Why Another Venture Capital Book?
The simple answer: I believe venture capital should be approached as a subject of entrepreneurial strategy, not finance. I have taught venture capital classes and run a global venture capital competition for over 15 years. Throughout that time, I have struggled to find materials for my students, frustrated by the simultaneous abundance and lack of available content.
There is an abundance of terrific blogs written by VCs and founders, usually teaching specific lessons relevant to specific circum-stances. Many VCs are prolific writers and have covered a wide variety of topics of the VC investment process. However, most blog postings have a very narrow scope and are not organized into a coherent body of work. They do a great job of examining each tree, but the forest gets lost.
Similarly, there are plenty of textbooks that treat venture capital as a topic of finance. Wrong forest! Venture capital is undeniably a subset of private equity. However, approaching the industry from that perspective ignores the vast majority of what VCs actually do: bring new technologies into the world by helping build companies, from tiny startups with a couple of cofounders to potentially hundreds of employees and millions of customers.
Treating venture capital as a topic of finance overemphasizes the importance of numbers and quantitative analysis. For VCs, numbers play a large role, but the story about the numbers is just as important. VCs are skilled at creating a narrative to explain their analysis. In this regard, I will argue that VCs are more like journalists and filmmakers than traditional financiers.
There are also numerous retrospective books written by VCs or venture-backed founders who share their war stories and worldviews. These are often coming from some specific angle, such as how to raise venture capital or how to become a venture capitalist. Several of these books are listed in the sources at the end of this volume.
What I have not been able to find is one source that provides a holistic overview of venture capital as a topic of strategy, explaining its place in the broader entrepreneurial ecosystem. It is not simply entrepreneurial finance! VCs play a very important strategic role in commercializing technologies. Just as importantly, they employ specific strategies that we can learn and apply to our own entrepreneurial endeavors.
In this book, we will focus on how venture capitalists make decisions. My goal is to teach you how to think like a VC. To do so, we’ll need to understand the context of their behavior as capitalists. But most VCs consider themselves company builders, not financiers. We will spend most of our time focusing on the venture side of venture capitalism, so to speak.
Intended Audience
Understanding how venture capital works in our economy can be of benefit to a wide variety of readers. Certainly, if you are a founder considering raising venture capital, you will benefit from understanding the behavior of your future equity partners. Further, you are your first investor, devoting your precious time, money, social capital and mental energy to your startup. You will benefit from learning how to think like an investor.
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