The Business of Venture Capital. Mahendra Ramsinghani

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СКАЧАТЬ You make money only when you find hidden gems in nonobvious places.

      5 We take ourselves too seriously, and imitate each other mindlessly. Most VCs like to portray themselves as super-intellectuals when all they do is rinse and recycle ideas, picked up from others. Most VCs mindlessly imitate a handful of top-tier investors, chasing their investments while positioning themselves as thought leaders. HBO launched a parody… er … a comedy show on the antics of VCs and founders in Silicon Valley. We have come a long way indeed when we have our own show — a sign of maturity. It's not just investment strategies or authoring blog posts and essays that are being mimicked. Be it office space or fashion, VCs herd together from Sand Hill Road to South Park. Patagonia vests are so popular with VCs in Silicon Valley, Fortune magazine ran a parody post titled “Group of White Men in Patagonia Vests Confused for VC Fund, Raise $500 Million,”⁵ where one fictitious VC, Evan, says, “At first I tried to tell people we don't work in venture capital…But then I got to thinking, how hard can it be? I can always tell which ideas are good ideas, and now I have a few hundred million dollars to prove it.” One of their investments was in Patagon.io (no relation to Patagonia), which is experiencing hockey-stick growth. To make their job really easy, they backed a group of data scientists who have found a way to use drones and artificial intelligence to geolocate groups of white men wearing Patagonia vests in order to predict future investment opportunities. Amen!

      6 We rationalize in hindsight, and don't fully understand our biases. One of the finest books on human behavior, Thinking Fast and Slow by Daniel Kahneman is fat and dense, but it can give you insights in your own mind's operating system (or the OS and the BS in our heads). Or Workplace Poker by Dan Rust can help you play politics better, and even gracefully tackle your smiley-faced backstabbing partners. Try to understand your special skills and unfair advantages that can help you win — you may be able to spot technology trends while others are busy elsewhere, or know people that can bring value to your world in creative ways. You may be a well-connected princeling or have access to the corridors of power. Improving your game involves maintaining a student mind-set, understating human psychology, biases in decision-making, spotting groupthink, avoiding false starts or flash trends, and catching big waves.

      7 The VC business model is evolving, but slowly — very slowly. When Fred Wilson was asked how the VC model will evolve in 20 years, he said, “All I know is that it will be different.” He was humble enough to avoid making grandiose predictions. The only significant innovation in the past decade has been that carry has gone from 20 percent to 30 percent for some firms, while losses have worsened. In recent years, we have seen the rise of online platforms to facilitate more transactions and liquidity (AngelList, SecondMarkets) and the use of big-data and AI (just Google “Chris Farmer and SignalFire” and see how his data-driven VC approach can disrupt the disruptors), and the distributed ledger. It can shift the flow of capital from the LP-GP-founder trickle to a game-changing peer-to-peer funding model. Fun times ahead.

      Build on these last 50 years of VC legacy and create your own recipe for VC in the next 50 — your own brave new world. And don’t compare yourself to the VC heroes and gods, but carve your own authentic path.

      As advertising guru David Ogilvy once said, “Aim for the company of immortals.”

NOTES

      1 1 C. P. Cavafy, “Ithaka,” Collected Poems Revised Edition, translated by Edmund Keeley and Philip Sherrard, edited by George Savidis. Translation copyright © 1975, 1992 by Edmund Keeley and Philip Sherrard. Princeton University Press. https://www.onassis.org/initiatives/cavafy-archive/the-canon/ithaka .

      2 2 “James 4:13–14,” Holy Bible, English Standard Version UK (London: Harper Collins, 2012).

      3 3 José Luis A. Fermosel, “Jorge Lui Borges: ‘No estoy seguro de que yo exista in realidad,’” El País, September 25, 1981.

      4 4 Rudyard Kipling, “If,” Rewards and Fairies. (Garden City, NY: Doubleday, Page & Company, 1910).

      5 5 Ashwin Rodrigues, “Group of White Men in Patagonia Vests Confused for VC Fund, Raise $500 Million,” Fortune, September 29, 2017.

Acknowledgments

       Each of us bears the imprint

       Of a friend met along the way;

       In each the trace of each.

       For good or evil

       In wisdom or in folly

       Everyone stamped by everyone.

       —Primo Levi

      And so, this book bears an imprint of many brilliant minds, friends good and wise. This labor of love would not have been possible without the help of all those who shared their experiences, insights, and wisdom — in sharing tactical and strategic, they also show us how to become better people, living their lives with the precepts of #givefirst. Thank you, Brad, for sharing your knowledge, abundance of spirit, and generosity of the soul. You are, indeed, the silent force that works relentlessly for the greater good, like the Gandhi of Venture Capital. I am deeply grateful to Scott Kupor, managing partner at Andreessen Horowitz (A16Z) and former chairman of National Venture Capital Association. Scott is a gifted and empathetic leader. His big heart and rigorous intellectual engagement have helped and guided many, including me. Having good role models in our business is important, so thank you to all those who spent time with me — too numerous to name — your quotes, wisdom, insights, and fingerprints are all over this book. You have helped shape the minds of investors of tomorrow with your ethos, behavior, blog posts, and tweets.

This book, in its third edition now, has stood upon the shoulders of investor-giants. When the first edition came out a decade ago, I had no idea where all this was going. You, dear reader, have made this journey an absolute delight. I am grateful to you for all the numerous emails, reviews, feedback, and comments for the previous editions. All your kind words are rightfully deserving of the VCs mentioned in this book. They are the lead singers who deserve the applause and gratitude. That I get to hang out with such smart, generous people is a blessing.

      Above all, I thank the Great Spirit — the mysterious unknown that inspires and guides us to pursue greater good, gives us the tenacity to stay the course in tough times, and helps us to bring our gifts to society.

Part One The Making of a VC

      Most good beginnings in this land of venture capital careers involve some planning, some luck, and not taking yourself too seriously. How does this business work — what does an average day look like — how do you get in and how do you grow — and what are the pitfalls? Is it just about making money — multiplying green pieces of paper and filthy lucre?

      Should you try to keep improving every day? “If you are under the impression you have already perfected yourself, you will never rise to the heights you are no doubt capable of,” Kazuo Ishiguro, wrote in his book, The Remains of the Day. It is no wonder that Jeff Bezos, founder and CEO of СКАЧАТЬ