long-term because they’ve seen so many young people come and go.

    8. Appetite for Risk. One’s appetite for risk generally diminishes as you get older. This can become even more pronounced in a professional setting. You spend your working life in nice offices around well-compensated people. You often have support staff from Day 1. The only people you interact with work at large public companies. Your expenses creep upward over time – you get used to nice things. Your interpersonal obligations mount. As you adapt to your role and circumstance, taking a risk professionally becomes more and more of an abstraction. 

In my view, professional services have become conflated with ‘business’ when really they’re a narrow subset/category of businesses. College seniors would often benefit from figuring out what their long-term aspirations are and then try to pursue them directly. In particular, going to banking or consulting to learn how to start or run a business is not ideal. It’s like trying to learn how to become a chef by going to a company that sells things to restaurants.

One of our goals with Venture for America is to introduce some of the benefits of professional services environments (e.g. training, strong work product, socialization, credentialing, network, etc.) while enabling some of our best and brightest to take risks and become action-oriented builders from the beginning of their careers. At a minimum, they’ll have 2 years of seeing how early-stage businesses perform from the ground floor. Entrepreneurship is something you get better at over time, and an early start can make a big difference.

I also hope that Venture for America can represent part of a more genuine range of choices for our talented young people to start their careers and develop professionally. What they do should be more than a function of which organizations and industries have the highest levels of resources to recruit.

  • *Professor Gregg Fairbrothers, Director of the Dartmouth Entrepreneurial Network, made this observation and shared it with me. Great guy – Dartmouth students are lucky to have him.
  • **The Innovator’s Dilemma by Clayton Christensen spells this out in complete and compelling detail.
  • *** The average post-MBA job tenure is less than two years, and the same types of firms recruit the second time around.

Running a Non-Profit vs. Running a Company

Recently, VFA Founder Andrew Yang wrote an article for the Huffington Post about the difference between running a non-profit and for-profit company based on his time at Manhattan Prep and Venture for America. Read the article below, and be sure to subscribe to Andrew’s articles on the Huffington Post.

Running a Non-Profit vs. Running a Company

December 11, 2012
Originally published on Huffington Post

Prior to Venture for America, I was the head of Manhattan Prep, an education company. I occasionally get asked which I like better – running a company or a non-profit.

Let me provide the caveat that I don’t consider myself a non-profit guy by nature. When I was first thinking about what would become Venture for America, I was trying to figure out how to solve a problem – that our top young people were being driven to roles that did not, to me, address the needs of our time. That VFA would be a non-profit just seemed like the most efficient way to solve the problem.

Now, having done both, I feel that there are several discrete differences that cut both positively and negatively with a non-profit:

1. You’re serving two audiences (at least)

The biggest difference is that most non-profits lack a direct feedback mechanism. Let’s say you have a business selling chocolate chip cookies. People tell you, “Mm-mmm! Your cookies are delicious!” More importantly, they show you how much they like the cookies by buying them, telling their friends, etc. Your business grows, and you spend the money on more cookie stands, better marketing, maybe even different and improved recipes, etc. Your feedback is direct, immediate and appropriately self-reinforcing (the GMAT business was like this).

In the non-profit world, your feedback is much more indirect. To stretch the example above, you’re giving the cookies away. You then go to donors and say, “Look at these cookies! See how much everyone likes them? You should give me the resources to bake some more.” How many contributions you get is related to the quality of the cookies, but it’s also related to what people think of the cookies (without eating them), how good you are at describing the cookies, how many people you can tell about the cookies, etc.

In the non-profit world, there’s service delivery (in our case, recruiting top college graduates, training and mentoring them, placing them at start-ups and growth companies in areas of need for 2 years, etc.) and then there’s fund-raising. They’re generally two very different activities with different competencies and audiences.

It’s easy to see how non-profits become engrossed in catering to donors, which may or may not be the best thing at all times, while if a company is ultra-engaged with its customers it’s universally positive and helpful.

2. Goodwill is the coin of the realm

Back in 2001, my first start-up was mentioned in the New York Times and USA Today. I figured that would drive thousands of visitors to the site and tons of new business. Instead, only a handful of people visited our site and not much business came of it at all. It turns out that most people don’t drop everything and go visit the site of a company they read about. As a result, I developed a pretty deep skepticism of the business value of articles and press coverage. At Manhattan GMAT, we didn’t get much press, yet we enjoyed continuous growth for years because our customers had great results.

On the flip side, there are businesses that enjoy a great deal of attention, enthusiasm and goodwill that didn’t succeed. Color was a much-hyped start-up that raised $40 million and almost immediately disappeared. People love Twinkies and everyone knows about them, yet Hostess went bankrupt. Attention and commercial success have an uncertain relationship in business.

I’ve found this to be different in the non-profit world. Press and goodwill matter a lot. Narratives are important. Your audience (donors, foundations, companies, individuals, etc.) all enjoy the sense that people care about what the organization is doing. You ask people for things all of the time (e.g. donations, in-kind services, work at a discount to market, etc.) and they need to be motivated by something bigger than themselves or personal benefit.

Goodwill, it turns out, is much more likely to happen in-person. When we were starting out, I was looking for ways to avoid what I regarded as the event trap – non-profits would spend $200k on an event to raise $300k. I thought to myself, “That’s silly. Why not just get the $300k and skip the event?” Then, when I tried it, it turns out that people would much rather give money if they show up to something and experience what the organization is doing. (Note – at our first Summer Celebration in 2012, we raised $365k on expenses of about $65k. That revenue-cost ratio was only possible because IAC donated the space, vendors donated goods, etc.)

In the business context, unless you’re an event or concert or conference business, getting in front of people is typically a marketing expense. In the non-profit context, getting in front of people is crucial- it drives goodwill which drives your growth.

3. Your incentives are different

I believe in what we’re doing here at Venture for America wholeheartedly, and I know that the same is true for the team, Board Members, and everyone who supports us. It certainly makes it more exciting to do one’s job if you believe in the mission and feel like you can help advance it every day.
That said, there are non-profit guidelines that make it easy to over-rely on this intrinsic motivation. Many non-profits have very conservative pay scales that make it difficult to reward and advance high performers. This can lead to an unfortunate dynamic where you lose people who can help drive the organization forward.

At Manhattan GMAT, I believed in creating a positive work environment and culture, and we invested in it heavily. But I also believed in rewarding people financially at the market rate for a job well done. The last thing anyone should want is for a non-profit to rely upon the personally privileged, young and idealistic, or worse yet, less-than-stellar performers to dedicate their professional lives to the organization. You want ambitious, high-efficiency superstars to view the organization as a place to build their careers. This is simultaneously easier and harder to pull off at a non-profit, but on balance it becomes harder over time (we’re working on ways to mitigate this).

So, if you ask me personally, which do I prefer? I’d have to say I prefer the business context. I love the direct feedback. I don’t think having to frame and package everything you do is terribly efficient (and I’m not the type who really loves the messaging component). And I particularly like the ability to reward people who do excellent work in every way possible, including monetarily.

My preferences aside, Venture for America being a non-profit was 100% the right decision. We’re much better positioned to be able to achieve our mission as a result. We’ve raised $1.2 million to date and have a similar amount mission:

To revitalize American cities and communities through entrepreneurship.
To enable our best and brightest to create new opportunities for themselves and others.
To restore the culture of achievement to include value-creation, risk and reward, and the common good

It’s important to know that some problems lend themselves to for-profit solutions, and some lend themselves to non-profit solutions. The trick is balancing it so you can, to the extent possible, get the best of both worlds.

Running a Non-Profit vs. Running a Company

Recently, VFA Founder Andrew Yang wrote an article for the Huffington Post about the difference between running a non-profit and for-profit company based on his time at Manhattan Prep and Venture for America. Read the article below, and be sure to subscribe to Andrew’s articles on the Huffington Post.

Running a Non-Profit vs. Running a Company

December 11, 2012
Originally published on Huffington Post

Prior to Venture for America, I was the head of Manhattan Prep, an education company. I occasionally get asked which I like better – running a company or a non-profit.

Let me provide the caveat that I don’t consider myself a non-profit guy by nature. When I was first thinking about what would become Venture for America, I was trying to figure out how to solve a problem – that our top young people were being driven to roles that did not, to me, address the needs of our time. That VFA would be a non-profit just seemed like the most efficient way to solve the problem.

Now, having done both, I feel that there are several discrete differences that cut both positively and negatively with a non-profit:

1. You’re serving two audiences (at least)

The biggest difference is that most non-profits lack a direct feedback mechanism. Let’s say you have a business selling chocolate chip cookies. People tell you, “Mm-mmm! Your cookies are delicious!” More importantly, they show you how much they like the cookies by buying them, telling their friends, etc. Your business grows, and you spend the money on more cookie stands, better marketing, maybe even different and improved recipes, etc. Your feedback is direct, immediate and appropriately self-reinforcing (the GMAT business was like this).

In the non-profit world, your feedback is much more indirect. To stretch the example above, you’re giving the cookies away. You then go to donors and say, “Look at these cookies! See how much everyone likes them? You should give me the resources to bake some more.” How many contributions you get is related to the quality of the cookies, but it’s also related to what people think of the cookies (without eating them), how good you are at describing the cookies, how many people you can tell about the cookies, etc.

In the non-profit world, there’s service delivery (in our case, recruiting top college graduates, training and mentoring them, placing them at start-ups and growth companies in areas of need for 2 years, etc.) and then there’s fund-raising. They’re generally two very different activities with different competencies and audiences.

It’s easy to see how non-profits become engrossed in catering to donors, which may or may not be the best thing at all times, while if a company is ultra-engaged with its customers it’s universally positive and helpful.

2. Goodwill is the coin of the realm

Back in 2001, my first start-up was mentioned in the New York Times and USA Today. I figured that would drive thousands of visitors to the site and tons of new business. Instead, only a handful of people visited our site and not much business came of it at all. It turns out that most people don’t drop everything and go visit the site of a company they read about. As a result, I developed a pretty deep skepticism of the business value of articles and press coverage. At Manhattan GMAT, we didn’t get much press, yet we enjoyed continuous growth for years because our customers had great results.

On the flip side, there are businesses that enjoy a great deal of attention, enthusiasm and goodwill that didn’t succeed. Color was a much-hyped start-up that raised $40 million and almost immediately disappeared. People love Twinkies and everyone knows about them, yet Hostess went bankrupt. Attention and commercial success have an uncertain relationship in business.

I’ve found this to be different in the non-profit world. Press and goodwill matter a lot. Narratives are important. Your audience (donors, foundations, companies, individuals, etc.) all enjoy the sense that people care about what the organization is doing. You ask people for things all of the time (e.g. donations, in-kind services, work at a discount to market, etc.) and they need to be motivated by something bigger than themselves or personal benefit.

Goodwill, it turns out, is much more likely to happen in-person. When we were starting out, I was looking for ways to avoid what I regarded as the event trap – non-profits would spend $200k on an event to raise $300k. I thought to myself, “That’s silly. Why not just get the $300k and skip the event?” Then, when I tried it, it turns out that people would much rather give money if they show up to something and experience what the organization is doing. (Note – at our first Summer Celebration in 2012, we raised $365k on expenses of about $65k. That revenue-cost ratio was only possible because IAC donated the space, vendors donated goods, etc.)

In the business context, unless you’re an event or concert or conference business, getting in front of people is typically a marketing expense. In the non-profit context, getting in front of people is crucial- it drives goodwill which drives your growth.

3. Your incentives are different

I believe in what we’re doing here at Venture for America wholeheartedly, and I know that the same is true for the team, Board Members, and everyone who supports us. It certainly makes it more exciting to do one’s job if you believe in the mission and feel like you can help advance it every day.
That said, there are non-profit guidelines that make it easy to over-rely on this intrinsic motivation. Many non-profits have very conservative pay scales that make it difficult to reward and advance high performers. This can lead to an unfortunate dynamic where you lose people who can help drive the organization forward.

At Manhattan GMAT, I believed in creating a positive work environment and culture, and we invested in it heavily. But I also believed in rewarding people financially at the market rate for a job well done. The last thing anyone should want is for a non-profit to rely upon the personally privileged, young and idealistic, or worse yet, less-than-stellar performers to dedicate their professional lives to the organization. You want ambitious, high-efficiency superstars to view the organization as a place to build their careers. This is simultaneously easier and harder to pull off at a non-profit, but on balance it becomes harder over time (we’re working on ways to mitigate this).

So, if you ask me personally, which do I prefer? I’d have to say I prefer the business context. I love the direct feedback. I don’t think having to frame and package everything you do is terribly efficient (and I’m not the type who really loves the messaging component). And I particularly like the ability to reward people who do excellent work in every way possible, including monetarily.

My preferences aside, Venture for America being a non-profit was 100% the right decision. We’re much better positioned to be able to achieve our mission as a result. We’ve raised $1.2 million to date and have a similar amount pledged, so it’s working well. People are excited about our potential to achieve our mission:

To revitalize American cities and communities through entrepreneurship.
To enable our best and brightest to create new opportunities for themselves and others.
To restore the culture of achievement to include value-creation, risk and reward, and the common good

It’s important to know that some problems lend themselves to for-profit solutions, and some lend themselves to non-profit solutions. The trick is balancing it so you can, to the extent possible, get the best of both worlds.

Tony Hsieh and Downtown Project pledge $1 Million to Venture for America

We are very proud to announce that Tony Hsieh, CEO of Zappos.com, and Downtown Project have pledged $1 Million to Venture for America over the next several years to help revitalize downtown Las Vegas.  Downtown Project is a $350MM+ initiative to transform downtown Vegas that includes a $200 million investment in real estate, $50 million in local businesses, $50 million in tech start-ups, and $50 million in education, arts and culture.

This pledge is our largest commitment to date, and we couldn’t be happier to be working with Downtown Project to have a sustained positive impact in the years to come.  7 of our 2012 Fellows (Andy Chatham, Barry Conrad, Josh Levine, Jude Stanion, Laura Berk, Ovik Banerjee, and Rob Solomon), who were chosen from among hundreds of applicants last year, have been working with Tony and his team since August.  They have been helping move the ball forward and balancing a range of responsibilities each day.  With this commitment, we will be able to send more Venture Fellows to join and support Downtown Project in 2013 and beyond.

Tony appeared on CNBC after making his pledge to talk about Venture for America and his progress at Downtown Project:

Venture for America’s Mission is:

To revitalize American cities and communities through entrepreneurship.  
To enable our best and brightest to create new opportunities for themselves and others.
To restore the culture of achievement to include value-creation, risk and reward, and the common good.

It’s hard to imagine a better fit for VFA than Tony Hsieh and Downtown Project.  We are thrilled to support their work,  and excited to put our Fellows in position to both contribute and develop over the coming years.

For the official press release, see here.

The Ride So Far

It’s been almost a year and a half since Venture for America launched last July.  The past 18 months have been an incredible ride.

Our biggest accomplishment is that we now have 40 Fellows on the ground working hard at start-ups and growth companies in Detroit, New Orleans, Providence, Cincinnati and Las Vegas.  The Fellows are doing great – over 80% of them are rated by their companies as either in the top 1% or top 10% of early hires.

4 of the Fellows (Mike Mayer, Billy Schrero, Brentt Baltimore, and Brian Bosche) started a non-profit, the Startup Effect, to train junior high school students in Detroit and New Orleans in entrepreneurship.   The idea was born of a suggestion by Jeff Weiner, the CEO of LinkedIn and an Advisor to VFA who generously contributed the seed capital for the Startup Effect.  Other Fellows are also hard at work making the cities around them better even as they look to help their companies expand and succeed.

Applications stream in every day for the Class of 2013, and we already have 20 top prospects who have accepted offers and are set to go for next year.  They include programmers, a biomedical engineer, a physicist, a college athlete who started a couple of businesses while in school, and many other talented and motivated young people.  Our 2013 class will be approximately 80 – 100 Fellows.

In addition to our first five cities, we are expanding to Baltimore thanks in large part to a grant from the Abell Foundation.  We are also heading to Cleveland to work with JumpStart and New Haven due to the leadership of Miles Lasater, co-founder of Higher One.

It’s hard to imagine now that Venture for America was little more than an idea 18 months ago.  Since then we’ve been to 50 different universities, in the New York Times and on Fox News, to the White House, to Training Camp at Brown, and to the offices of hard-working entrepreneurs across the country.  We certainly couldn’t have foreseen half of what’s transpired this past year plus.

When we launched in 2011, there were only 3 people full-time.  We had commitments for about $400k and were working out of my old offices.  I was going without salary, in part to save money and in part to help galvanize fund-raising.

Now we are up to 7 people on the full-time team and have raised over $1.2 MM.  Our annual budget has gone from $400k in 2011 to $800k this year to about $1.5 MM in 2013.  We just moved into new offices (still free as we’re being hosted by one of our generous Board members at Mimeo).  There have been countless people who have moved mountains and gone above and beyond to help us reach this point.  We have some very exciting developments coming shortly too.

Upon reflection, it’s a wonder that we’ve progressed this quickly.

I believe it’s because everyone sees the need – our top young people are not being driven to roles that address the needs of our time.  The question I pose at campuses (and occasionally, nice offices) around the country is this – imagine if the same proportion of talent that currently heads to finance, law, and/or management consulting were instead heading to start-ups and growth companies around the country.  How long would it take to meaningfully impact job growth, innovation and economic vitality? What effect would it have on our culture?

That is the question we’re going to answer over the coming years.  Thank you to everyone who’s looking forward to finding out alongside us and helping make it happen on the ground.  Excited to see what the next 18(0) months have in store!

-Andrew

Message to All VFA Applicants

Thank you for considering applying to become a Venture for America Fellow. Your interest says a fair amount about you as a person – enterprising, motivated, and looking to have an impact.

My belief in you and the potential of our country’s best and brightest is why I founded Venture for America. I know that what makes the biggest difference on the ground is having the right combination of people. A core group of smart, energized individuals has been behind every success story, in business and every other realm.

I want to acknowledge a painful truth – the number of applicants to Venture for America will far exceed the number of Fellowships. At present, we will be able to offer approximately 80 Fellowships in this second year. The precise number is indeterminate because we are continuing to identify new companies that want to hire a Venture Fellow, and the circumstances of companies change in both directions (i.e. a company that is committed in August may not have the resources the following March, while another company may successfully raise money and be newly interested).

Our expectation is that hundreds of individuals will apply for the Venture for America Fellowship in 2012 – 2013, resulting in a very low Offer Rate.  An Offer Rate this low means that we are by definition going to miss out on many exceptional candidates.

In recognition of this, if you are a Finalist for the Venture for America Fellowship and find it appealing, we will share your information with start-up companies around the country that have opportunities for recent graduates. There are many growing businesses that will want to talk to you. In this way, we hope to connect a larger number of applicants with early stage companies that could use a talented, energetic hire.

As for the awarded Fellowships, in a standard admissions process, you look for candidates who have certain qualities to the extent you can discern, and you select the individuals who perform above a certain level.

Here, the number is so small and the needs are so distinct that we’re almost looking for specific individuals. That means that applicants can do everything right and possess a phenomenal set of attributes and still not be selected.

First, we will consider three threshold questions:

1. Does this applicant satisfy a particular company’s requirements? Each Fellow will be working for a real company that has specific needs. Audiosocket in New Orleans has a strong culture where everyone is either a musician or a huge music buff. NABsys in Providence is a thriving biotech company that would like someone with a life sciences degree. These are real companies with real needs to fulfill. As we review candidates, we will have the companies’ needs in mind. Yes, if you’re an engineer or programmer you will likely have a better chance at getting a closer look, though we expect over half the positions to be non-technical in nature.

2. Does this person satisfy our program’s requirements? We are looking for individuals with high records of achievement in academic, athletic, extracurricular, personal, or business contexts. Basically, we believe that the virtues of talent, work ethic, attitude and character are transferable to the early-stage business setting, and are seeking individuals who have demonstrated the ability to be successful in whatever they’ve done to date. Venture for America is also seeking to build a diverse group of Fellows in terms of geography, major, gender, ethnicity, socioeconomic background and other considerations.

3. Would this candidate represent Venture for America’s values and mission and serve as a role model and example to others? Our mission as an organization is to rebuild American cities through entrepreneurship, enable our best and brightest to create new opportunities for themselves and others, and restore our culture of achievement to include value creation, risk and reward, and the common good. Any start-up entrepreneur will tell you that an organization’s culture is crucial to its success – we feel the same way.

Only if the answer appears to be a clear ‘Yes’ to all of the above will a candidate be considered past the initial submission. We expect that the vast majority of candidates will not make it past the first stage. The subsequent rounds will consist of phone and video interviews and work product samples that will eliminate a majority of the remaining candidates. The final stage will consist of an in-person Venture Fellow Selection Day in New York with Board members and established entrepreneurs; if you make it to Selection Day there’s still a substantial chance you will not receive an Offer.

If the above sounds forbidding or discouraging, we want to be forthright in what we’re looking for. We will be working hard to find the right candidates who will be able to make a real difference in the success and development of an early stage company and contribute to the economic and cultural revitalization of our country.

Best of luck in applying, and looking forward to meeting some of you in the coming months.

Andrew Yang

President and Founder

Venture for America

Invite from the White House

Monday night I received the following message from the White House:

INVITATION: Meeting with the President (4/26/2012)

Dear Andrew Yang,

April 2012 marks the one-year anniversary of the White House Champions of Change Program. To celebrate this anniversary, we are inviting a small group of our past Champions to participate in a small meeting with the President on April 26, 2012.

As one of our great Champions, we wanted to invite you back to the White House to personally tell the President about the incredible work you are doing in your community.

Although we do not have a time confirmed, this meeting will take place on April 26, 2012 at the White House in Washington, DC. Please respond to this email indicating whether or not you will be able to accept this invitation. If you are able to attend, please complete the attached security form and send it to [xxxxxxxx]@who.eop.gov by Tuesday, April 17 at 6:00 PM EST.

Thank you,

Kyle Lierman

I had been selected as a White House Champion of Change last August, and enjoyed the chance to meet up with Josh Linkner and Jen Medbery during the event. But I certainly didn’t figure on a return visit.

Upon processing what this invite meant, I responded “Yes” and then shared it with my teammates, Board members, entrepreneurs, Fellows, supporters, and others who have brought Venture for America to this point. From the beginning the world has been conspiring to help VFA succeed, and the conspiracy has taken the form of many different people. VFA would be nowhere without Eileen Lee, Mike Tarullo, Bernie Sucher, Charlie Kroll, Darren MacDonald, Brielle Beaudette, Sy Jacobs, the folks at Manhattan Prep, and so many others who have gone above and beyond to see Venture for America put in position to achieve its goals. Perhaps most importantly, our 40+ Fellows are demonstrating what our best and brightest are capable of taking on if given the proper opportunity.

I wish that everyone who’s been part of VFA’s success could come next week, but the group would be bigger than even the White House could accommodate. I’ll do my best to bring part of the experience back with me (and write it up). And hopefully we’ll all get to celebrate together for real when Tony Hsieh comes to town for our big Summer Celebration in June.

To restore the culture of achievement

We drafted a mission statement for Venture for America a number of weeks ago:

To revitalize American cities and communities through entrepreneurship.

To enable our best and brightest to create new opportunities for themselves and others.

To restore the culture of achievement to include value-creation, risk and reward, and the common good.

Though they’re all appropriately ambitious, I think that the third goal is perhaps the most far-reaching and profound and vital to achieving the others.

To restore the culture of achievement to include value-creation, risk and reward, and the common good.

When I was in college at Brown, I had a general desire for status and achievement. In my case, it led me to law school and a job as a corporate attorney in mergers and acquisitions and banking in New York.

That didn’t make me a bad person. I volunteered to do pro bono work as a sign that I was still interested in doing something kind of positive. That was maybe 2% of my time. The other 98% I was grease on a wheel, helping large transactions happen.

We need transaction attorneys to keep the wheels of commerce turning.  But we need more than that.

Our culture of achievement has grown to emphasize visions of success that are, for the most part, fairly predictable. Go to Goldman Sachs/McKinsey/Bain/BCG/Morgan Stanley, then to a top-ranked business school, then back to banking/consulting/private equity/a name-brand tech company. Or in the legal realm, go from law school to top firm to partner or in-house at an investment firm. Live in New York or SF.

People who head down these roads are generally very smart and hard-working. But we need smart and hard-working people to build businesses around the country as much as we need them to process complex transactions.

I was talking to someone who said, “I wanted to take a risk. That’s why I left Google for Foursquare.” This was AFTER Foursquare had just raised millions of dollars and had become a household name in tech circles. I thought to myself, “That’s a risk?” But to this person (who had graduated from Stanford), it probably seemed awfully risky.

Charlie Kroll started his software company as a senior in college with some seed money.  He worked for years in relative uncertainty and obscurity.  He almost went out of business multiple times, and had to figure out what to say to employees if he couldn’t make payroll.  Now, a decade later, his company, Andera is thriving, with 85 employees in Providence.   Jen Medbery is building Kickboard, an education tech company in New Orleans, that is making teachers’ lives better and more efficient and is hiring right now.  Don Naab is the CEO of Danotek Motion in Detroit, which is making more efficient wind turbines using magnets.  These are people who took on significant personal risk in order to build businesses that deliver real value and create jobs. 

We had our applicants and Fellows agree to the following statements as part of their application process:

1. I see my professional pursuits and my career as a moral choice that indicates my values.

2. I appreciate those who assume personal risks in order to build a company or pursue a common good.

3. I believe that actions are the proper measure of one’s accomplishments.

4. I believe that creating value and opportunities for myself and others is an important aspect of professional success.

5. I believe that one’s professional conduct is a reflection of personal character, and will always strive to act accordingly.

These statements likely represented something of a ‘check the box’ for most applicants. But our Fellows are actually demonstrating these values through their actions. They are dedicating the first portion of their careers to building businesses in parts of the country (Detroit, New Orleans, Providence, Las Vegas, Cincinnati) that could use an economic boost. Most of them turned down far more lucrative offers. They’re taking a risk in that the company environments they are heading to are uncertain (and in this 1st year, Venture for America is kind of new). The goal is that most of them over time will become the kind of job creators and business leaders that the country needs.

We need to redefine achievement to include these qualities.   We need more intelligent risk-takers and value-creators who see their communities reflected in the work they do.