Many finance-focused students at Cornell view a career in venture capital as the hallmark of professional coolness — alluring along the likes of a career in hedge funds or private equity.
But what really is venture capital?
“A venture capital firm fundamentally is about investing in private, high-growth companies,” explains Jennifer Tegan MBA ’01, managing partner of Ithaca-based Cayuga Venture Fund.
In addition to partnering with CVF’s other leaders, actively seeking out and reviewing new investment opportunities, Tegan’s role also involves managing internal operations and the businesses CVF has already invested in.
CVF currently maintains a ballpark of 50 limited partners with assets under management of approximately $50 million, according to Tegan. While CVF invests primarily in the New York State area, the fund also manages a small fraction of portfolios in locations such as California and Texas. Additionally, the fund has engaged with companies of varying sizes, ranging from teams of three or four people to 30 or 40.
CVF invests in companies at various stages in development. A company in the first stage — or seed stage — is usually experiencing its first period of investment.
“Seed stage usually means that they have a product,” Tegan said. “They have started to test it in the market, but the product is pretty new [and] isn’t all wrapped up and tied up with bow.” In seed stage, CVF investments typically circle around $250,000.
The early stage or Series A, follows the seed stage. According to Tegan, this is “almost always a professional round, meaning that there is at least one venture fund or more professional investors that is investing” in this round.
At the early stage, CVF typically invests $1 million, but the total sum from all investors can amount to $4 million and over. For the third stage, or growth stage, Tegan says that CVF investments are usually above $1 million.
Tegan said that when selecting which companies to invest in, one of the most important things that CVF looks for is an entrepreneur that they can work with.
“I joke sometimes that it’s almost like you’re getting married, but you hope to have it end in a happy financial settlement at the end of the day,” Tegan said.
Tegan described how entrepreneurial work can at times be a very human experience. Entrepreneurs often have personal connections with their start-ups, and when they encounter stumbling blocks in their development, matters can become very “tense and difficult.” As a result, Tegan says that her team wants to make sure that any entrepreneur that CVF works with, is one that they feel they can weather through all the highs and the lows with.
Besides finding an entrepreneur who is easy to work with, Tegan also underscored how CVF must thoroughly evaluate a startup’s competitive edge in the marketplace when deciding to make an investment.
“How unique is it, what they’re doing, and how differentiated is it? Do they have a long-term, sustainable advantage in the market? Is the market large enough to make it an interesting investment?” she explained.
The Evolving Ithaca Startup Scene
Although Tegan has experienced engaging with companies and their founders on a personal level through her work with CVF, she also speaks to the evolution of venture capital in the local community as a whole.
One change in the entrepreneurial climate in the area involves the increase in prevalence of start-up culture. “When I first started, it was hard to find entrepreneurs; it was hard to find startups,” Tegan said, which made it difficult to find good targets for investments.
But in the past few years, Cornell has played a big role in the shifting local startup climate, Tegan said. “It was not necessarily a popular, well-supported thing at the university, even back 20 years ago, to start companies. And it was just a more challenging endeavor, and there wasn’t the infrastructure at Cornell that there is now.”
Tegan discussed how the communities with which she has worked have grown to be more supportive of entrepreneurship, saying that “as a community there’s a lot more awareness and support and interest in helping develop this culture.”
She mentioned local success stories, such as Grainful, a producer of 100 percent whole-grain-based frozen entrees, and GiveGab, a for-profit fundraising platform for nonprofits, as testaments to the robust and expansive nature of start-up culture in the Ithaca area.
“If the community is interested in wanting to have significant job growth, then you really do have to invest in those entrepreneurs and invest in the people who are coming up with the innovations of tomorrow.”
Aside from an increase in community support, Tegan also discussed an increase in gender diversity and inclusiveness that has occurred in the world of venture capital. “I think when you’re in an emerging area for venture and startups, I do think that it lends itself better to being more supportive and inclusive of different groups of people,” she says.
In particular, Tegan said that New York State has welcomed an increase in female entrepreneurs and investors. For instance, she mentioned Chloe Capital, an Ithaca-based venture capital firm which invests primarily in women-led technology companies.
“When I first started, we had one woman CEO,” Tegan said of her time with CVF. “And to be honest, it wasn’t just that she was the one woman CEO; she was the one woman sitting in a C-level chair of any company.”
Tegan explained that there were scarce opportunities to engage with companies representative of gender diversity. Although New York State has experienced an increase in diversity, however, Tegan also referenced a recent study proving that the number of women receiving venture capital funding is in decline.
For students interested in breaking into venture capital, Tegan suggests networking, scoping out venture capital firms that hire “associates and analysts” and engaging in “strategic consulting roles or financial investment banking roles.”
Tegan also reminded students to look into getting involved with an upcoming Cornell conference in April, which brings together people from various backgrounds to celebrate entrepreneurship.