The Business of Venture Capital. Mahendra Ramsinghani
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Название: The Business of Venture Capital

Автор: Mahendra Ramsinghani

Издательство: John Wiley & Sons Limited

Жанр: Личные финансы

Серия:

isbn: 9781119639701

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      Do you really need a big, fat, expensive book on venture capital, when a thousand blogs can give you answers instantaneously? Surely, in this day and age of free content, why would you want to pay an ungodly amount to buy a book? And who has time to read these days?

      And you must surely know, no book will teach you how to be a great investor — you have to get out there and start investing. Like learning to ride a bicycle. A book can only do so much. The learning comes from doing.

      But what is the best way to become a good investor — to build a structured approach, to build your foundation, and to build a strong core? Maybe this book can help. The business of venture capital not only presents basic principles, checklists, and frameworks, but also shares philosophies and wisdom of the ages. At its very core, an investor has the ability to understand risk and then make a probabilistic bet against that risk. We do this to achieve outstanding “venture-like” returns, well above some other asset classes.

      In public equities, trading strategies include a “momentum” driven approach. You invest in a stock that has a high level of buy–sell activity. This momentum drives the price. In a frenzy, everyone jumps in and the price starts to go up, but very few pause to step away from the herd. To ask, “Why is this happening?” is not the mind-set of the momentum investor. They are well trained to make several short trades and know when to get in, when to get out. The “value” investor — someone like Warren Buffett — studies the company's financials, its value proposition, the ins and outs of the sector, competition, product pricing, defensible moats, and more. The intellectual effort for understanding value is much more different and strenuous than the herd mentality momentum-based trade. Bear in mind that we are not here to make moral judgments against momentum trades nor demonstrate superiority of any kind — we are merely choosing a path, based on our strengths to get to a destination. I was a herd trader, too, until I could develop my own muscles and confidence. Success can come from many paths, and you have to choose what works best for you. I have tried both approaches and can tell you one is far easier than the other, but the rewards of a well-planned strategy are immensely gratifying — both intellectually and financially. It is like a game of chess — only in this case, you have n number of opponents.

      One of the primary goals of this book is to help you to build the muscle — manage risk effectively, shield yourself from all the biases, and get to the promised land.

      And this business will not disappoint — you will find the best and worst of human behaviors when you make (or lose) big money. Because there are two primal drivers — those imposters called greed and fear. This business brings all the highs and lows of these two demons. Dysfunctions within venture funds, their founding teams, CEO desire for global dominance, street fights with competition, slick maneuvers, politics, ego, drama — you name it, and this business has it all. Not getting caught up in this theater and still staying true to yourself can be a challenge. I could share some great stories of power, greed, backstabbing, and more, but I will save the gossip and entertainment for People magazine. My goal was to bring out the best of this business and leave the reader empowered and inspired. To stay persistent and focused over the long haul despite all these primal challenges requires some tenacity. How do you build a fair and balanced core in your ethos, your DNA, and your daily persona?

      To find the founder whose vision is to serve for the most good of the society is not an easy task. In the beginning, all founders sound alike — their mission statements filled with zeal and passion. They serve up PowerPoints to our demand for “billion-dollar” markets. It is your job to dissect the frothy shapeshifters from the authentic forces of good. How do you make value judgments when faced with the promise of fantastic returns? Juul — the e-cigarette vaping company — grew the fastest in recent years, raised the most amount, and can generate the best returns for their portfolio. But if you were to make a lesser return in another company, say one that's addressing cancer, would that align with your values? Would your limited partners (LPs) be happy? Would you be satisfied with the trajectory of your career?

      Indeed, “values over valuation” has been one of our larger business challenges — if we chase the promise of an IPO and triple-digit IRR but damage the socioeconomic fabric, where do we draw the line? I know one prominent investor who chooses to not use the portfolio company's technology for defense markets. The CEO was blunt — our technology can kill a lot of people, but we will never sell it for that purpose. The company would be valued at least 10 times more if it went down that path, but its bedrock values keep it on course, staving off the monkeys of greed. If you do not establish the foundation of values, you could make money, lots of it — but then you might feel purposeless, adrift in the sea of capitalism.

       Better if it lasts for years,

       so you're old by the time you reach the island,

       wealthy with all you've gained on the way,

      And we are here only for a short while, even though VCs are desperately trying to solve for death.

       Come now, you who say, “Today or tomorrow we will go into such and such a town and spend a year there

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