books on venture capital

• VC firms began to seek and use capital from outside investors to fund and nurture new business ventures starting in the mid-twentieth century in the United States.
• Innovation and technological progress have always been at the heart of economic progress, and for centuries, this work was done by wealthy families, monarchs, and governments.
• The article compared nineteenth-century whaling with modern venture capital, arguing that whaling was the archetypal skewed-distribution business that had a long-tailed distribution of profits that held the same allure for funders of whaling voyages as it does for a venture-capital industry reliant on extreme returns from a small subset of investments.
• The Harvard Business School professor, Tom Nicholas’s book “VC: An American History” reached far back in time and into activities that are alien to us to find such patterns, which helps discern an answer to questions about the future of the industry.
• The spinning jenny, invented in the late 18th century, deepened the use of capital in the economy, allowing spinners to multiply their labor, and bolstering the claim that the cotton industry was not the low-tech activity we now tend to think it is, but the leading technological edge of the late-18th century.
• Proto-venture-capital deals supported the development of the spinning jenny, and the backers of these deals included whaling families.
• The laying of railroads, which began a half-century later, required government financing and venture-capital backing.
• Andrew Mellon engaged in equity participation across a portfolio of early-stage ventures, often in new high-tech industries comparable to contemporary venture capitalists.
• John Hay Whitney, known as Jock Whitney with Benno Schmidt, the founder of J. H. Whitney & Co., built an infrastructure that enabled his firm to help its portfolio companies grow, improve their management practices, and achieve a successful exit.
• Between Jock Whitney’s activities, including collecting art, representing the US at the Court of St. James’s, and serving as president of the Museum of Modern Art, he built an impressive fully functioning business.
• Returns have varied widely throughout the history of VC and depend on a variety of factors, but the growth of venture capital as an industry has been massive in recent years, with many of the most significant companies of the past few decades, including FANMAG, being venture-backed.
• The best VC firms had spectacular returns in the past, while going forward, some investors wondered if they could expect the same return or are in a new era of lower

• Venture capital has been a vital source of financing for high-growth start-ups over the past 30 years.
• VC firms fill a crucial market need by connecting entrepreneurs who have good ideas but no money with investors who have money but no ideas.
• Little is known about what VCs actually do and how they create value.
• The article pulls back the curtain and provides detailed information about how VC firms work.
• The article surveyed almost 900 venture capitalists and followed up with several dozen interviews as part of the most comprehensive survey of VCs to date.
• The first task a VC faces in the investment process is to connect with start-ups that are looking for funding, a process known as “generating deal flow.”
• The best deals often come from a VC’s network of trusted investors, entrepreneurs, and professors.
• The next step in the investment process is to narrow the funnel of potential investment opportunities.
• On average, for each deal a VC firm eventually closes, the firm considers 101 opportunities.
• Out of those opportunities, 28 lead to a meeting with management; 10 are reviewed at a partner meeting; 4.8 proceed to due diligence; 1.7 move on to the negotiation of a term sheet with the start-up; and only one is actually funded.
• Few VCs use standard financial-analysis techniques to assess deals. Instead, the most commonly used metric is simply the cash returned from the deal as a multiple of the cash invested.
• VCs focus on finding companies that have the potential for big exits rather than on estimating near-term cash flows.
• Once VCs have put money into a company, they provide post-investment value by offering strategic guidance, connections, and guidance on operational issues.
• VCs interact substantially with 60% of their portfolio companies at least once a week and with 28% multiple times a week.
• VCs provide a large number of post-investment services: strategic guidance (87%), connections to other investors (72%), connections to customers (69%), operational guidance (65%), help hiring board members (58%), and help hiring employees (46%).
• A successful exit can generate a 100-fold return.
• VC firms are inflexible on pro rata investment rights, liquidation preferences, and antidilution rights as well as on the vesting of the founders’ equity, the company’s valuation, and board control.
• VCs are more flexible on the option pool, participation rights, investment amount, redemption rights, and, in particular, dividends.

• Venture capital has experienced a sustained bull market across all asset classes in the last year.
• Two trends to watch in 2022 include inflation/interest rates and the squeezed middle of the capital structure.
• Inflation may mark the end of more than a decade of incredibly cheap cash, and it could affect entrepreneurs raising investment.
• The Squeezed Middle refers to the middle-income families struggling to get by, and those funds which operate in the middle of the capital structure, where Series A funds operate.
• With more funds than ever chasing companies that have early revenues and strong signs of product-market fit, the upwards pricing pressure this year looks set to continue.
• Six sectors look set for a strong 2022, which investors will be keenly watching as the impact of the pandemic continues to be felt. These sectors are:
  • Future of Work: remote and hybrid work enforced by the pandemic is just the start of the fundamental shifts that are taking place in this sector. The market looks set to grow with a double-digit compound annual growth rate (CAGR) over at least the next five years.
  • Education: entrepreneurs are finding ways to make education pay again, whether it’s solutions for upskilling and retaining existing employees or continuing education for freelancers.
  • Climate: startups that focus on climate tech and helping meet the world’s ambitious ‘net zero’ targets are particularly well-positioned to benefit from more funding and less inertia from their potential buyers.
  • Healthcare: startups that focus on remote patient management for chronic diseases or working to remove the frictions for research and drug discovery are particularly well-positioned to benefit from more funding and less inertia from their potential buyers.
  • Automation: businesses and industrial processes are now capable of being reliably performed by machines, and companies now need technology solutions simply to keep their businesses running.
  • Supply Chain: there will be significant budgets available for startups who can leverage cutting-edge technology to solve problems that bigger, slower-moving corporates struggle to.
• The webpage does not provide information about specific books on venture capital.

Not used in article

Not used in article

• The book titled “VC” by Tom Nicholas explores the history of venture capital industry from its origins in the whaling industry to Silicon Valley.
• The text suggests that VC has been driven from the start by the pull of outsized returns through a skewed distribution of payoffs, that is a faith in low-probability but substantial financial rewards that rarely materialize.
• The book notes that venture capital played an essential role in the creation of an epicenter for the development of high-tech innovation.
• According to the text, the United States has long had an orientation towards entrepreneurship which gave rise to the venture capital industry.
• The book covers different examples of bets made by venture capitalists, from the whaling industry to the newest startup in Silicon Valley.
• The book highlights venture capital as not only a model of finance that has proven difficult to replicate in other countries but also as a state of mind exemplified by an appetite for risk-taking, a bold spirit of adventure, and an unbridled quest for improbable wealth through investment in innovation.
• The text argues that venture capital is not just about making money but is also a social good that enables innovation, creates employment opportunities, and drives economic growth.
• The book discusses how venture capital has contributed to the rise of Silicon Valley, including the development of a supportive ecosystem that includes universities, research institutions, and other sources of innovation.
• According to the text, venture capital firms have played a crucial role in identifying and nurturing startups with high growth potential, offering support in the form of mentorship, networking, and financing.
• The book covers how venture capitalists structure their investments, including the use of milestones and equity stakes to manage risk and maximize returns.
• The text notes that despite its successes, the venture capital industry has also faced criticisms, including concerns about the concentration of wealth and power, lack of diversity, and short-termism.
• The book concludes by calling for a more nuanced understanding of the venture capital industry, recognizing both its significant contributions and its limitations.

• The webpage provides a list of the “best books on venture capital”, with a short summary of the content of each book and quotes.
• The listed books are:
  • Zero to One by Peter Thiel:
    • The book talks about how to create unique things and change the world, and argues that competition is not the way to achieve this.
    • The quote is: “The best entrepreneurs know this: every great business is built around a secret that’s hidden from the outside.”
  • VC by Tom Nicholas:
    • The book discusses the history of the venture capital industry, from the point of view of faith in low-probability but substantial financial rewards through investment in innovation.
    • The quote is: “What are venture capitalists saying about your startup behind closed doors? And what can you do to influence that conversation?”
  • Secrets of Sand Hill Road by Scott Kupor:
    • The book offers insight into how VCs think and decide where and how much to invest, providing a guide for entrepreneurs on how to get the best possible deal and make the most of their relationships with VCs.
    • The quote is: “In fact, you’ll often hear VCs say that they like founders who have strong opinions but ones that are weakly held.”
  • Venture Deals by Brad Feld and Jason Mendelson:
    • The book offers guidance on how venture capital deals are constructed, which terms matter, and how to negotiate a fair deal for all parties involved.
    • The quote is: “Failure is a key part of entrepreneurship, but, as with many things in life, attitude impacts outcome.”
  • The Art of Negotiating by Gerard I. Nierenberg:
    • The book teaches how to make negotiating experiences easier, more enjoyable, and more profitable, covering topics like analyzing the opponent’s motivation and dividing complex issues into simpler, more manageable ones.
    • The quote is: “”Experts” are rarely the source of new ideas.”
  • The Hard Thing About Hard Things by Ben Horowitz:
    • The book provides practical wisdom and advice for managing the toughest problems in running a startup, based on the author’s personal experiences.
    • The quote is: “Every time I read a management or self-help book, I find myself saying, “That’s fine, but that wasn’t really the hard thing about the situation.””
• The webpage is part of a website called Good Books, which is a book recommendation site that provides lists and reviews of books on

• The Reddit post is a year old and has 53 upvotes.
• An Econ degree Reddit user made the post asking for recommendations on books that focus on the educational side of venture capital.
• The user requested books that lean more towards the technical side and help him better understand venture capital.
• The comment section under the post has several suggestions and resources to help the user find the best books on venture capital.
• Reddit users suggested several books like Venture Deals by Brad Feld, The Business of Venture Capital by Mahendra Ramsinghani, and Secrets of Sandhill Road by Scott Kupor.
• Two books suggested in the comments are technical: The venture capital cycle by Paul Gompers and Venture Capital: An American History by Tom Nicolas.
• One Reddit user recommends visiting the Y Combinator website and Startupschool.org for resources to learn about venture capital.
• Another Reddit user lists podcasts, books, blogs, people to follow, and VC courses that users can read for a better understanding of venture capital.
• A Reddit user offers to send Venture Deals, 3rd Edition to another user if they share their email address.
• Two Reddit users recommend joining a Slack community for Entrepreneurs to learn about the business of venture capital.
• Users cautioned the Econ degree user that Venture Deals only provides an introduction to the process of venture capital from the entrepreneur’s perspective rather than the VC’s side.
• Reddit users express that the recommended books should be studied thoroughly like in university, and that finding someone who can answer questions is essential.
• The website offers a variety of resources and suggestions for books and material that users can explore for a more in-depth understanding of venture capital from different perspectives.

💭  Looking into

An overview of the venture capital landscape and how it has evolved in the last 20 years

💭  Looking into

A selection of the 3 best books on the topic of venture capital