Grads shun top pay for start-ups in troubled cities

7/20/2013

NEW YORK — Some people might look at what Brentt Baltimore did and shake their heads. Last year, Mr. Baltimore, then a senior majoring in economics and finance at Claremont McKenna College in California, turned down a six-figure job at a Los Angeles-area hedge fund. Instead he took a $33,000-a-year position at a venture capital firm in Detroit. This, even though he has about $38,000 in student loan debt.

Mr. Baltimore, 24, is part of a small group of recent graduates who are forgoing large salaries to work for start-up businesses in Detroit, Las Vegas, Cincinnati, Cleveland, New Orleans, Baltimore, Philadelphia, and Providence, R.I. He chose his job with the help of Venture for America, a nonprofit agency that selects fellows to work in cities that aren’t the usual magnets for young college graduates. By August, 108 fellows will be working at 70 firms as part of the two-year program.

Detroit, which has declared bankruptcy, could use some job-creating entrepreneurship, and that is a big reason that Mr. Baltimore chose the venture capital job over the hedge fund.

“I wanted to be in a position where I could have a huge impact on the community,” he said.

Part of his job at Detroit Venture Partners is to scout potential investments and lure companies to Detroit. He also has started the nonprofit Startup Effect, which teaches local eighth-graders entrepreneurship principles.

“Smart people should be building things,” said Andrew Yang, 38, who started Venture for America in 2011. “Instead, they become bankers and consultants. We need to do something about talent allocation that pulls our top minds toward these fields.”

Mr. Yang said that this generation of graduates was starting to look at alternative career paths, having witnessed many traditional industries, such as finance and law, contracting in the last few years.

“These are young people who have come of age in an era of institutional failure,” he said. “The sense I get from talking to them is that there is some disillusionment.”

He is trying to turn that disillusionment into an entrepreneurial edge. His vision was on display last month as the program’s second class of 68 fellows sat at small tables during a Venture for America boot camp at Brown University — Mr. Yang’s alma mater. At this session, employees from IDEO, a design-consulting firm, were presenting a course on product design. The five-week camp includes classes on topics such as entrepreneurship, Web design, and public speaking.

After the boot camp, the fellows take jobs at start-up companies in industries such as ecommerce, biotechnology, finance, media, and clean technology. Generally, the companies must be less than 10 years old and employ fewer than 100 people. Starting salaries are $33,000 to $38,000; pay increases and stock options are at the companies’ discretion.

The fellows are receiving invaluable experience, but “they are definitely making a sacrifice,” said Jeanne Markel, director of brand experience at Zappos, based in Las Vegas. She works with the Zappos founder, Tony Hsieh, on his commercial Downtown Project to revitalize the city. Mr. Hsieh pledged $1 million to Venture for America last year. As of August, the Downtown Project will employ 14 fellows.

This year, applications to the program nearly doubled, to 550, with only 16 percent accepted, though not all went on to join the program. The average grade-point average of the fellows is 3.6. Next year the program plans to expand to St. Louis, Pittsburgh, and New Haven, Conn.

Large corporations have ample resources to spend chasing talent, and small start-ups in cities such as Detroit or Cleveland often can’t compete with them on campuses. Venture for America connects graduates to the local start-up scene through relationships with foundations and local government, as much as Teach for America connects graduates to jobs in schools in underserved areas.

“Finance and consulting were so strong on campus” when it came to recruiting, said Kathy Cheng, who graduated from MIT last year with a degree in urban planning and economics. She declined a consulting offer in New York for Venture for America. She now works in Detroit for Doodle Home, an online platform for designers, for half the salary she would have received in New York.

“I had interned at the consulting firm and knew that I could learn a lot of statistics, but there probably wouldn’t be a lot of impact,” Ms. Cheng said. “My job has given me the opportunity not just to analyze, but to really learn how to build a business.”

Fernando Prieto, the president of Doodle Home and Ms. Cheng’s boss, said: “Kathy went to MIT, and she is from New Jersey originally. She would have never thought of Detroit if she hadn’t come through Venture for America.”

Dan Gilbert, founder of Quicken Loans, which has operations in Detroit and Cleveland, pledged $1.5 million to Venture for America. He also has invested more than $1 billion in buildings, renovations, and other improvements to help revitalize Detroit. “Getting people who were at the top of their class is not an opportunity we might have gotten if we just woke up one day and said we have job openings,” Mr. Gilbert said.

In August, 14 fellows will join eight others at firms that operate under the Quicken umbrella, including Doodle Home and Detroit Venture Partners.

Given the lower salaries, the program is an easier choice for those who have little or no student debt. “It would be really hard for me to have to put myself in that position if I had loans,” said Shilpi Kumar, a recent Duke graduate who will start at the Downtown Project in Las Vegas. He turned down a consulting position at Deloitte.

"The topic of debt and money comes up,” said Benjamin Goldstein, a Princeton graduate who is to work at a business incubator in Providence. “If you come out of school with $50,000 in debt, you need to take a high-paying job. What I would like to see in the future is for Venture for America to allow more people to join it.”