Paul Brown tipped me on Guy Kawasaki's post on the Venture Capital Aptitude Test. (Disclosure: Paul's kind words come from years of he and I working together in a startup where he and the other developers did all the hard work) . Thanks, Paul.
In Guy's post, Guy gives two positive nods two areas I've had lead roles with (engineering & sales) and disses two other areas I've been also been involved with (MBA and management consulting) in terms of how it affects one's ability to be a venture capitalist.
Guy writes about management consultants:
The three worst backgrounds for a venture capitalist are management consulting, investment banking, and accounting. Management consulting is bad because it leads you to believe that implementation is easy and insights are hard when the opposite is true in startups.
Guy writes about MBAs:
Finally, there is the issue of the pertinence of an MBA to venture capital. The upside is that such a degree can provide additional tools and knowledge (such as calculating that 25% of $1.6 billion is $400 million) to help you make investment decisions and to assist entrepreneurs. The downside is that earning this degree (and I have one) causes most people to develop the hollow arrogance of someone who’s never been tested. All told, the downside of an MBA outweighs the upside.
While I won't address Guy's claim about the whether these areas are good or bad for venture capitalists (as I can't claim to be an expert about picking good venture capitalists), what I will address is Guy's claim that "Management consulting is bad because it leads you to believe that implementation is easy and insights are hard when the opposite is true in startups" and "The downside is that earning this degree (and I have one) causes most people to develop the hollow arrogance of someone who’s never been tested. All told, the downside of an MBA outweighs the upside."
On the point about management consulting I simply disagree (with no disrespect) with Guy. Guy's statement is an overgeneralization. There are different types of consulting firms out there, and Guy's perspective may be more influenced by pre-2000 practices. Consulting firms pre-2000 that were focused on strategy might have more of a tendency to be focused solely on stategy, but these firms got burned by making recommendations without focusing on ease of execution. On the other hand, there were firms that grew of of an implementation background (and potentially interim management background) and moved upstream into more strategy consulting. Although markets started to overlap a bit, structurally I think consulting firms and client were better off by having this type of cross breeding.
All said, if one has not spent any time managing or working in a business role prior to management consulting, I think this can be a weak point that one needs to work on careerwise. But there are strong benefits to management consulting that should not be underestimated either - by working in management consulting, one can get exposed to the internal operations of a lot more firms than one could by working for one firm straight for five to ten years. In five to ten years as a consultant, one may have seen the detailed operations of twenty to forty firms versus two to five as an operating person.
On Guy's point, "The downside is that earning this degree (and I have one) causes most people to develop the hollow arrogance of someone who’s never been tested."
To this, all I can say is that my hypothesis would be that MBAs may tend to attract arrogant people [who overstep their bounds in terms of what they think they've accomplised over non-MBA entrepreneurs]. I don't think the MBA naturally breeds this type of person.
Overall, I think Guy is onto something when he says people should value the difficulty of implementation and value and proximity of market insight. I also think he's onto something when he talks about arrogancy affecting the ability of VCs to do the job effectively. But Guy's characterization overly discriminates against consultants and MBAs. What about the negatives to engineers who only think about technical beauty and miss the market need? What about the salespeople who only sold what the customer already bought and never hunted for a deal?