VC

Key Takeaways

Under Consideration — to be added.

Interconnections

Under Consideration — to be added.

Highlights

• The origins of the venture capital industry in America are conventionally traced back to the founding of the Boston-based American Research and Development Corporation (ARD) in 1946.
• Venture capital is concerned with the provision of finance to startup companies and it is heavily oriented toward the high-tech sector, where capital efficiency is at its highest and the potential upside is greatest.
• In the venture capital context, long-tail investing denotes a systematic approach to the deployment of risk capital into entrepreneurial ventures by intermediaries who attempt to use their domain expertise to generate large returns.
• The fact that venture capitalists do exist is arguably because they are able to maintain informational advantages in the selection and governance of startup investments.
  • What happens if you remove the information asymmetries in startup investing? E.g. distribution of playbooks, democratization of customer access, data sharing re: the best companies? #[[Data in Investing]]
• History shows, however, that the social benefits of venture capital have been immense. By facilitating the financing of radical new technologies, US venture capitalists have supported a large range of high-tech firms
• Medieval Venice was strikingly modern in terms of its contracting traditions, and it could be argued that the Venetians acted very much like venture capitalists in their operation of risky trading voyages.
• Looking at this first stage in the history of VC, the direct lineage from some early entities based on family wealth to various modern VC firms can also be traced. For example, Laurance Rockefeller, the grandchild of the oil baron John D. Rockefeller, was a prolific venture capitalist. Venrock Associates, founded in 1969, is an extension of his investing activities. Another well-known venture firm today, Bessemer Venture Partners, was founded in 1981 as a spinoff from a family office created by Henry Phipps, who had partnered with the famous steel magnate Andrew Carnegie.
  • What does the family tree of venture funds look like? Whose worked where? Started what firms as a result of what experience?
• The first venture capital limited partnership in Silicon Valley, Draper, Gaither & Anderson, founded in 1959 in Palo Alto, California, generated poor returns, underscoring the difficulty of realizing payoffs from a portfolio of early-stage investments within the timeline of a limited partnership.
• Other firms profiled in the chapter—east coast–based Greylock Partners, founded in 1965 by William Elfers after a long career at ARD, and Venrock Associates—did much better, however, providing impetus to expansion in the industry.
• Three key figures in the history of venture capital—Arthur Rock (cofounder of Davis and Rock in 1961), Tom Perkins (cofounder of Kleiner Perkins in 1972), and Don Valentine (founder of Sequoia Capital in 1972)—responded to and helped compound that regional advantage.
• They also personified the three oft-cited investment styles in the VC industry, since Rock tended to identify opportunities based on investing in people, Perkins emphasized investments in technology, and Valentine stressed the idea of investing in markets.
• First, history shows that exceptional VC-style payoffs have been sporadic and infrequent, concentrated in specific firms and time periods.
• Second, if one asks how exactly VCs do what they do, it is not clear that the answer today is much different from half a century ago.
  • Will the answer to this question change any time soon? Will there be a true disruption in [[Venture Capital]]? #[[Bifurcation of Investing]] #[[Data in Investing]]
• Fourth, and relatedly, it is important to note the often ignored fact that the venture capital industry became institutionalized partly as a consequence of government policy.
• Reversing the venture capital industry’s poor record on diversity will be vital to its future, in terms of talent management, competitiveness, performance returns, and how the industry is publicly perceived.
• is no accident that effective captains were at a premium; they knew who was more likely to desert or be discharged, and in turn, agents knew the captains better than the capital providers did. Value accrued to domain expertise. It could be argued that a good whaling agent was central to success because he could raise capital, organize a voyage, and alleviate informational gaps.