High roller: The Kauffman Fellows Program

Abstract

The venture capital industry invests billions of dollars each year, yet for a long time, there was no structured way to train budding venture capitalists - until the Kauffman Fellows Program came along. Started in 1995, the program selects roughly 10 people each year from a pool of about 250 applicants. The program pays $80,000-a-year stipends for them to serve 2-year stints at an established venture capital firm and learn the business.

The venture capital industry invests billions of dollars each year, yet for a long time, there was no structured way to train budding venture capitalists-- until the Kauffman Fellows Program came along.

Started in 1995, the program selects roughly 10 people each year from a pool of about 250 applicants. The program pays $80,000-a-year stipends for them to serve two-year stints at an established venture capital firm and learn the business. Fellows also attend occasional specially designed educational programs around the country, where veteran VCs, entrepreneurs and other experts teach the ins and outs of private financing. Applicants must have a graduate degree and three years of professional experience; the application deadline is September 24.

The program is run by the Kansas City, Mo.-based Kauffman Center for Entrepreneurial Leadership, founded by philanthropist Ewing Kauffman. Before it existed, the only formal training available was the Venture Capital Institute's (www. vcinstitute.org) four-day educational program for new VCs, or a few venture firms' associate programs, which typically involve a lot of bag-carrying and observing.

The purpose of the Kauffman program is to develop more early-stage investors with expertise in supporting startup companies, says Brian Sullivan, the programs recruiting and selection manager. It seems to be working. Twenty-one of the program's 25 graduates have stayed in the venture capital field, 14 of them with the firms where they were fellows.

"I found the Kauffman program incredibly valuable," says Ravi Mohan, who was a fellow from fall 1996 to spring 1998. Before that, he interned at McKinsey & Co. and at an information systems consulting firm in Bombay, India, that his mother founded.

As a fellow, Mohan was placed in the Wellesley, Mass., office of Battery Ventures, a technology-oriented venture firm where he was assigned to enterprise software. "It was very independent," he recalls. "You were supposed to find great deals that you wanted to do, convince the firm to do them and get the deals done. A lot of it was proactively thinking about the market."

But his first deal also taught him the value of luck. That's because he found the company by dialing a wrong number, which landed him at Prologic Corp. The company, which makes software for processing checks and loans and performing other functions at midsize retail banks, happened to be looking for funding. One thing led to another, and soon Mohan was researching the market and performing due diligence on the Richmond, British Columbia, company.

His mentor at Battery helped him pitch the deal to the firm's partners, and in February 1997 Battery invested $6.5 million. In 1998, Prologic raised another $15 million in venture funds, Mohan says, and Battery now owns about 18 percent of the private company. When his fellowship ended, Battery Ventures hired Mohan as a vice president at its San Mateo, Calif., headquarters. Last year, Mohan became a director of Prologic, and in April, he became a principal at Battery.

"The program gave [Mohan] a good head start" on learning the VC business, says Oliver Curme, the general partner at Battery Ventures who served as Mohan's mentor. The Kauffman program helps develop venture capitalists quickly, Curme says, which is important because "it's very dangerous to be a neophyte VC."

The programs "learning modules" are a key element, bringing the fellows together roughly three times a year for a few days of classes. Through the modules and an orientation session, the fellows form a network of young VCs who can turn to each other when they're starting out at their firms.

"The venture business tends to be an apprentice kind of business, but venture capitalists tend to be bad mentors," Curme says. "I learned a lot about being a mentor. And I got a lot out of it; I didn't expect that." He will serve as a mentor again starting this August.

Current fellows are working at firms such as Draper Fisher Jurvetson, New Enterprise Associates and others, and the list of participating firms is growing.

"The amount of venture being invested has soared," explains Curme. "And the Kauffman program is really filling a void."