Rich Pickings for Picking Winners

W anted: Scientist with business savvy to earn wads of cash for investing lots of other people's money in new companies.

It might sound attractive, but "post vacant" ads--even more soberly worded ones--for would-be venture capitalists are rarer than hen's teeth. Do genuine opportunities exist for researchers to start handing out money rather than begging for it themselves?

Well, it's true that finding a position in the venture capital (VC) industry isn't easy. Companies are finicky, one might even say elitist. They cherry-pick their staff, often from the vast network of scientists they consult, or from well-known business schools. While smaller companies are more open to hiring young scientists with little or no experience, larger companies are keen on business and investment experience. Some even find doctoral degrees unnecessary. "A PhD degree is ancillary for most hires at Apax Partners," says partner Jeremy Reffin.

There is a reason for this exclusivity. The industry is tiny. There are almost 200 VC companies in Europe, but many are small, often with a payroll of just four to 20 people. Fewer than 40 companies focus on life science or biotechnology businesses, which is the sector where you'll find most of the industry's PhDs.

For prospective job seekers, not all the news is bad, however. Despite the some 55% decrease in European VC spending during the first half of this year compared to the first half of last, as reported by Windmill European Venture Capital Database, companies are hiring. "We hire about 10 new people each year, of which one or two may have PhDs," says Reffin. "We're always looking," adds Laura Morse, partner and head of human capital at Atlas Venture.

It may seem counterintuitive to hire during an economic slump, but there's a reason that VC firms are always hunting for new talent. Unlike other businesses that expand by adding goods and services, VC companies rely on the strength of their human capital to reel in new business. In other words, to grow, VC firms look for people who have successfully spun ideas into thriving businesses--and who complement their existing expertise. In fact several people Next Wave spoke to said that a company had first hired them as a consultant, and then several months later offered them a full-time position--evidence of how choosy a company can be. "We're always looking for that last piece of the puzzle," Morse adds.

Obviously companies that spend so much effort hiring don't want their staff to leave. There isn't much turnover in this business, and many companies offer financial incentives to stick around (such as distributions from company exits). VC companies are often headed by people with 20-plus years of investment experience decorated with a string of successes. "You get better over time," says Morse. "Your reputation with entrepreneurs is the single most valuable thing you can have" in order to grow your business.

Whom do companies hire?

Apax employs 180 investment executives worldwide, and just 11 of those have doctorates. "Our recruits most often come to our attention for some other reason than their academic credentials," explains Reffin. "Our youngest recruits will have a number of years of very high quality industry experience either in banking, biotechnology, or consulting."

What's more, adds Reffin, the company actively courts and recruits people from Harvard Business School in Boston or INSEAD in Fontainebleau, France. "We never hire straight out of the PhD pool," he adds. Nor does the company generally hire from the pool of resumes job seekers send in.

Hiring practices at Atlas aren't so clear cut. "Somebody who just graduated with a PhD is fine," says Morse. "We would tend to bring that person in as an analyst. If they had no business experience, they would have to demonstrate that they had some pretty good instincts." Many analysts move up and become associates and partners. Nonetheless, "we prefer for a PhD to go to business school and then spend a few months working in financial services," she highlights.

"We do think that either having a PhD or a research-oriented MD is necessary to make the kind of early stage bio-pharma investments we do," Morse adds. There are 10 investment executives in Atlas's life science's division; six are PhDs and four are MDs. "We favour people with degrees in molecular biology. We do have chemists too, but our people are primarily trained in the biological sciences."

Doctoral degrees, however, are less important in other investment areas such as information technology and telecommunications. While both companies do employ PhDs in these divisions, there are many more in life science or health care. Atlas, for example, has one person on its communications team with a PhD in optoelectronics. Almost everyone else has at least a master's degree in some related field such as engineering.

Like Apax, Atlas courts people from the major business schools too, sometimes for years. This kind of "relationship building" goes on all the time, as companies like to have a pool of talent from which to choose should the need to hire arise. What's more, some business school graduates will become entrepreneurs looking for capital. VC companies want their business. What better way to score a deal than to woo potential clients from the start?

Do you really want the job?

"It's very hard work," says Paul Triniman of London-based MVM--a small VC company that's focused on health care and has only 10 employees. "You've got to be very thorough and meticulous. You've got to be self-motivated, and you've got to be genuinely interested in the field," he adds. Twelve-hour days and weekend work are common--and be prepared to travel on as little as a day's notice.

"You've got to communicate with everyone," says Cathy Prescott, one of two PhDs among Cambridge, UK-based Avlar BioVentures' seven employees. "You need to be able to sit down with different types of people. You have to give people the confidence that their baby is in good hands, which is not always easy."

"Part of this job is frustrating because it's not your idea you are taking forward," Prescott adds. "But you can have a tremendous input, and that's a huge compensation. It's a tremendous high."

Speaking of compensation, VC can be extremely lucrative. Companies were cagey when asked how much they pay, but Morse describes starting salaries for upper-level professionals in general as on par with the consulting industry--essentially between ?90,000 and ?130,000. What's more, in good years, when there are a lot of company exits, bonuses "can exceed base compensation significantly," says Morse. Junior investment professionals sometimes have fixed bonus opportunities, which generally range from 20% to 40% of their salary.

But whatever the salary, "it's probably not enough," reflects Prescott, "each project must also bring its own level of intellectual stimulation." Considering the amount of training and experience required to land a job, that's surely not too much to ask.

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