and Business Resources
Wall Streeters break down on Sand Hill Road.
It seemed so natural at the time: superstar Wall Street analysts--those
with the most talent for combining solid analysis and effective marketing--were
attracted by the more relaxed lifestyle and huge potential returns of
venture capital. But now, just a few years later, the idea looks like
a failed experiment. Well-known former analysts like Lise Buyer, Keith
Benjamin, and Danny Rimer have found the transition far more arduous than
In the fall of 1999, Keith Benjamin left a high-profile post as lead
Internet analyst at Robertson Stephens to join Highland Capital Partners.
In the following nine months, a parade of analysts followed suit. Of the
eight most prominent movers, only three remain at the firms they first
The most recent one to move on is Ms. Buyer, whose stint at Technology
Partners ends in July. She hasn't decided what her next move will be,
but hasn't ruled out venture capital. Ms. Buyer says the four-person firm
decided to increase its focus on health care investing, necessitating
a cut in its technology group. "A number of partnerships are reassessing
their infrastructure, and by definition, it's almost always last person
in, first person out," she says. Although she believes VC firms need
a mix of financial and management experience, Ms. Buyer acknowledges that
these days, partners with experience running their own firms are more
useful to portfolio companies than are former analysts.
Clearly, the skills needed to be a venture capitalist in 2002 are drastically
different than they were in 1999 and 2000. When IPO grooming and financial
jockeying were paramount, former analysts were highly sought after. Now,
VCs and their portfolio companies prefer someone who has captained several
private or public companies through tough times.
The language of startups has also changed, says Bill Tai, a general partner
at Charles River Ventures. Companies are "stories" or "deals"
in banking lingo, an attitude VCs also adopted in the late '90s, says
Mr. Tai, a former analyst himself. Lately, he says, VCs are referring
to companies as "projects," indicating a more long-term commitment.
One reason for the lack of big hits by former analysts is that they have
a steeper learning curve than do VCs with operating backgrounds, says
Bill Gurley, a Benchmark partner who spent three years as an analyst at
Credit Suisse First Boston and Deutsche Morgan Grenfell. The trouble is,
those who get their start at Wall Street firms aren't exactly receptive
to constructive criticism; they're used to calling the shots, and often
find it hard to defer to other partners. "The analyst job is very
autonomous--you're building a practice, and your reputation's your own,"
says Mr. Gurley. "Here, the team element's a much bigger deal."
Analysts are also accustomed to the market's daily feedback on their
success, while VCs often have to put in three years of work before they
know for sure whether a given investment will pay off. "In venture
capital, only about 10 percent is making the investment," says Mr.
Burnham. "The other 90 percent is living with it."
Still, given the turmoil on Wall Street, you'd hardly expect many former
analysts to be wishing they were back in their old jobs. Bill Burnham,
managing director at Mobius Venture Capital (an early-stage affiliate
of Softbank Capital Partners), is grateful he jumped the fence when he
did. "It's a welcome relief to spend 100 percent of my time working
with companies a lot more closely than I could as an analyst," he
says. Mr. Burnham has made ten investments since joining Softbank's ranks
in 1999, only two of which have lost money--not bad for a firm saddled
with dozens of defunct Internet companies.
But Mr. Burnham's experience seems to be the exception. Most of the high-profile
analysts who became venture capitalists during the last few years have
since moved on. Success as an analyst didn't automatically translate to
success as a VC. That said, the star analysts who remained on Wall Street
have lost as much lustre as those who dimmed on Sand Hill Road. These
days, VC firms rarely consider analysts when doing searches for new partners,
according to recruiter Mel Connet, who says operating or venture experience
is preferred. Despite its pace in the late '90s, VC is a game best played
slowly and carefully--and apparently a difficult one for those coached
by the stock market's daily feedback.
Write to Julie Landry.
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