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The Power Law is a must read for all those dealing with #VentureCapital. If you're a VC, you shouldn't miss chapter 13 explaining the success of Sequoia Capital. If you're a regulator, don't miss pages 395-399. If you're an entrepreneur, chapter 14 will give you an interesting pov on protections VCs ask (most of all, the liquidation preference).
To all the rookies out there (I'm still one of them) this is a must read. Mallaby has produced a truly impressively well researched read. This book you want to read if you belong to any single one of the numerous stakeholders involved in this fast paced and evolving world. Founders, angels, VCs, corporates and startups may find a plethora of anecdotes to learn from. As always, no one book or formula is THE verb. However, this is one that gets very close. And if you really want a semi-spoiler, Chapter 13 is THE chapter of this book, and I won't say why. But that's just my opinion. This book tells the story of venture capital from its early beginnings in the 60s with Arthur Rock and how such a relatively small industry has had an outsized impact and contributed to the development and growth of what are today's leading and largest corporates and technologies in the world, from the US to China and Europe. From the days when venture investing was about financing routers and hardware and much capital was needed but difficult to come by to the days of the internet it sparked, and where "software is eating the world", capital becomes plentiful and startups need less of it. From the days in which VC went from owning 50% of a company to 10-15%. This is about understanding that the business models it backs are characterised by exponential growth formulas. Where average is the enemy. Where the outliers are the non-obvious targets. Where the counter-intuitive mindset and approach is the only creator of mind-blowing transformative opportunities. About those relentless venture-backed founders that are building and inventing tomorrow. Where most new technologies may not have been possible without venture capital. But also of how the world has gone to creating intangible wealth from tangible wealth. About an exponential, power law world living within a linear world. And all his interviews with all those godfathers of the VC industry are just priceless.
Startups without venture capital is like one hand clapping. For those not familiar with Venture Capital as an industry, its inception and evolution and role in building the U.S. innovation ecosystem, this book is a valuable addition and worth a read.
That said this book feels like it written by committee, each responsible for a third of the book.
The first third of the book, a survey of the history of venture capital to the end of the 20th century is a good overview, albeit one with a very parochial view. All of these early histories, this one included, offer a very limited perspective on the role of the military in funding/founding Silicon Valley in the midst of the Cold War. It’s not unexpected as most of those efforts are buried in projects and reports that only now are becoming declassified. But their impact was substantial on the early days of Silicon Valley. To be fair, it would be extremely difficult for academic historians who didn’t have code word clearances to understand this. So far none have.
As the second third of the book crosses into the 21st century it loses its dispassionate perspective of trying to find meaning and context and instead reads as a paean to Sequoia Capital and Accel. This might be an artifact of the narrative as the book traces the evolution of venture through the lens of individual Venture Capitalists and their firms (Patterson and Swartz, Moritz and Leone/Morritz, et al.). However, I found this section obsequious to the point you’d think the author was an investor in their funds.
The last third of the book provides valuable insight on the evolution and growth of venture capital in China. It’s one of the few coherent retrospectives about the growth of Chinese VC I’ve read.
Finally, two points worth noting. The first, is that this is not a history of all of venture capital. In the 20th century most VC firms invested in all forms of technology; hardware, software and starting in the 1980’s, life sciences (therapeutics, devices and diagnostics.) But by the beginning of the 21st century most firms specialized. However in reading the book you’d have no idea that Life Science VC’s exist. Yet arguably the companies they’ve funded have provided more value to society than every social media investment ever made.
As a closing note, and this has nothing to do with the value of the book, is the authors unabashed view that venture capital is just fine as is, don’t screw with it. Yet at the end of the day venture for all it has done in creating an innovation ecosystem, is an unregulated financial asset class without any morals. It’s equally happy funding Apple and Moderna (Covid Vaccines) as it has Juul (addicting teens to tobacco) or Facebook (the Purdue Pharma of social media.)
I've been in VC for 20+ years on both sides of the pond, US and Europe and have worked on deals with many of the firms mentioned in here. I've learned so much about my industry from this book. What a fantastic read! The footnotes are also a real treasure trove. Thank you.
I really enjoyed this book. It does a great job of giving enough details to be interesting but not to the point of being dense. I would have given 5 stars except he says the word “duly” about 30 times and he makes a huge issue out of the fact that most VC workers are men.
A nice account of the complex dealings in Silicon Valley.
How there was a kind of equality for the gifted and mostly highly qualified people that new projects needed. Some were also self-taught and had no formal qualifications, but had proved their talents. Looking after them was part of the process.
He does not mention the bad treatment of those who were not particularly needed, like Amazon warehouse staff. The book also fails to give details of how the three basics - advanced electronics, the package-switching for the internet and the easy-to-use hyperlinks of the World Wide Web - were all pioneered by rather different people. And made with public money and no thought of profit, either for military research or particle physics at CERN, where Tim Berners-Lee invented the World Wide Web.
Nor does he notice that the gigantic profits going to a few people have no clear benefit to the society as a whole. Allowing for a population increased by vast numbers of immigrants, the USA grew no faster after the changes begun by Reagan than it had before.
But what it does say is interesting and informative. Some of the human stories have the same fascination as the early episodes of Dallas, or even The Sopranos.