I mentor 2-3 high school students each year who want to get into a great college and want to understand how to navigate the complexity of admissions, test preparation, extra curricular activities and high school academics.
As part of this process, I end up learning two important areas that I really need to know about, selfishly because I have 4 kids.
First, I end up learning about the selection process at the top schools. What it takes, who is involved, how they make their decisions and what they value. Which helps tremendously in picking companies to back as an investor.
Second, knowing more about the common admission test for the US – the SAT. It is no surprise to many that know me, that I like to take the test and keep myself updated.
The important element of the first I have learned about the first, is that the “selection” committee’s that ends up picking the right students for any school is pretty diverse, but driven by a common goal –
How do we get the “best” students to our college?
As you can imagine, the word best in this question is the most controversial, subjective and arbitrary in this question.
From what I have known, read and heard, the one thing that the committee for admissions feels the responsibility for is charting the course of thousands of young kids worldwide.
On average 25K – 40K students apply to each of the top colleges each year to the top 25 schools and roughly an average of 7%-10% get selected in each college.
While you can claim that the top colleges are fairly diverse in their focus, what they look for and the students they want to attract, they are fairly similar in their desire to attract the “best” for themselves.
What strikes me the most about the process of selection is the criteria that goes into the best.
Lets say you are a committee member at a top US school.
You get an average of 25K applications.
The students who apply, submit their a) high school grade reports b) SAT scores c) personal essays d) recommendation letters and e) accomplishments outside their school – extra curricular activities. You only have these 5 criteria to judge whether they will be “great”.
Now, you have to quickly segment these 25K applicants into 3 categories.
1. Exceptional – the “best” based on the 5 criteria listed above.
2. Passable – the applicants who can be easily passed based on the 5 criteria listed above.
3. Maybe – these are the toughest, because, they have shown some promise, but are not in the “exceptional” category yet.
What is exceptional?
You can see these applicants are going to be great. How? Based on the 5 criteria of course. They have taken harder courses than others, they have better test scores, have excellent recommendation letters and essays and finally have done one thing very well.
They are likely to succeed, regardless of where they get in or what they do. What I am learning is that < 0.5% of applicants fit into this bucket at every school – so in our 25K applicant pool, that’s about 100 applicants or less.
What is passable? You can see these applicants are going to coast. How? Again, based on the 5 criteria, they took easier courses, have average test scores, good recommendations and an ok essay but have been a Jack of all trades, master of none.
These folks are not likely to fail, but they are going to be average. Which is the opposite of great, which is not a bad place to be, but again, every school is looking for people who are going to be “great” and help the school shine. What I am learning is that > 75% of applicants fall into this segment – so about 19K applicants.
The “Maybe” is not that obvious. They have done well in 3 or 4 of the 5 criteria. They may be great, but you can’t say for sure. This applicant pool has tried, maybe succeed in some, maybe failed in some of their attempts, but are some sign of progress.
They could be exceptional, if they are given the right opportunity, but it is not clear. The remainder of the applicant pool or about 6000+ fall into this segment.
The problem is the school can only accept a third of them.
This is the problem that faces every investor as well.
Over 90% of requests for funding I get are “un-investable” by return, investment focus, stage or market.
9.5% are “maybe”.
0.5% are a “yes” to a second meeting, not an immediate investment.
The biggest problem is that the ONLY way to determine “If” someone is going to be successful is based on their past achievements – Just like in the school selection criteria.
This puts many “late bloomers” and “hidden talent” at a distinct disadvantage.
Which is one of the most interesting and challenging parts of the role.
So, why do investors focus so much on the past history of the entrepreneur, their background and “pedigree”?
That’s because they did not have anything else to go by.
Now, that’s changing.
What else can you use as “criteria” or should you take the same criteria and “weigh” them somewhat differently?
The criteria we can use for new startups is a) Entrepreneur and team background b) Market c) Traction and Momentum d) Uniqueness and e) Defensible position.
Until recently, the #1 criteria was always the “Entrepreneur and the team” – which you will still hear from most investors.
Sequoia Capital, though, arguably one of the best investors has gone against the grain and says Market.
The seed stage investors have started to go against the grain and say the #1 criteria is “Traction and Momentum”.
Which is great, but comes with its own set of challenges.
That’s the BIG change that’s happening in the ecosystem.
More people are re-ordering the criteria, weighing the differently and also changing what’s within those criteria.
The thing that’s not changing is that they can only predict the future on anything but past success.
Which is why entrepreneur from “great” colleges, “exceptional” companies and “rock star” backgrounds have an unfavorable advantage.
You can change that with “great” traction”, “exceptional” momentum and “rock star” velocity of your business.
Or continue to do what you are doing and bootstrap yourself and build it on your own terms.