Phil Wickham, Charter Class
The Kauffman Fellows Program—one of the largest and most successful projects inss the history of the Kauffman Foundation—was conceived in controversy. The idea of investing in the health of the entrepreneurial capital food chain, dominated by venture capitalists, seemed obvious to some Kauffman board members in the early 1990s, but blasphemous to others. One detractor characterized it as “investing in the enemy.” It rested on Michie Slaughter, then President of the Center for Entrepreneurial Leadership, to facilitate a board dialogue that would ultimately bless the idea or shut it down, and this combative entrepreneur–investor characterization led them to conclude that the investment must be made. They saw that in an innovative world driven by diversity of ideas and deep trust, such enmity between entrepreneur and investor would kill innovation before it had a chance to begin.
Launched in 1995 and graduating its first class of Fellows in 1997, the primary goal of the Kauffman Fellows Program was to create a community of innovation leaders fluent in the science of capital formation, who would better reflect the entrepreneurial community and society as a whole. Two fundamentals drove this diversity: the understanding that dialogue forced to cross new boundaries gives birth to radical ideas, and Mr. Kauffman’s passionate belief that entrepreneurship is the driver of class mobility in the United States. Among other responsibilities, we Fellows were charged to take our learning in the science of capital formation and our network of world-class investors—assets gained from two years in the Program—and apply them into many areas of innovation: startups, venture funds, policy formation, and education (figure 1).
Figure 1. Kauffman Fellows Handbook, 1995, goals statement.1
Beginning as a radical notion in the early 1990s, in July 2011 the Society of Kauffman Fellows marks the 15th year of community.2 To the credit of the Program’s founders, what started as an experiment has steadily grown into a vibrant, important voice in the industry.
Over those 15 years we have learned that the “venture capital process”—what separates the very best venture investors—is far less about financial capital and almost entirely about human capital. This process, the science of capital formation, means understanding and aligning your human capital with an organizational culture that can survive and thrive in the extreme conditions and the many years it takes to establish a company’s leadership in a new technology sector.
The Program founders understood that innovation is holistic, and entrepreneur and investor are like star player and coach in a large, complex game—they are on the same team, there to bring out the best in each other. Without that dynamic, everything falls apart. Surrounding that star player (entrepreneur) are key role players and contributors from the corporate realm, government, service industries, and universities—to be effective in the game of innovation, they too need literacy in capital formation. The Kauffman Fellows Program was designed from the start to build a cadre of ambassadors into each of these realms, ambassadors who would enhance appreciation for the importance of capital formation and the foundation it creates for fast-growth success. The Program founders envisioned how Fellows would pursue a range of career opportunities, depending on their passions (figure 2).
Figure 2. Kauffman Fellows Handbook, 1995, description of Fellow career options.3
Since the founding of the Program, 48 Fellows have launched new venture funds in underserved sectors or regions, more than 30 have led new startups as CEO, and untold hundreds of startups have been created and supported in advisory and board positions. In addition, many Fellows have dedicated their careers to educational and policy positions. From a single $3.8 million grant in 2002, the Program has grown to 40 countries with a sustainable, multifaceted business model that ensures its stability and growth for the next twenty years and beyond. The past President of the Kauffman Foundation and Mr. K’s CFO at Marion Labs, Mike Herman reflected, “the spin-out and subsequent financial independence of the Kauffman Fellows Program is one of the great stories in American philanthropy.”4
This 2011 edition of the Kauffman Fellows Report reflects how Kauffman Fellows are working to fulfill the goal of capturing, codifying, and disseminating best practices in capital formation. From the slums of Rio and the worst prisons of the United States, Matt Mochary’s (Class 2) distinctive energy and fearlessness makes an impact. Jocelyn Brown (Class 13), beginning from her role at Finance Wales in the United Kingdom, architected a global network of 50+ social impact investors that has grown into its own stand-alone community within the Society of Kauffman Fellows. Yinglan Tan (Class 15) excerpts an article from his recent book on how innovation happens in China, and a team of Fellows (Class 13) recount their on-the-ground investigation into trends in China’s energy markets.
As evidence of the corporate world’s growing sophistication in venture capital, Andreas Weiskam (Class 13) describes the particulars of a new program at SAP to better link their investment team with the strategic needs of their global business units. Also from Class 13, Daniel Kraft shares his view of the future of medicine, while Tamara Elias offers a reprint of her Venture Capital Journal article summarizing her field research on Limited Partner (LP) dispositions after the 2008 sub-prime mortgage meltdown.4
A special thanks and note of admiration go to my classmate (Charter Class) and friend Thomas Darden. To my mind and for many others, he epitomizes what this Kauffman Fellows Program is about: A successful entrepreneur and investor, co-founder of his own fund, Thomas walked away to dedicate the remainder of his career—through the prestigious Broad Foundation Superintendents Program—to the burning problem of inner-city public schools. Who better than an innovator and expert in capital formation (and a teacher at heart) to tackle this challenge and teach others what he learned in the process? Thomas kindly shares his journey into public education with the Philadelphia Public School System, and the insights he gained along the way.
Eric Müller captures one of the more important stories in global innovation in recent years: Saed Nashef and Yadin Kaufmann’s successful raising of Sadara Ventures, which is focused on investing in software entrepreneurs in the Palestinian Territories. The team of Saed, a Palestinian by birth, and Yadin, a New York-born Israeli, further pushes the exciting concept that people in the Middle East truly seek opportunity.
A final note of thanks to Kate Mitchell of the National Venture Capital Association (NVCA) for her contribution. While the Kauffman Fellows Program serves a number of constituencies globally in addition to U.S. institutional venture capital, the membership of the NVCA is the wellspring of our best ideas and the source of our best faculty. Kate, a co-founder of Scale Venture Partners, a Mentor in Class 11 and lecturer in the Program, discusses the possible concern at the downsizing of U.S. venture: While not as high a concern for the Program, given our diverse markets, this is a concern for the U.S. economy as a whole.
The lack of smart, connected, aligned capital that serves the needs of entrepreneurs is the bottleneck for most innovation. If we can guide entrepreneurs in the cultural design of new innovative organizations from the outset, we will unleash new levels of innovation. I hope you enjoy this round of research and analysis from the Society of Kauffman Fellows.
Phil is President and CEO of the Center for Venture Education. Phil was in the Charter Class of the Kauffman Fellows Program, serving his fellowship under Ed Kania at OneLiberty Ventures in Boston, and was founding Vice-Chairman of the CVE Board. Prior to joining the CVE staff, Phil served as a General Partner at JAFCO America Ventures and at Copan, based in Munich, Germany. In his venture career, Phil made over 30 investments, including Ikanos, Web Methods, Com21, Emergent, and Trilibis. Phil received his BS from the University of Arizona and his MBA from Rensselaer. He serves on the board of the non-profit SVASE (Silicon Valley Association of Startup Entrepreneurs) as well as on the boards of Trilibis and S2 Technologies.
1 Center for Entrepreneurial Leadership Inc. and Ewing Marion Kauffman Foundation, A Human Investment in the Venture Capital Process: The Kauffman Fellows Program 1995 (Kansas City, MO: Author), 3.
2 17th year of the Kauffman Fellows Program.
3 Center for Entrepreneurial Leadership and Kauffman Foundation, 4.
4 Personal communication, 6 June 2011.