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The Money of Invention: How Venture Capital Creates New Wealth

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This volume provides a meaningful framework for understanding the relationship between venture capital and entrepreneurial success. It helps readers spot the real limitations of and challenges facing venture capitalists, entrepreneurs and individuals or institutions who want to play either role in the venture game. The authors give the background to why venture capital has This volume provides a meaningful framework for understanding the relationship between venture capital and entrepreneurial success. It helps readers spot the real limitations of and challenges facing venture capitalists, entrepreneurs and individuals or institutions who want to play either role in the venture game. The authors give the background to why venture capital has exploded as an industry by explaining how venture capitalism drives - and has always driven - innovation, economic growth and job creation beyond high technology and industrialized countries.


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This volume provides a meaningful framework for understanding the relationship between venture capital and entrepreneurial success. It helps readers spot the real limitations of and challenges facing venture capitalists, entrepreneurs and individuals or institutions who want to play either role in the venture game. The authors give the background to why venture capital has This volume provides a meaningful framework for understanding the relationship between venture capital and entrepreneurial success. It helps readers spot the real limitations of and challenges facing venture capitalists, entrepreneurs and individuals or institutions who want to play either role in the venture game. The authors give the background to why venture capital has exploded as an industry by explaining how venture capitalism drives - and has always driven - innovation, economic growth and job creation beyond high technology and industrialized countries.

30 review for The Money of Invention: How Venture Capital Creates New Wealth

  1. 5 out of 5

    Austin

    This is a seminal book on the venture capital industry and a valuable touchstone for understanding the basic economics of venture investing. It's a bit outdated at this point, but not enough so to invalidate its fundamental research showing, for example, that venture capital accounts for fully 1/3rd of the value of public companies, or that businesses backed by venture capitalists are worth more over time than those not backed by VCs. It's a bit rosy eyed given the exact date of publication, but This is a seminal book on the venture capital industry and a valuable touchstone for understanding the basic economics of venture investing. It's a bit outdated at this point, but not enough so to invalidate its fundamental research showing, for example, that venture capital accounts for fully 1/3rd of the value of public companies, or that businesses backed by venture capitalists are worth more over time than those not backed by VCs. It's a bit rosy eyed given the exact date of publication, but because the scope of its research spans decades and focuses on fundamentals, it's worth the read. The valuable frameworks and facts from the book from the book for me are: --The four critical problems in valuing and financing entrepreneurial firms are: 1. uncertainty about the future, 2. the information gap, 3. valuing soft assets, and 4. market conditions. pp 7-9 --The ways that VCs manage these problems are: 1. sharing investments across different venture groups, 2. provide capital in stages, 3. intensive scrutiny and diligence, and 4. the monitoring of firms after the investment ensuring timely and accurate information, and contributing to the firms' success. pg. 11 --The lead venture capitalist might visit each company once a month on average and spend 4-5 hours / visit, as well as receive monthly financial reports from all investees. pg. 48 --A critical step in building any successful company is the recruitment of a skilled senior-management team, so our venture partners should really be comprised of senior managers --The ideal size of a board of directors is 5-7 individuals. pg. 58 --Rather than selling successful investments and returning cash to their investors, VCs may simply give investors their allocation of the stock, which allows the investors to arrange the sale of their shares in a manner that would minimize their tax obligations. pg. 90 --Most managing partners of venture funds contribute 1% of the capital to the fund, though the % is higher in first funds. pg. 108 --A first fund's lead investor will typically contribute 20-50% of the fund. pg. 109 --A good way to avoid overshooting in valuations when a promising market is hot is to engage in venture creation. pp. 134-135 --The author's prescription of how funds can secure a top position for themselves is: 1. generate more fee income, 2. leverage venture capitalists' time better, and 3. build venture brands --More mature private equity groups have sold a piece of their management company to a strategic LP who also promises to contribute a certain amount of capital to subsequent funds. pg. 241 --Staging, ratchets, and minimum returns are all good tools to use when working with 3-5x type investments (my own reflection)

  2. 5 out of 5

    Jordan Frankfurt

    Unfortunately, a lot of the major points made in this book are crippled by its timing. The bubble that strongly supported the authors' points popped the year this was published and gives reason to doubt their conclusions. Unfortunately, a lot of the major points made in this book are crippled by its timing. The bubble that strongly supported the authors' points popped the year this was published and gives reason to doubt their conclusions.

  3. 5 out of 5

    Jon

  4. 4 out of 5

    Warren Hosseinion

  5. 5 out of 5

    Van

  6. 4 out of 5

    Fabio Tran

  7. 5 out of 5

    Todd

  8. 5 out of 5

    ANDRE CAMPANELLA

  9. 4 out of 5

    Matheus Baldi

  10. 5 out of 5

    Chris

  11. 4 out of 5

    Anthony S

  12. 4 out of 5

    Emily Easley

  13. 5 out of 5

    Cezar

  14. 4 out of 5

    Charlene

  15. 4 out of 5

    Clarence D. Long IV

  16. 5 out of 5

    Bright Chuks

  17. 5 out of 5

    Angus Walker

  18. 5 out of 5

    Sheldon

  19. 4 out of 5

    Vidhi Bansal

  20. 4 out of 5

    Nigel Visser

  21. 4 out of 5

    Matthew Leschber

  22. 4 out of 5

    Michael Hsu

  23. 5 out of 5

    Wade Anderson

  24. 4 out of 5

    Rebi

  25. 4 out of 5

    Mark

  26. 4 out of 5

    Prandi

  27. 5 out of 5

    Natasha

  28. 5 out of 5

    Terry

  29. 4 out of 5

    Ihuaku

  30. 5 out of 5

    Kinser

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