value and opportunity

The subtitel claims that the book explains” Venture Capital and How to get it”. It is written by Scott Kupor, “employee Nr. 1 ” of Andreesen Horrowitz (A16Z), one of the most famous newer VC firms in Silicon Valley (Sand Hill Road is a street in Silicon Valley where many famous VCs have their offices).

The book starts of a little bit slow with Kupor trying to explain overall capital market issues like institutional Asset Allocation which to be honest, might not be his main area of expertise. However the content of the book gets much more interesting pretty quickly.

He really explains well how typical VC funds are set up and how people at a VC are incentivized and describes very well the lifecycle of a typical fund. This is very important to founders who are looking for funding. For intance, a fund which is close to the end of its life, might not be the best investor as it lacks the ability to do follow on investments that are necessary to keep the start-up going.

Another important aspect he touches on  is the background why most VCs are not interested much in merely “decent” businesses but are looking only for companies with potentially huge upside. For a typical VC, missing out on a Unicorn where everyone else is invested is a clear carreer risk

Compared to to a typical public stock fund manager, most VCs are far more active with regard to their portfolio companies. At A16Z more than 2/3 of the employees are actually working on helping the portfolio companies, be it via business contacts to gain new leads or providing candidates fot positions to be filled. I think this is one of the major differences of VCs to many other investment managers maybe with the exception of PE companies that they are often deeply involved in building the business together with the founders.

He also explains very well the structure and contents of typical term sheets, although for Term Sheet details I would still recommend “Venture Deals” as the main must read.

Nevertheless I found a lot of interesting nuggets of wisdom in the book, be it how to structure pay-outs for founders in M&A scenarios (“double trigger” cash out) or even the standard teerm sheet that he attached in the appendix.

Overall I do think it is a very good overview on how Venture Funds work and I can recommend it to anyone who is interested in the Venture Capital industry. as it describes quite well the inner workings of a typical VC.

Personally I would argue that the book is even more helpful to people who want to work in Venture Capital than for founders.

The book also makes clear that there is no “Silver Bullett” for getting funded but understanding how VCs think and work will definitely increase the chances.