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All the evidence that we have shows the number one reason that young people aren’t starting businesses is student loan debt. We have 45 million Americans who have almost a trillion and a half in student loan debt right now, that’s not preventing us from taking risks. I don’t know what is. So, in my opinion, Business School serves a very narrow niche, and you’re actually starting to see those application numbers going down, because I think people get it.
Jay Clouse 0:28
The startup investment landscape is changing, and world class companies are being built outside of Silicon Valley. We find them, talk with them and discuss the upside of investing in them.
Jay Clouse 0:41
Welcome to upside.
Jay Clouse 0:55
Hello, hello, hello and welcome to the upside podcast, the first podcast finding upside outside of Silicon Valley. I’m Jay Clouse, and accompanied by my co host, Mr. Five Years himself, Eric Hornung.
Eric Hornung 1:08
Wow. That’s a very thoughtful nickname. That’s like…I think that’s your best nickname to date. I have been dating Colleen for five years friend of the podcast Colleen as Jay loves to say. For five years now. And our anniversary was just a few short days ago. We kept it really low key. We went to the zoo because they have tulips galore, which is Colleen’s favorite flower. Unfortunately, the giraffes went out and the cheetahs weren’t out. I don’t even know if they have bears or elephants there which are my two favorites.
Jay Clouse 1:39
You just slur the word giraffes so severely that I heard the word drafts and I was like you’re trying to drink at the zoo. And they didn’t have beer at the zoo?
Eric Hornung 1:48
Oh no. They have they had draft beer. But no giraffes.
Jay Clouse 1:51
Still sounds like drafts.
Eric Hornung 1:53
How do you say giraffes,
Jay Clouse 1:54
Eric Hornung 1:55
Jay Clouse 1:56
Eric Hornung 1:57
Am I saying it differently?
Jay Clouse 1:59
Eric Hornung 1:59
Jay Clouse 2:00
Yeah. What would you say is your favorite anniversary that you and Colleen you have had sorry friend of podcast Colleen.
Eric Hornung 2:05
It’s kind of unfair to Colleen because the CFA is always in May or June, which means that we’ve never had any like crazy anniversary type experience. So I’ve liked all of them. I’ve liked all of them equally, Jay
Jay Clouse 2:20
Was really hoping you would have picked a year that was not year five. So I could have followed up with and it’s been all downhill from there huh. I was setting a trap for you. You almost stepped into the trap. Thankfully for you if a post production process and so you did not step into the trap.
Eric Hornung 2:34
I didn’t instead I just you wanted a hill, I gave you a mesa. You know what a mesa is?
Jay Clouse 2:40
Eric Hornung 2:41
So in the desert, there are these things there’s buttes, and there’s mesas and there’s mountains and there’s all kinds of stuff in the desert Jay, there’s tumbleweeds and cacti. But a mesa is essentially really steep sides with a flat top. So we went up when we started and we just been having a great time ever since.
Jay Clouse 3:02
It’s like a haircut style.
Eric Hornung 3:03
Yes, like Fresh Prince of Bel Air.
Jay Clouse 3:06
High and tight.
Eric Hornung 3:07
A high and tight Yeah, Fresh Prince of Bel Air and the early seasons.
Jay Clouse 3:10
Can be called a mesa high and tight
Eric Hornung 3:12
Yet you should try that out. Start that up.
Jay Clouse 3:15
Well, Eric, you brought up the CFA. But alas, today we’re not talking about the CFA, we’re talking about VFA
Eric Hornung 3:23
Oh acronyms, acronyms galore.
Jay Clouse 3:25
Rhyming acronyms. Today we’re talking to Amy Nelson, the CEO of Venture for America. Venture for America is a two year fellowship program for recent grads who want to work at a startup and create jobs in American cities. fellows learn important startup skills at their month long training camp, apply for jobs within their vetted company network and work for two years as full time salaried employees in one of 14 cities. Eric, VFA was founded in 2014 by Andrew Yang, who is now a presidential candidate for our United States here,
Eric Hornung 3:58
Very interesting organization that, Jay, I have had actually some exposure into for quite a few years now. I remember when they first started off, and I had a few friends who were in some of the earlier classes.
Jay Clouse 4:11
Yeah, I think VFA was starting, you know, right around when we were exiting Ohio State. And Columbus was not one of their first cities. So by the time it came to Columbus, actually, they weren’t even sure this is coming to Columbus. When I was graduating, they said I might come to Columbus. And so I was actually trying to finagle a VFA fellowship myself, even though I had already lined up a position with a startup in Cincinnati. And then I just kind of figured out it was too much work for me to finagle that relationship when I really just needed to start working at the company. But for most fellows, you know, they have opportunities to go straight into a startup that have already joined the VFA network. And it is to my you know, outside perspective, a really unique and awesome opportunity for someone coming out of college who wants to take an untraditional path and learn some, some startup skills. I’m close friends with a lot of VFA fellows.
Eric Hornung 5:06
Likewise, I also think the organization is great for the startups themselves and for the startup communities, because it fosters a community within a community. And also gives brings talent to cities that need it and needed it
Jay Clouse 5:21
VFA was founded in 2011, which I think I said it’s based in New York City, they’ve had about 700 fellows or more graduate to date, or be part of the program to date. Amy, our guest today started out as a VP of external relations with VFA in 2013, before moving up to managing director in 2016 and is now held the CEO title since 2017.
Eric Hornung 5:46
Always an interesting situation when you replace a founder of anything more interesting when that founder leaves and become such a public facing human being. So I’m interested to hear from Amy what the transition was like, and what everything is like now, it’s not like Andrew Yang is gone or retired, like he’s still doing things
Jay Clouse 6:08
Running for president of the United States, one may say is the ultimate Venture for America.
Eric Hornung 6:14
And on that note, if you guys have any thing that comes up on this interview that you want to talk to us about, you can send us a long form note at email@example.com, or tweet at us that’s probably preferred at upsideFM. Let’s jump in.
Jay Clouse 6:35
Amy, welcome to the show.
Amy Nelson 6:36
Thanks for having me.
Eric Hornung 6:38
We like to start on upside with a background of our guests. So can you tell us about the history of Amy?
Amy Nelson 6:44
Yeah, so I was born in a small town in the Midwest. I was raised by a single mother. I was the first person in my family to go to college. And when I decided to go to college, I was like, how can I get as far away from St. Louis Missouri. as humanly possible. I was from a small town just kind of outside more cornfield dairy than skyscrapers for sure. So I decided to move to Southern California because I had this concept of what that was going to be I’d been a went to be in middle school, I was interested in that lifestyle. That’s how I wound up there not not a particularly good reason. Then when I was in college, I studied philosophy, but I got really interested in international development. So I ended up studying abroad in Cameroon in Central Africa, studying prostitution, got a Fulbright to go back and thought I was going to spend my entire career sort of international development space, helping improve livelihoods across the globe. And then, when I was graduating from college, I found out that I was pregnant. And so I became a single mother at 22. and ended up working in international development but couldn’t jaunt around the globe quite the way I had anticipated with baby in tow. And so ended up doing a lot of fundraising and back in office stuff, kind of learning how these companies are nonprofits organize themselves. And at some point, I got really disillusioned with that feeling like I was on a hamster wheel, raising money, not creating real change in the world. And I decided that everyone I knew who was really impressive, did something in business. And I had no idea. I didn’t even know that startups were really a thing at that point. But I decided that I needed to learn about business if I was going to make real change in the world. So I went to business school, because that was what you do. If you want to learn about business, in hindsight, feel like there are other things I could have done. So I moved to New York, that when I had two kids racked up a lot of debt, but had a great time for the most part. And when I was in business school, I was working for an organization called B lab that helps impact investors through what I was working on helped impact investors understand the social and environmental return on their portfolio. And I needed a job and I read about Venture for America. In New York Times there was this like Sunday Business Journal article, it was the most shared Article of the week, I had actually refused to read it because I thought it was another millennial trend piece. And then someone from my college shared it because there was a mutual person that we knew who was actually in there. And so I was like, wait a minute, this is so cool. And at that point, answer 10 years post High School Plus, I realized that St. Louis has a lot of cool things going on. And that when I was graduating from college, that wasn’t necessarily the case, right? There weren’t opportunities for someone like me, or you didn’t know how to access them. So we got really excited about this notion of sending recent college graduates to cities that I hightailed it out of I was like the poster child for brain drain. And I reached out to our founder through cold and was like, Hey, I know about nonprofit fundraising. You seem new to this. Could I help you out? Two weeks later, I had a job. The nutshell background of me.
Jay Clouse 9:55
Yeah, we covered a lot of ground really quickly there. Early on, when you’re, you’re out of college and out of St. Louis. And now you’re having kid and you’re looking to go back to business school, who are you looking to as sort of inspiration, or who was like a mentor to you.
Amy Nelson 10:11
I remember reading the blue sweater by Jacqueline Novogratz. And she was really one of the first leaders in the impact investing movement, using capital for good particularly, particularly in the global south, although they now work in the US as well. And being really, really inspired by her. So I’ve read her book, I saw her speak at like a Milken Institute event in California. And so she was very much my model. In terms of mentors, I had some great people who I worked with who are on my board. But honestly, working in international development living in Southern California, being a single mother of two, my networks were actually quite small at that point. And one of the reasons that I wanted to move to New York and go to business school was to meet people, because I was feeling fairly isolated at the time.
Eric Hornung 10:57
How do you measure environmental and social impact? Like quantitatively?
Amy Nelson 11:02
Yeah, so the way that B lab does it is they have this very rigorous questionnaire that depends on the size of the company, the industry of the company, the geography of the company, so international versus sort of less developed countries for those highly developed countries. And there’s a number of different measures, right? Because if you’re a manufacturing company, your environmental outputs are going to be very different than a services company. But it’s what they look at is everything from the governance of the company, independence of, you know, directors, they look at community engagement, you know, and they look at employee practices a lot, you know, is there equitable pay? Is there diversity at the leadership level, there’s like hundreds of measures. There, there are a lot of different frameworks for bigger companies, there’s sort of an ESG framework, but it’s definitely a tricky thing. And there’s a lot of it depends right on the company. And all of the data self reported you so there’s some verification, but the most part, people are trying to spit it how they choose to, but they sort of differentiated as well between companies who had doing good, kind of baked into their DNA, their governance practices, their employee practices, versus their product or service, right. And some companies do both. Like Patagonia is one of those companies where their product in ultimately is camping equipment, hiking equipment, outdoor equipment, but they produce it in such a way that you’re having like a, that they’re reducing their carbon footprint as much as possible. Whereas if you look at like a microfinance institution, their core of their business is helping, under banked people access capital,
Jay Clouse 12:38
How did you decide on which business school to go to,
Amy Nelson 12:41
I was really only open to New York or Los Angeles, partly due to constraints put on me by a third party, as you can imagine, which meant they were really for business schools that I could go to. And I really liked NYU, all the places that I visited and applied to and had other options. But the culture there is one of true collaboration, like people are excited when you get that job at XYZ firm, not competitive with one another. And I really felt like it had the scrappiness and sort of the grit that I wanted, compared to some of the top tier institutions.
Jay Clouse 13:26
Outside of that did business school live up to your expectations.
Amy Nelson 13:30
So I’m on the record as being very critical of the promise of business school for people who want to be entrepreneurs or in the social sector. It’s incredibly expensive. And business schools. So a lot of undergraduate institutions are designed where the customer is really the faculty, everything is designed to optimize for the faculties happiness and very little is designed to to really optimize for the student experience. In Business School. Oftentimes, the school is really organized around on campus recruitment. So the people who are paying a lot of money to be there, your banks, your consulting firms, your brands, who want brand managers, they are, you know, absorbing the product of the school. So they’re really the customer, right. And if you do not want to be a banker, a consultant, a lawyer, I guess a lawyer be lawful, but a brand manager, you shouldn’t go to business school, it’s going to be incredibly expensive. Yes, you’ll improve your network. And maybe that’ll be helpful. But I really take issue with the fact that so many schools are selling themselves as like step one, on your entrepreneurial journey, when all the evidence that we have shows the number one reason that young people aren’t starting businesses is student loan debt. We have 45 million Americans who have almost a trillion and a half in student loan debt right now, that’s not preventing us from taking risks. I don’t know what is. So in my opinion, Business School serves a very narrow niche. And you’re actually starting to see those application numbers going down, because I think people get it. And so it’s not, it’s not universally bad thing. But I think for most entrepreneurs, there’s a much better way to get an entrepreneurial education than paying six figures, or right degree,
Eric Hornung 15:20
What are the other reasons why people aren’t starting businesses, you said, number one, student loan debt. What else is on that list?
Amy Nelson 15:27
I think that there are two types of reasons. And the first are these structural reasons around financial markets around student loan debt, but also the fact that it’s become increasingly more difficult to start a business, you see the sort of mass convergence of firms, and there’s not as much room for new entrance to the market. And so a lot of the loss that we’re seeing within New Business Development is actually at the level of kind of the mom and pop store, there’s plenty of tech startups that are still out there. But on a net basis, we’re not starting small businesses anymore. And I think a lot of it is because it’s very, very difficult to do, as you see, you know, growing income and wealth inequality, etc. But I also think there’s this huge cultural component, particularly for high achievers, who, in my opinion, have become these incredible hoop jumpers, syllabus followers, they know how to get an A, if you put you know, instructions in front of them, they will follow them and they will be successful. But no one has ever said to them, think creatively, take a risk, do something outside of these sort of narrowly defined pathways that we’ve defined as being successful. And so we talked about what the culture of achievement is in this country. And it used to be the American dream, right? Come over, you’d start a business, you’d build a livelihood. And now if you go work for a big tech company, or you go work on Wall Street, or you get a fancy degree. And you join sort of a bigger institution, where you never have to be the one responsible for making big decisions and big and taking big risks.
Jay Clouse 17:09
I would love to dig in on this a little bit more, because it seems like you’ve probably studied this more than I have. Are there any cities around the country that are approaching student loan debt in a good way?
Amy Nelson 17:19
So right now, there are a lot of barriers on the tech side for student loan relief. So there are some bigger companies and there are some startups coming out that are trying to help companies pay for student loan debt. But the way that our tax system works today, which is not how the laws were originally interpreted about 10 years ago, is that if I provide one of my employees a grant of $5,000, to help offset their student loans, that income is taxable. If I had given them that same $5,000 to pay for their tuition in real time, it would not have been taxable if I gave them $5,000 as reimbursement for expenses incurred in a business context, that would not be taxable. But right now, there’s it’s very, very difficult for companies who actually want to help their employees to do so in a meaningful way. And I think I’m not sure that this is an area where there seems to be shared political will across the aisle, I think everyone recognizes that student loans, you know that we’re going to see massive defaults in the coming decade or so. And it’s going to be a real problem for the government who relies on these payments. And there’s interest in finding ways to stem the problem. There just hasn’t been at this point organized efforts around it. And if anything, the public service service student loan forgiveness program is kind of in jeopardy right now. The current Department of Education,
Eric Hornung 18:48
How tied in are you to what’s going on with the federal government? I know the VFA is a
Amy Nelson 18:53
Not at all.
Eric Hornung 18:56
Amy Nelson 18:56
We are a nonprofit, we’re relatively small compared to some of the bigger agencies, but we have never received any money from the federal government. And only fairly small amounts from state and local governments tied to our work directly. But we’re not part of the AmeriCorps program or anything as well. And we steer clear of lobbying and things like that. But some of our donors do talk to us about like, what are the things that we could do to help you with our lobbying efforts? And for me, student loans really is the number one thing that I think that there is fairly broad consensus that it needs to change that would meaningfully impact our work.
Jay Clouse 19:35
Are there any actual you mentioned, companies and companies have these struggles with getting around tax law to even forgive things the way they would want to or contribute to student loans for their employees? Is there anything being done at a state and local level anywhere?
Amy Nelson 19:49
You know, not that I’m aware of, but that doesn’t mean that that there isn’t?
Eric Hornung 19:52
Take me back to this article you read? What about the article on VFA, I believe you said was the New York Times What about that article convinced you that this wasn’t just some millennial trend and convince you, Hey, I should reach out to this guy. Like, how did that thought process go? That this was like, Oh, this is a light bulb for me?
Amy Nelson 20:11
Yeah, so they’d already done the thing. Right. It was a profile that mostly took place that our summer training program, and it was talking about the different fellows who started in the program, and the companies that they were working for, and telling their stories, and some of them had chosen VFA over Wall Street, over over consulting or after working in a financial institution. And it was this period after the recession, where it really felt like we needed to be investing in places like Detroit, and St. Louis, and Cleveland, and it still feels that way, but they’re moving in a right direction. And I think there was a period, particularly around the Detroit bankruptcy where a lot of people felt quite hopeless. And to me, this was a very tangible thing. A lot of people talk about entrepreneurship or building community, but I could see here are human beings, showing up to a place doing work and creating, you know, hopefully something positive in the community. And so I felt like I, I could get my head around it. Sometimes, when I’m talking to people in these spaces, I can’t quite understand what they’re doing. And this to me, was pretty straightforward. And you know, the headline was really clean, though. It was something like, four going six figure salary, you know, recent college grads choose to do good, something along those lines. But when you dug it was really quite interesting what they were actually doing.
Eric Hornung 21:35
How early was VFA when you came on board?
Amy Nelson 21:38
Yeah. So we were officially founded, and I believe, April of 2011. We placed our first class in 2012. So we didn’t really get going until late 2011, early 2012. And then I joined in the fall of 2013. So it was about 18 months, maybe not quite two years old.
Jay Clouse 21:57
Can you talk to me about your strategy of reaching out to I’m assuming you’re talking about Andrew Yang, the founder of the VFA? So was that just a cold email? What did you say? How do you react?
Amy Nelson 22:07
So they, they actually had a job posting up for fundraising position. And that was a little too Junior for me, which I knew, but I needed a job. And it seemed interesting. I was having other conversations, of course. And, you know, it was it was like, Hey, I think this is really cool. I’m from this place. Here’s my resume, let’s chat. It was not much more than that. Although, I think I talked about how coming out of business school, I had seen my classmates, even the ones who thought they wanted to do something interesting. get sucked in by the siren song of these on campus recruiters. And I was pretty steadfast that I was not going to do that. But people I respected who said, Oh, I’ll just do this for a couple of years, and then I’ll go XYZ, most of them have not done those things. And and I very much agreed with Andrews thesis, which was, you know, people young people do what’s in front of them. And you have to show them that there are alternative pathways. So they’re not going to know how would you know that starting a business is a viable option for you. If your parents didn’t do it, or you don’t know other people around you who are doing it, it’s incredibly intimidating. And you probably think it’s going to take more capital or more X, Y or Z than it actually is. And our whole philosophy is around running small test, validating hypotheses like just getting started. That doesn’t mean that you’re going to grow your business to a billion dollar company overnight. That’s not the business that we’re in. We’re about getting people to create things that are positive, and can become self sustaining,
Eric Hornung 23:43
When you joined, what was harder, recruiting students, recruiting startups or recruiting people to give you money?
Amy Nelson 23:51
Yeah, good question. So all of those things probably should have been a little bit harder than they were. And I like in that first year truly debt to alchemy, because Andrew, he literally went to college campuses and said, join us, there’s all these companies, they really want to hire you. He did not know that at that point. And then he went to these cities, and he said, these young people are going to come You should hire them. They definitely didn’t exist yet. And he got both sides of the market to believe that it was possible. So it’s never been a huge challenge for us to identify companies who want to hire our fellows. Honestly, we actually always have way more companies who want to hire a VFA fellow than actual fellows, because our process is so selective. And one of the reasons for that is because we’re industry agnostic, and our fellows come from a variety of different backgrounds, making a match is quite difficult. So if you had exactly the same number of fellows and companies, it wouldn’t work. So we need oversupply on the company side. But companies are also looking at other sources to fill those those openings. fundraising is always tough, because we are ourselves a nonprofit companies do pay us to hire our fellows, they pay us a placement fee of $5,000. But that only offsets about a sixth of our costs. So most of our resources are coming from philanthropy. And in the early days, when I joined, there was a small number of large corporates, kind of in the wake of the financial crisis that really needed to be seen as on the side of small business in the Midwest, the South, etc. And they were they were many of our first vendors. And some of them are very much still with us, because it aligns with their strategies. But it was sort of this national money mostly coming from New York, that went into these markets. And then we built out local fundraising supports. And what I realized when I got there was that if we didn’t have the majority of our resources coming from philanthropy in the markets, we were never going to be sustainable. Partly because corporate philanthropy is just a little more fickle, different leadership will come in, and they’ll be a new priority, whereas these philanthropists in these cities are always going to be committed to that place. Because the vast majority of philanthropy in our country is in fact, local, right. So we’ve spent several years shifting our model. So now, the majority of our philanthropic resources are coming directly from the market that we’re working in, which was really my insight and coming into we needed to ramp that up.
Jay Clouse 26:21
We talked to a lot of founders. And obviously fundraising is a topic of interest and something they bring up all the time. But that’s a very different type of fundraising. It’s, I’m going to give this investor a very clear financial return, or at least that’s the basis upon which they’re investing in the world of corporate fundraising or philanthropic fundraising. What are the considerations of those organizations? How do you do that?
Amy Nelson 26:43
So every funder is a little bit different. And the way that I think about nonprofit fundraising is, you know, in a for profit business, you have a product, someone buys that product, and you get feedback on whether or not they like it. In the nonprofit world, the person who’s paying is not the person who’s consuming the product. And so you don’t have that same market feedback mechanism. And you really have to be careful to make sure that the interests of both parties align. And corporations are always going to be a little bit different from foundations, because they’re interested in, obviously, the marketing play. But they’re also interested in how their company’s core assets actually align with your business because they want to use their talent on your behalf. So it really needs to be a true marriage in that way. And there are some companies who sort of just spray a little bit of money all over town, we don’t tend to work with those companies. We work with a handful that are really committed to entrepreneurship and innovation. And then the foundations that we work with, most of them were founded by entrepreneurs. So Bill Davidson in Detroit, William Davidson Foundation, he built Guardian automotive, and owned the pistons and was a true entrepreneur. And that’s the biggest piece of what they’re funding is entrepreneurship. And in Southeast Michigan, Dan Gilbert is the same he built his company in Detroit and wants to see others be able to build their companies in Detroit, Graham Weston in San Antonio built Rackspace and is now committed to helping the next generation of entrepreneurs in San Antonio. So we see that again and again, that either these legacy philanthropies were founded by people who were very entrepreneurial, the Kauffman Foundation is another great example, or people who are, you know, post exit and want to give back to the community that they’re in, we do have a small and fairly significant set of donors on the coast as well, you know, New York and San Francisco in particular. And I think those are people who recognize that it’s important for all of our economies in this country to be economically resilient if we want to move forward as a nation. And it can’t just be the sort of deprecation of California, New York, maybe Boston, where, where people can really, you know, live from prosperous lives.
Eric Hornung 29:01
You mentioned this idea of having a very selective process. I’m curious how that plays in this idea of exclusivity plays with this mission of placing people and making a big difference, like how do you balance exclusivity and mission of the VFA,
Amy Nelson 29:19
I actually think they’re really important to be together, because one of the three things that we’re testing for, is actually mission alignment, there are a lot of really bright, capable young people who apply to our program for whom this is absolutely not the right opportunity. And so we’re very clear that if you do not want to build a for profit profit enterprise, in a market outside of the top set of markets, you shouldn’t join the VFA. And it’s a fairly easy thing to test for, although, as you know, and interviewing people, people can tell you a story that they think you want to hear but there’s a lot of ways that we can look for evidence that that’s actually what they want to do. So you know, if you want to be a nonprofit professional for the rest of your life, Venture for America is probably not the right opportunity for you. Even if you end up working in one of our markets. If you really want to grow a business in San Francisco, we’re not the right opportunity for you. And so that actually helps us call some of the pack. And then the rest of it is around having those startup ready skills. Because at the end of the day, we’re delivering our talent to these companies, and they have to be able to add value. So that’s the other thing is this someone who can actually add value to a startup. And we need to make sure that the quality is there. And again, there are plenty of people who apply to our program who are talented, who probably would be better off in an analyst program or a larger organization for their first job out of college. So that’s another way that we cut the pool. And then the last piece is really around character. And we have ways that we measure for that. But we think that we’re creating a community. First and foremost, Venture for America is creating what I like to think of as a Stanford Business School caliber community with none of the debt. And in order for our fellows to start businesses together, to invest in each other’s businesses, to be best friends and roommates, they need to share the same set of values. We have a credo that we use to organize around that. And it means we have a no assholes policy. We think that in order to be a successful entrepreneur, you need to be a fundamentally optimistic person, you need to think that the world can be better so that you can invest in it. We believe that you have to have the grit and resilience to dust yourself off and get back up every time you hear know, because when you’re building a business, you’re going to hear no a lot. And so we really think that those pieces are critical. And so we say is we aim to be selective, not competitive. Yes, our acceptance rate is, you know, somewhere between 10 and 15%, depending on the year, but we’re not gunning for that. We’re trying trying to identify the people who are going to excel in this environment, because it absolutely is not for everyone, or we would have all started businesses already.
Jay Clouse 32:08
Could you give me almost from like a marketing persona standpoint, a look at what a VFA fellow is like?
Amy Nelson 32:15
Yes, there are. So we actually used to have personas. And we don’t use them in quite the same way anymore, because we found it a little bit limiting and perhaps bias inducing. But I will say that there are some characteristics that most of our fellows have in common. The first is bias for action. So if they’re confronted with some sort of problem, they’re going to dig in and try to understand it and just do something to fix the problem. Rather than sit around and wait for someone to tell them to do a thing. The other is a belief that they can use their career as a platform to create change and opportunity, particularly for others. So I describe it as you’re not just building your own resume, which so many people are doing, like, how can I platform my way from this to this to this? It’s Wow, I have an incredible opportunity. And I only have the one career, how can I leverage this to create something that’s going to be bigger than me. And I think that that is a belief that are shared amongst our fellows. But they’re honestly an incredibly diverse group of humans and every sense of the word. You know, you have coders who are also magicians and marketing people who are opera singers. And it’s it’s a really talented bunch of curious people. And I think that that’s true of a lot of entrepreneurs, because there are people who like to try things and push themselves.
Jay Clouse 33:40
Talk to me about the process, then of how a student becomes aware of the VFA and may pursue becoming a fellow.
Amy Nelson 33:48
Yeah, so we do a lot of on campus recruiting, as you can imagine, but we’re relatively small team, so we can’t make it to 300 campuses across the country or more, which means that we also do a fair bit of digital marketing, we tried to use tools to basically find people who look like our current fellows, you know, in terms of their their profiles, we target schools, we target different majors. We also work with a lot of affinity groups, who target very talented people of different demographics. So like HPC, that DC has become a new partner of ours, we’re working to expand our reach at HPC’s and Hispanic serving institutions. And we also work with clubs like Kairos, which is War Horse. So we do try to find people who are sort of in these target rich environments, and there are certain schools that we tend to do well at every year. I think our biggest schools last year, were you and see Duke, Michigan and Ohio State, let me see if I can find any other rivalries. And then Ibiza represented, but we also had more than 85 schools in the total class. So it’s a really wide range of students coming from from different areas. Unfortunately, word of mouth is still our number one theater. So you’re more likely to apply. If you already know a Venture for America fellow, I get that it’s risky if you’re just hearing about something on the internet and trying to figure out if it’s legit or not. But we really are trying to continue to expand the reach because we think that talent is everywhere.
Jay Clouse 35:18
I’m trying to think of how I became of VFA, because I very nearly became a fellow. And it would have been back in 2013 or 2014. And so super new at the time,
Amy Nelson 35:29
We both missed out on you.
Jay Clouse 35:31
Well, the thing was, I had an offer for being employee number one at a startup in Cincinnati. And he I think he was aware of the VFA because it had been in Cincinnati already. And he was kind of like, well, if you could figure out how to join the VFA and ensure that you’re placed with me, might be worthwhile
Amy Nelson 35:49
Better work that out.
Jay Clouse 35:50
Yeah. Well, we thought and we thought about it, but it seemed like this, this seems like a lot of work to get to where I could be tomorrow, if I just did it. But it called to me, you know, like the messaging was something that where I was at the time coming out of college, I was thinking, you know, I want to do more than the typical management consulting or brand management type thing. How did you guys decide, as you mentioned, at 85, universities, I’m looking at the map, it seems like it’s 14 cities now. How do you guys decide which cities to go into? And how you did you do that by year.
Amy Nelson 36:26
So we expanded a lot in the first four years, and then slow down a little bit. And I would love to say that there was a really rigorous methodology to it. There was not, which is part of the reason that we’ve actually ended up leaving some cities that didn’t ultimately turn in to be a fit. And so two years ago, when we were putting together our initial strategic plan, we worked with a team of consultants at Barclays bunch of quants, who basically ranked the top 50 MSA’s in the country on a couple of dimensions. And so we’re really looking for is needing the market. Is this a city that’s experiencing brain drain? What’s the educational attainment of the population? What’s the employment landscape? You know, what, what are the other sort of economic indicators that demonstrate that more talent would be helpful to this place? And then we were looking at indicators of strength of the entrepreneurial ecosystem. So is there a critical mass of startups who can hire our fellows? Are there supportive institutions that are doing entrepreneurial support work? Is there you know, capital, and we know that most places are not getting a lot of capital. But is there even evidence that this community has been able to attract venture and not all of our companies are venture bankable, but the vast majority are, and so they did the sort of two by two matrix that consultants like to do. And we basically decided that we’re going to focus on cities that have this combination of need to attract more talent, and strong entrepreneur ecosystems as so that has meant that places like Pittsburgh, St. Louis, Birmingham, Alabama, that we were already working in, we’re sort of very squarely in that right quadrant. And cities like Atlanta and Denver, were not, frankly, because they weren’t struggling to attract that talent. And that was pretty important for us. So we’ve scaled back in some of the cities, we also have scaled back in one or two markets, where we just weren’t able to get the density that we wanted. There weren’t enough startups. And these things are cyclical, in a few years, we might go back to Providence, Rhode Island, you know, once we get to see some seed and series, a action happening there again, but it’s a tough thing. And I think we were we’re not arbitrary. But in the early days, you know, Detroit was obvious for us, you know, Las Vegas felt obvious with downtown project. New Orleans, also, you know, was sort of obvious at the time, Providence was a city that Andrew was connected to, because he went to brown. And in Cincinnati, actually reach out to us we had some leaders in the community who read about it said, Why don’t you come here. And we’ve had that a lot. Most of the cities that we’ve expanded to, it’s because there’s been some interest from someone locally. And right now we’re in this position where we’ve actually scaled back our map, because we’re focusing on going deeper, and the places where we are hiring local directors and all of our cities, building out local boards, building out that fundraising, because we want to have strong infrastructure in every single market. Before we start going to new ones. We are looking at some new markets, probably for 2020 and have a shortlist going. But we’re not you know, we really were sort of hitting the accelerator on expansion. And I was deeply involved in that work. And the past few years, it’s been kind of like, okay, we know what we’re good at. We’ve learned some lessons from the first five years, where should we be harnessing our energy? So we’ve grown the cohort, we’ve grown our applications, but we’ve reduced the number of cities that we’re working in so that we can bring strong cohorts to every single market.
Jay Clouse 39:58
What are the expectations, or criteria for a startup company that wants to hire a VFA fellow,
Amy Nelson 40:05
it’s not a strict criteria. But we have sort of general parameters that make sense. So we’re industry agnostic. But we do want companies that have a growth posture, and are interested in investing in a young person, which means that the vast majority of the companies who hire our fellows end up being tech or tech enabled, although there are some scalable service platforms and and venture capital firms that do hire our fellows. So we’re looking for that kind of attitude. If you’re a small business, and you want to stay a small business forever, fantastic. It’s probably not going to be the right learning opportunity for a Venture for America fellow. So what that means is the companies who hire our fellows are typically they’re all about less than five years old, they’ve raised maybe between one and 5 million of venture, they already have 10 to 30 employees. The little bit different from the early days, where a lot of them were very true startups were our fellows were employee number one or two, we still have that. But we found that those companies tend to need a little bit more senior talent, senior co founding team, before they really have the ability to manage a recent college graduate effectively, some people can do it and are very effective in that, but it’s rare.
Jay Clouse 41:31
And so if I if I meet those criteria, I know that a fellow goes to a company with a two year expectation. What else is look like from a company? What What is our their standard terms of employment? How does it look?
Amy Nelson 41:44
Yeah, so they sign a hiring agreement with us, that basically says they will pay the fellow a minimum of 30,000 a year, and it’s a true minimum, you know, particularly our fellows who are developers tend to do better than that. We want them to be paid fairly. And at whatever market is for that city. And that role, the company is also agreed to pay Venture for America, one time placement fee of $5,000, upon successful hire, so it doesn’t cost anything to interview our fellows to look at the talent pool. But when you do actually bring someone on, you have to pay us for it. And you have to agree to having a pro diversity stance with your employment, it’s very important, like our fellows are incredibly diverse. Our company founders are incredibly diverse. We want these to be safe and welcoming environments for all of our fellows. And then there are some small things around like, you have to agree to let them go to our summer training program, and which is probably a good thing for you. But it’s it’s a fairly lightweight relationship, although many of our company founders get deeply involved join our boards become donors, but some of them they’re like, this is just access to great talent. And thank you so much. There’s definitely a range. And for the companies, you know, a lot of them do come back year after year. And it becomes quite competitive and intense. So we have an online portal that handles all of the sort of original conversations between the companies and the fellows. And then we do these job fairs regionally, where we’ll have a few dozen companies and you know, 40 to 80 fellows doing speed interviewing during the day, we did one in Columbus last year, we’re going to be in Cleveland in two weeks. And it’s a lot of fun.
Jay Clouse 43:24
So you mentioned a couple years ago, you started decelerating the number of cities wanted to go deeper into it. That also seems to be about the time that you stepped up as CEO. What changed when you joined it when you took over as CEO? What was your mantle?
Amy Nelson 43:39
Yeah, so we had been in a strategic planning process already. So I’ve been CEO for 18 months now. And there was a six month transition before that when we announced that I was going to be CEO, but Andrew hadn’t left yet. But we’ve been starting this planning process a little bit before that we really narrowed in on wanting to go deeper in the markets where we felt we could be effective. It was the first time we put together criteria on what the city should look like in a formal way. We made a commitment to helping more of our fellows and alumni launch businesses and saying like this is actually really important, which means that we need to be supporting fellows beyond the two years, right, there needs to be services and capital to help them get on that journey. And then the third piece was around making a very proactive stance in diversity, equity and inclusion. Because we have a tremendous amount of credibility. We have great networks. And so as a result, we actually have an ability to influence who decides to be an entrepreneur. And we see so often, particularly with women, I would say but across categories that are underrepresented, if people don’t have those role models, and they don’t think like, Oh, yes, this is a path for me, they’re not going to voluntarily self identity is like I’m an entrepreneur. But when you meet them, you can tell that they have all of the raw material, right? And so taking that proactive stance to be more intentional about who we’re recruiting, how we’re treating, you know, different things in the process. So, for example, if we only look at Have you already founded something that’s going to skew very heavily in certain demographic ways, because there are certain people who have in college who have more resources to be able to found something, it just kind of makes sense. And so looking at that, more broadly, not just have you started a company, but did you start a campus organization? Have you started something within your church or community group, and taking a more broad view of how we test for entrepreneurial skills has been really, really successful.
Jay Clouse 45:48
So this experiments been running now for eight years, I maybe experiment isn’t the right word. But at this point, you’ve had several fellows finish their two year engagement, a lot of them, I think you’ve placed close to 700 in total to this point, if I’m
Amy Nelson 46:02
More than 700 ,yeah, we’ve had 850 come through our training program. And right now, we have about 400 alumni and will meant another 170 this year.
Jay Clouse 46:12
So there’s 400 alumni, let’s look at them. What are they doing after their two year fellowship.
Amy Nelson 46:18
So the things that we want them to do are to either stay in their city and continue to contribute to it or start a business, and ideally do both. So at this point, 30% of our alumni have started business, which is actually a little bit more than we would have anticipated. And so if you go to that first class of 2012, more than half of them have started a company. They’re not all currently running a company. But a lot of them are right. And as time goes on, you see more and more alum start to take the leap after they get a little bit more experience under their belts. So today, I believe the number is 84 businesses that are going concern that are being run by a Venture for America alumni, which is kind of crazy. In my opinion. We’ve also seen that about half of our fellows stay in the city where we place them, we’re an additional two years, so four total years. And we have fellows from our first two three classes that are still in a cities where we place them with no end in sight. So we’re pretty excited about those retention numbers as well. And we’re also seeing people Boomerang like this is a fairly transient group, right, recent college graduates highly talented kids who can take offers anywhere, but some of them have actually gone to San Francisco and move back to Cincinnati because they had an opportunity. And you’re going to see those affinities over the entire lifetime that are going to play out in really interesting ways.
Jay Clouse 47:45
How often do they stay at the same company their place that past year to.
Amy Nelson 47:49
So I think it’s something like 40% stay for another year at the specific company. There’s a little bit of variants, but a lot of them have been with companies for seven years now. Because they are now the COO and it’s the hottest startup in you name the city. And there’s no reason that they would leave.
Jay Clouse 48:08
I saw that one of the alumni based companies are founded companies is Felix gray, which is something I see as for all the time and my girlfriend has a pair of them. So what other companies are fellow founded that we may have heard of.
Amy Nelson 48:24
So Felix gray is a glasses company against eyestrain, they filter blue light, ones that a lot of people would have heard of, particularly in tech. Banza, which is a chick pea pasta company is probably our most successful alumni founded venture was founded by 2012. Fellow in Detroit, Brian Rudolph, and there and I want to say 12,000 stores in North America. And it’s pretty delicious. So if you’re looking for a gluten free, high protein, pasta, and they have rice now, it’s great. And then in Ohio, where you are, there’s a company called ActionStreamer, founded by one of our alumni in Cincinnati, which is basically a they are really a software company, but it looks like a helmet cam to stream live sporting events, which is what they do, but their secret sauce is the software and enough hardware. There’s a company called natural club, that is a haircare product for women of color. And she’s doing incredibly well just graduated from Y Combinator. So it’s a pretty wide range of companies. One of the ones that I’m particularly excited about is Balto, which is based in St. Louis, and is a software platform for call centers to help their sales representatives be more effective using through AI in voice technology.
Jay Clouse 49:38
Looking forward, what do you have plans for for VFA what needs to change, improve, do more of you know what our future plans for VFA.
Amy Nelson 49:49
So we’re really deepening our commitment to inclusion and entrepreneurship, and bring in some great partners who have expertise in that area, we’re starting to look at nothing to confirm yet. Other ways that we can benefit the ecosystems that we’re working in, particularly around creating inclusive and equitable spaces for different entrepreneurs in those communities. which is I think there’s a lot of white space for that. And a lot of people are in that space as well. And so we want to be additive. And we want it to be tied to our core expertise, which is really around talent. But thinking about that. And then we are also raising our second venture fund. So I we’re not raising yet we are gaining feedback on the concept, which I think a lot of entrepreneurs can appreciate. But we raised a small fund a few years ago, really two years ago to invest in our fellow founded companies. And we’re almost fully deployed on it, because there’s been a lot to invest in. And we’re looking at some creative models for a new fund that’s going to be hopefully evergreen in nature, so we can be offering these types of opportunities indefinitely.
Jay Clouse 51:01
Awesome. Well, Amy, this has been great. If people want to learn more about you or Venture for America, where should they go?
Amy Nelson 51:07
They can definitely go to the website, www.Ventureforamerica.org. I’m very accessible, people can always reach out to me, you know, at me on Twitter, whatever you need to do. And I’m always excited to connect with anyone who shares our our mission and vision.
Eric Hornung 51:28
All right, Jay, we just spoke with Amy Nelson of Venture for America. Let’s get some hot takes. What do you thinking?
Jay Clouse 51:35
One of the most enjoyable aspects of this interview to me was touching on an issue that had nothing to do with what we’re trying to talk about really, student loan debt, and business school. And I thought that hearing Amy’s perspective on that was really refreshing not to take away at all from the interview we had about the VFA itself. But I really enjoyed spending some time on those topics. Because it’s something that I spent a lot of time thinking about, especially student loan debt,
Eric Hornung 52:00
You think a lot about student loan debt personally or like in the general environment.
Jay Clouse 52:05
In the general environment, I am fortunate to not have student loan debt. And that is one of the main reasons that I am able to be self employed. And I know that a lot of my peers, and also a lot of my clients don’t have that same luxury. And it certainly wasn’t something I thought about when I went to college thinking oh, I’m going to go here because I won’t have student loan debt. And I want to start a business someday. I was just fortunate by that. By the time I realized I wanted to start a business. The decisions I had made prior without much forethought at all led me to be able to do that and not have any debt. And a lot of people are not in that boat.
Eric Hornung 52:37
Yeah, it is. I tweeted something about the Howard University gift. Because I was just blown away that the average student loan debt at Howard was $100,000. And I don’t understand how that math work because everything I’d ever seen, says that the average student loan debt according to like federal sources is like 30,000. And I started doing a lot of digging. And I found out that it’s pretty much like 100,000 per person, which is wild to me. I’m someone who also doesn’t have student loan debt. So we are kind of on the outside here as well, where we don’t really understand the problem. We don’t fully understand the problem.
Jay Clouse 53:15
Yeah. So jumping into the VFA side of things. I really like this organization. I like it a lot. And I think it’s doing a lot of good in a lot of different ways. At this point. They’ve had 850 fellows go through the training program, they have over 400 alumni. I think the stats she shared about retention of alumni in those cities and someone like the downstream effects of those alumni. So far said 30% of alumni have started a business since that first cohort in 2012. That’s more than half of the first class. There are 84 businesses of the VFA fellows that they’re tracking right now. And half of the alumni stay in the city. They’re placed for an extra two, at least two years after being there. And to me, that’s some pretty compelling numbers. If I’m thinking about some of these cities who are not, you know, the main main startup markets,
Eric Hornung 54:10
Yeah, I, I’m a big fan of the VFA program, I think that it does a lot of good for companies that need great talent, they do a great job screening. I have had a lot of friends that have went through the program from Ohio State in Cleveland and Detroit and Baltimore and a couple other cities. And I think that the program is is a great idea, great concept and is still in the early stages of where I think it’s going to get to.
Jay Clouse 54:38
She mentioned their goal of having a Stanford Business School style community without the student debt. And when I was considering VFA myself back in the second year that it was operating. That was what was attractive to me about it. I thought this is going to be an amazing network of people that I can be one of the first people in and you’ve talked about the value of being first into programs like this before. I have a lot of really close friends who are VFA fellows, and they are some of my best friends. They’re awesome, bright, optimistic to us, Amy, where Amy’s words, people. And I think that we’re going to continue to see success from Venture for America down the down the line.
Eric Hornung 55:16
Do you think that the VFA will ever get the same cachet as Teach for America?
Jay Clouse 55:22
I don’t have enough experience with Teach for America even know how strong of a cachet it has.
Eric Hornung 55:27
For my understanding, Teach for America has like an incredibly strong spot on someone’s resume if they can finish it, because it’s a very grueling thing that you have to go in and do. You’re going into a school that is chronically underperforming in a class that is chronically underperforming, you’re creating a lesson plan, you’re developing these students, and I’ve heard some just like crazy stories about it. And a lot of people actually end up quitting Teach for America, because it’s just too emotionally stressful. But if you can make it through those two years, it’s like one of the strongest thing is you can put on an Ivy League MBA application, and a lot of other things as well. But it’s obviously named in line with Teach for America. So just generally wondering on your thoughts.
Jay Clouse 56:12
Yeah, I don’t know. I liked that they have a fun for their alumni to pitch for and apply for to start their own businesses. I mean, I love that the mission of this is after this, we want you to be equipped to start your own business. So in that sense, it almost doesn’t even matter if it has cachet on a resume. But I could see I definitely see the potential.
Eric Hornung 56:31
Yeah. And I hope that in the future, we get to bring on a couple of VFA a funded companies that have come out of that alumni fund. That’d be that’d be a cool little full circle to go here on upside.
Jay Clouse 56:42
Full Circle. And speaking of full circle, any mentioned at the end of the interview being excited about Balto in St. Louis, and Easter egg dear listener, if you’ve listened all the way through to this point, our next episode here this Wednesday will be with Balto in St. Louis. So we look forward to sharing that with you. If you have any thoughts in the meantime, On this episode, or anything else, you can tweet at us at upsideFM or email us firstname.lastname@example.org. We’ll talk to you next week.
Debrief begins: 51:26
Amy Nelson is the CEO of Venture For America (VFA).
VFA is a two-year fellowship program for recent grads who want to work at a startup and create jobs in American cities. Fellows learn important startup skills at our month-long Training Camp, apply for jobs within our vetted company network, and work for two years as full-time, salaried employees in one of 14 cities.
- About VFA (03:25)
- Is going to business school still necessary? (13:30)
- Discussing the challenges in starting a business? (15:27)
- What does it take to be part of VFA? (29:19)
- Getting to know the VFA community (32:15)
- What it’s like to hire VFA fellow (33:48)