The Impact of Qualified Talent on the Venture Capital Industry
The venture capital realm in the U.S. has grown an average of 11.3% per year between 2017 and 2022. The steady growth opens the door to countless opportunities for startups seeking funding and venture capital businesses looking to grow their portfolio.
One of the factors influencing the growth trends is qualified talent. From new college graduates to experienced professionals, the venture capital industry is filled with an abundance of knowledge and expertise that promotes growth through steady business decisions.
Two companies that have effectively navigated these new times are New Enterprise Associates (NEA) and Andreessen Horowitz. These two companies have taken advantage of market shifts and new startup entrants to grow their asset management portfolio.
NEA was founded in 1977 and has since been coined the largest venture capital firm in the U.S. with $24 billion in market capitalization while Andreessen Horowitz is relatively new, being founded in 2009, and has accumulated $1.5 billion in market capitalization.
Understanding the employment specifics of these two American companies will shed light on their success and the vital role their employees play in boosting asset management. The data we will use to uncover key employment statistics are provided by Osterus, a software program that utilizes hundreds of data points to highlight areas of similarities and irregularities between companies.
Let’s first start by looking at the work experience distribution of each company. Both companies have employees with over 15 years of experience with NEA showing 35% and Andreessen Horowitz reporting 39.9%. The 10–15 and 5–10 year categories trail close behind with 22.3% and 22.5% and 25.2% and 27.5% for NEA and Andreessen Horowitz, respectively.
The 0–1, 1–3, and 3–5 categories have minimal employees present with the 0–1 category being nonexistent for NEA. This tells us that both companies strive to employ experienced professionals rather than recent college graduates and those just entering the workforce. This hiring strategy seems to be playing out well for both companies as they have continued to accumulate assets under their current work experience breakdown.
The current employment duration distribution also sheds light on the specifics of the hiring strategy at each company. Most employees are relatively new with 24.3% and 40.8% in the 0–1 category for NEA and Andreessen Horowitz, respectively. The 1–3 category shows 22.3% and 27.5% for NEA and Andreessen Horowitz, respectively.
The employee duration appears to decline as the years go on with 20.4% and 17.1% and 18.5% and 9.8% in the 3–5 and 5–10 year categories for NEA and Andreessen Horowitz, respectively. The 10–15 and 15+ year categories are minimal for both companies.
What does this tell us? First of all, we can see that both companies went through extensive hiring efforts to bring on more talent. This could be due to high turnover or simply a growing business. The ability to recognize the need for more qualified labor is great and has given both companies the opportunity to grow and gain more assets; however, there may be a learning curve for these new employees, resulting in lower profitability in the near future.
Despite the increase in new hires, we still want to see the retention ratio be favorable with most employees staying with the company above 1 year. This does hold true for both companies as the 0–1 category has 16% and 6.7% for NEA and Andreessen Horowitz, respectively. The 1–3 category has the highest numbers of employees with 50% for NEA and 52.4% for Andreessen Horowitz.
The 10–15 and 15+ year category is significantly immaterial for both companies. For Andreessen Horowitz, we would expect to see minimal employees in these categories since the company was only created in 2009; however, for NEA the low retention in these categories indicates that the company does not keep employees for over 10 years.
Although this may signify management changes may be needed, the company is still continuing to grow and prosper, making retention a bump in the road. The new wave of employees joining the company brings innovative ideas that lead to creative solutions to acquiring assets and investing in companies.
The gender distribution of each company plays a role in the success. Having a diverse work environment with an equal mix of males and females promotes inclusivity, creative brainstorming, and a strong work environment. We see that both companies have made significant strides to even the gender distribution with females outweighing males in some of the categories.
The business administration category is female dominant, which is something we haven’t seen too often in our comparisons. NEA reports 78.57% females to 21.43% males while Andreessen Horowitz shows 96% females. Ideally, we would like to see a little more male representation in these categories; however, there are other male dominant categories that make up for the distribution. The partner job title has 76.92% males to 23.08% females in NEA and 61.62% males and 38.38% females in Andreessen Horowitz.
Finally, comparing the prior employers of each company helps us understand the rise in asset management. NEA seeks employees with an investment background with 1.5% of employees coming from Morgan Stanley and 1.3% from PWC, Stanford, and Goldman Sachs. On the other hand, Andreessen Horowitz hires employees from the tech industry with 1.2% from Google, 1% from Facebook, and 0.7% from Microsoft and Goldman Sachs.
The prior employers show a difference in the hiring strategy with NEA looking for candidates experienced in the investment industry while Andreessen Horowitz looking for employees with a tech background, potentially to build out a new segment in their business.
Both companies have been able to effectively manage their assets with the help of qualified talent. The experience employees retain at each company will only help NEA and Andreessen Horowitz to grow in the upcoming years, making them great companies to keep an eye on.
The data used to support our theories and comparisons is only the beginning that powerful employment software programs, like Osterus, can provide us with. In the future we can expect to see business and personal decisions based on employment data, such as the impact of taking a job on our everyday life.