The only college major that matters

If you want to work in venture capital focusing on internet/software companies, or start one of those companies, or work as an employee in any role at one of those companies, there is only one undergraduate major you should consider:  computer science.*

I’m not saying you need a computer science degree, but I am saying it’s incredibly helpful to know computer science.  Lots of great computer scientists are self taught. But almost all of them started coding in their teens.  If you are a coder already and want to spend your college years majoring in something else for the heck of it, great.  I spent my whole childhood coding, and worked during college as a programmer, so decided to major in Philosophy because I thought it was interesting.

Why is it so much better to learn computer science in college (or before)?  Because after college it’s very hard to find the time and discipline to teach yourself coding.  On the other hand, it’s pretty easy to pick up business skills, economics and all sorts of other skills on the job or in grad school.

Why is a computer science degree so important to VC and startups?  I would estimate in about half the conversations I have at my own startup, with tech founders, and with venture capitalists, there is a moment in the conversation when we start getting technical.  Sometimes someone will even ask “Are you technical?” before starting down a topic.  The non-technical people in the room just sit there like we are speaking Greek.

It’s a shame that student enrollment in computer science is in decline.  The thinking apparently is that computer programming is increasingly moving overseas.  What these students fail to realize is you don’t need to be a professional coder all your life to find computer science an incredibly valuable major.

* There is a whole separate world of VC and startups in energy and healthcare.  In those areas I’d recommend analogous technical undergraduate majors.

Question from a reader

I’ve gotten some emails recently from readers of this blog with questions about early stage startups.  I’m sorry if I haven’t responded to all of them yet.  I’m happy to try to answer questions but would generally prefer to do them on the blog so they can be shared/discussed.

Here’s one I got recently:

So you’re joining a startup as one of the first, or the first, non-founding members.  At the moment, the company generates little or even no revenue, but they do have a working first version of their product and a few early users.  To this point the company has been surviving on a modest amount of “friends and family” capital, which has largely been used to support the founders as they built the company and their product.  The founders, however, are convinced that a significant investment is imminent and you will be receiving a reasonable salary in short order.  They are equally certain that their product and their plan is ready to take off.

Determining a fair equity grant at this time is tricky enough; there seem to be far fewer established norms and guidelines for determining compensation in a pre-investment startup than there are following such a milestone.  To further complicate this situation, fast forward 6, 9, even 12 months into the future.  That “imminent” investment has not yet materialized and you have yet to receive any salary (though perhaps the founders have continued to subsidize themselves from the earlier friends and family investment).  The original product has been slow to build traction.  The product has undergone significant upgrades, and one or more new products have been developed, all with your input and assistance.

At this time, both sides decide to sit down and more formally address the issue of your equity grant, but by now the boundaries of your role have become even more blurred than when you first joined the startup.  To be sure, you are not one of the founders, but it seems the founders were not as far along as they believed when they brought you in.  Of course both sides are still likely to overvalue their contributions, so what guidelines and norms can you and the founders possibly look to in order to reach a fair and reasonable agreement on your equity grant?

Honestly, I’m not sure my top worry would be my equity grant at this point.  If I understand correctly, you’ve been working for a year with no written equity grant, no salary, for a company that has gotten little traction, and for founders who were way overly optimistic about their chances of raising money…? (perhaps even misleadingly so?)  I guess if you really love the vision or have no other options then you stay, but otherwise I’d recommend looking for a new job.  At an absolute minimum you should be given an option grant in writing ASAP, and I think that given your sacrifice and the uncertainty of raising any money beyond friends and family that grant should be significant.  If your skills are as important to the company’s as the founders, I’d say it should be at or around founder level.

I worked for a startup once where my equity grant wasn’t in writing.  Needless to say, when the company was sold, I got nothing.  Always, always get your equity grant in writing. Quality entrepreneurs will simply give you your grant in writing without you even needing to ask.

Joining a startup is far less risky than most people think

Joining a startup is far less risky than most people seem to think.  In fact, I don’t know if anyone has ever studied this systematically, but I would bet that people who join startups have greater job security than people who join large companies, and certainly have better risk-adjusted returns.

Here’s why:

Big companies aren’t as stable as you think:  I graduated business school 6 years ago.  Very few people in my class created or joined startups, instead opting for “safe” companies like… Bear Stearns, Lehman Brothers, Ford, hedge funds that no longer exist, etc.  Meanwhile, everyone I know who went the startup route has had job security and been successful – in some cases spectacularly so.

Big companies aren’t loyal to employees:  When there are cuts at big companies, they tend to just use a hacksaw and not consider how loyal you’ve been or how hard you worked.  The people who survive are often the ones who happen to be in certain favored divisions or are good at playing politics.

On the flip side:

Startups that have financing pay pretty well:  If the startup you found or join is VC backed, you usually make market or near-market wages (in addition to the potential upside you get with equity).   Even if things go south you will probably have broken even financially and learned valuable skills.

Startups tend to be much more loyal to employees:  For example, in the recent downturn I know of a number of startups where management took pay cuts (in some cases took their pay to zero) before laying anyone off.  Experienced startup managers know how devastating layoffs can be to morale and to their own reputation and tend to avoid them at all costs.  Moreover, even when there are layoffs they tend to be based on merit and loyalty.

– When you join a startup, you are also joining a network –  You aren’t just joining a company – you are joining a network of employees and investors who – regardless of the fate of the startup you join – will inevitably go on to do interesting and successful ventures.  If you impress them, they will bring you along.  I know of many cases where startups failed but employees went on to flourish at the founders’ next startup or another company their VCs invested in.

In short, just because startups tend to fail more than big companies doesn’t mean joining a startup is riskier than joining a big company.