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The Business of Venture Capital: The Art of Raising a Fund, Structuring Investments, Portfolio Management, and Exits

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The new edition of the definitive guide for venture capital practitioners--covers the entire process of venture firm formation & management, fund-raising, portfolio construction, value creation, and exit strategies

Since its initial publication, The Business of Venture Capital has been hailed as the definitive, most comprehensive book on the subject. Now in its third edition, this market-leading text explains the multiple facets of the business of venture capital, from raising venture funds, to structuring investments, to generating consistent returns, to evaluating exit strategies. Author and VC Mahendra Ramsinghani who has invested in startups and venture funds for over a decade, offers best practices from experts on the front lines of this business.

This fully-updated edition includes fresh perspectives on the Softbank effect, career paths for young professionals, case studies and cultural disasters, investment models, epic failures, and more. Readers are guided through each stage of the VC process, supported by a companion website containing tools such as the LP-GP Fund Due Diligence Checklist, the Investment Due Diligence Checklist, an Investment Summary format, and links to white papers and other industry guidelines. Designed for experienced practitioners, angels, devils, and novices alike, this valuable resource:

Identifies the key attributes of a VC professional and the arc of an investor's career Covers the art of raising a venture fund, identifying anchor investors, fund due diligence, negotiating fund investment terms with limited partners, and more Examines the distinct aspects of portfolio construction and value creation Balances technical analyses and real-world insights Features interviews, personal stories, anecdotes, and wisdom from leading venture capitalists The Business of Venture Capital, Third Edition is a must-read book for anyone seeking to raise a venture fund or pursue a career in venture capital, as well as practicing venture capitalists, angel investors or devils alike, limited partners, attorneys, start-up entrepreneurs, and MBA students.

485 pages, Kindle Edition

First published September 7, 2011

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Mahendra Ramsinghani

4 books18 followers

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Displaying 1 - 30 of 37 reviews
Profile Image for Karan.
8 reviews2 followers
October 11, 2015
By reading this book, I wanted come away with a detailed understanding of how VC Industry worked, specifically sourcing of new investment opportunities by Limited Partners & GPs. I would say this book succeeded in accomplishing those goals. I read "Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist" prior to picking up this book, and had a high-level understanding of Venture Capital Industry. I believe reading that book first really helped me understand the in-depth information presented in this book.

I really like the writing style of Ramsinghani, very easy (and humorous) to read, and not dry, and didn't require forced motivation to finish the book, excluding Chapter 11 - which covered board practices.

I was also pleasantly surprised by inclusion of Private Exchanges, and how they work. Since, I am specifically interested in this area, this was a huge bonus for me.

I realized too late that I was reading an older edition of the book, but I found vast majority of the information presented in the book quite relevant, and will pick up newer edition of the book for future reading.
1 review
April 29, 2012
After reading the Business of Venture Capital, all I can say is - "This is the best book on Private Equity, I have ever read"

The author has an amazing and very involving style of writing, and explains Venture Capital in a brilliant fashion alongwith real world insights, facts, figures  and easy to implement concepts.  

Mahendra Ramsinghani's enormous experience and interesting style of writing makes this book immensely invaluable to anyone across the investment business. Whether you have a skimming interest in Venture Capital or you are an entrepreneur considering/seeking Venture Capital, this remarkable book will prove to be your first and last book on private equity.



30 reviews1 follower
May 31, 2019
I came to this book with the goal to understand more about how the VC-business select investment opportunities, but this is not a very explored topic in the book. It states that normally the VC has some knowledge about an area and is able to prospect opportunities in that market and access which one are goods.

Besides that initial misalignment between my expectation and what the book provides, it is a very enlightening book. It covers all the aspects of Venture Capital, going into explaining low-level details, such as Term Sheets, to high-level concepts, such as participating on a board, talking about human psychology applied to the VC business. Therefore, it is a great book to start diving into the subject.
171 reviews
August 25, 2022
It's dry but exhaustive. Answers most questions about the VC business. I'd also flip through it if I were an entrepreneur about to raise money... but first read Feld's book, Venture Deals. He is a smart, experienced VC.
Profile Image for Austin.
176 reviews9 followers
April 5, 2019
This is an excellent and well-researched guide to the workings of venture capital, covering everything from basic fund economics and governance, fundraising, deal sourcing, the due diligence process, terms of investment, to investment management through exit. It really covers the full gamut.

Some of the things I learned:

How to display fund performance splitting out realized vs. unrealized value, pg. 114

“A good practitioner needs to have some ADD . . . ADD may be necessary and a much-desirable condition to be a good VC.” Pg. 37

Our LPs will have three things we need to understand: 1. Asset allocation strategy, 2. Investment criteria, and 3. Investment process, pg. 45

“John Maynard Keynes stated that there is an ‘anti-social . . . fetish of liquidity’ that drives investment institutions to concentrate their holdings in liquid assets . . . Liquidity creates fickleness and generates infidelity, which hurts long-term asset classes such as private equity and venture capital.” Pg. 49


The private equity exposure of the Yale endowment went from 0% in 1985, to 10% in 1995, to 30% in 2010

“It is typical for fund managers to raise a new fund when an existing fund is about 70 percent invested. Pg. 164

LPs much prefer that carried interest be calculated at the fund level as a % of net profits, pg. 165

“Desirable CEOs are the ones who move quickly, act aggressively, work hard, demonstrate persistence, and set high standards and hold people accountable to them.” These are known as Cheetahs. Pg. 228

We can use secondary markets to smooth the J-curve of fund returns and to raise awareness of fund, e.g. SecondMarket, SharesPost. Pg. 339
Profile Image for FAIZAN KHAN.
70 reviews3 followers
April 27, 2020
Man, What Can I Say About This Book.
If The Venture Capital Business Moves You Even Just A Bit & You Plan To Study It,
Then You Ought To Read This Book.

The Book'll Take You Step-by-Step To Each Process of The VC
& In-depth Educate You About It.
From Sourcing The Deals - Exiting.

As A Business Person, Having A Good Big-Picture View of The VC Industry Is A Must Needed Thing.
This Is A GoodPlace To Learn All The Ins & Outs of This Industry.
Pick & Read.
Profile Image for Harry Harman.
729 reviews14 followers
Read
February 22, 2023
The Global Entrepreneurship Monitor (GEM) global report gives Japan the lowest score for entrepreneurship of any large country, largely due to its risk-averse orientation.

According to the National VC Association 2010 yearbook, there are at least 800 firms with 1,188 funds in existence managing about $179.4 billion.

Research shows that a 50 percent increase in fund size leads to 1.5 percent decline in IRR. Performance peaks with $200 million fund and declines once funds cross $500 million.

VC is a home run business

Jan joined Advanced Cardiovascular Systems (ACS)

there is no straight path into the business of VC. You have to climb in from the window

A venture firm's functions can be broken down into four key parts:
1. Raise a venture fund.
2. Build a portfolio of investment opportunities.
3. Monitor and add value to this portfolio.
4. Generate a superior financial return via timely exits.

Ideally, all the invested capital would be harvested and returned to the investors, the LPs, in 10 years. The fund would then be fully liquidated.

These LPs include a mix of institutional investors (e.g., pension funds, foundations, and endowments) and family offices, including high-net-worth individuals (HNWIs).

Investors prize liquidity because it allows trading in and out of securities. Unfortunately, liquidity tends to evaporate when most needed

to make the purchase of an investment permanent and indissoluble, like marriage, except by reason of death or other grave cause, might be a useful remedy for our contemporary evils. For this would force the investor to direct his mind to the long-term prospects and to those only.
Profile Image for T. Laane.
428 reviews90 followers
September 13, 2022
I stopped reading at 45% so it might not be fair for me to give a rating. On one hand, yes it seems like the most comprehensive book on VC field (that i have not much knowledge in), but on the other hand - the book is SO dry, it is meant for only bookworms who like to read through a heavy encyclopedia without any fun :) But yes, in the field of VC - if you want to know it all and have weeks or even months to investigate a book, then this is the one for you.
One thing I liked about the book - many times over it made the point that VC-s should also have an exit strategy about the whole field. Meaning it is quite a dopamine run and addictive, that it might end up eating away at your life. And as an example, Tim Ferris gets mentioned in the book as stopping the whole VC game, since the stress and addiction (and FOMO) wasn’t worth it.
Profile Image for Pooja.
26 reviews4 followers
February 17, 2021
The author leaves the reader in no doubt that he is a ‘Sand Hill Road’ insider’, and to his credit, the book is exceedingly well researched, and packed with examples and quotes from all the big VCs. This is exactly the right book to read if you want to learn about what VCs' motivations are - very practical advice. I would have preferred it if the author had skipped the platitudes about VCs being in the business to serve the greater good.
Profile Image for Said AlMaskery.
290 reviews61 followers
January 20, 2020
One of the best books that comprehensively talks about the VC/PE industry from a practitioners perspective.
I thoroughly enjoyed the chapters, which are structured in a natural flow associated with how VC works.

Highly recommended for any entrepreneur.
Profile Image for Tracy Jin.
6 reviews1 follower
April 12, 2020
In this book, the author has done an excellent job. It has given readers a framework for understanding how this all works. While VC personalities, styles, behavior, and effectiveness vary widely, it helps describe VC in a comprehensive and easily understand manner.
Profile Image for Kiran Kishore.
13 reviews
September 11, 2020
A very good read for everyone who wants to get into Venture Capital Business. The author provides a comprehensive view of the Venture Capital segment besides providing the guidelines regarding different aspects involved in different stages for any aspiring venture capitalists.
Profile Image for Anthony Fiedler.
154 reviews1 follower
November 23, 2021
If you need an intro to VC and would like it dry, I would recommend this. It's fairly thorough but without examples. The anecdotes are insightful. However, much of the anonymous talking points are cases where they were the norm and should be left in the past. Let's try to open up VC to more.
38 reviews
March 25, 2022
Read this book halfway but stopped reading it because it's served its purpose for me.

This book is a concise and clean introduction to all things venture capital related, and it's not overly lengthy or instructive. It served me well and I'm glad I picked it up.
Profile Image for Rhys Lindmark.
131 reviews29 followers
November 22, 2022
I really want to give this 4 stars but can't quite.

Part I is fluff on being a VC.

Parts II and III are an excellent overview of LPs.

Part IV & V were good pieces on board & exit dynamics, but not for me right now.

Could've been shorter, but in the end it was fully of actionable info.
Profile Image for Addy Liñan.
29 reviews
September 22, 2017
Anyone interested in VC world be it either from the entrepreneur of investor side. Should have this book.
3 reviews
August 21, 2019
Wonderful Resource

Good advice and guidance. Practical and must read for beginners in VC. Will help understand the basics and foundation! Great.
Profile Image for Fabian.
405 reviews51 followers
August 24, 2019
As someone new to the VC world this book is a great primer.
Profile Image for Kerrie.
479 reviews9 followers
April 22, 2020
Solid primer, I appreciated the accessible language
Profile Image for Oskar Hiekkanen.
11 reviews
January 31, 2022
A well-written book describing the stakeholders, incentives, business models, and industry dynamics of venture capital in a straightforward, well-structured way.
Profile Image for Doug.
156 reviews16 followers
August 30, 2022
Every entrepreneur should read this multiple times!
Profile Image for Lê Anh.
4 reviews
January 1, 2023
A waste of time reading all the bluffs.
While time is the most valuable resources of people in this field.
Weak, superficial basics being repeated overtime.
Profile Image for Martin Smetana.
37 reviews5 followers
April 8, 2023
A great intro into the world of LPs, Founders, GPs, start-ups, and venture capital.
Profile Image for Pavel Annenkov.
443 reviews123 followers
December 30, 2021
О ЧЕМ КНИГА:
Фундаментальная работа про венчурный бизнес. Автор раскрывает все вопросы от поиска инвесторов в свой венчурный фонд до вопросов развития компаний, которые профинансировал. Книга совсем свежая 2021 года, с большим количеством кейсов по делу.

ГЛАВНАЯ МЫСЛЬ КНИГИ:
Венчур - это история в долгую, с непредсказуемым результатом, но с возможностью большого вознаграждения усилий.

ЗАЧЕМ ЧИТАТЬ ЭТУ КНИГУ?
Чтобы разобраться во всех деталях того, как устроена венчурная индустрия.

МЫСЛИ И ВЫВОДЫ ИЗ КНИГИ:
Книга на любую серьезную тему нужна, чтобы выстроить структуру и базу для понимания предмета. Никакие посты в блогах и отдельные статьи не дадут такое понимание.

Хороший VC должен выработать свою собственную, неочевидную позицию и уметь уверенно делать ставки и находить будущих скрытых чемпионов.

Столпы успеха хорошего VC:
Знание текущих технологических трендов.
Умение выбирать победителей.
Оптимизм и спокойствие.
Умение расти и учиться.

Отличный вопрос для потенциального партнёра фирмы - "Дайте мне имена 5 человек в каждой из этих трех групп: потенциальные основатели, работающие основатели и инвесторы. Почему вы выбрали именно их? Как вы с ними познакомились?"

You are only as good as your next investment.

Being a reasonably nice person has become a competitive advantage in venture capital.

GP служит двум сторонам: своим LP и основателям компаний, в которые инвестировал.

Надо выбирать LP не для одного фонда, а на всю жизнь.

Два главных критерия по которым LP оценивают фонд:
Опыт команды.
Стратегия инвестирования. Должен быть фокус и преимущество.

На выбор стратегии фонда влияют 3 главных фактора:
Макротренды.
Опыт и связи основателей в определённой области.
Личные инсайты основателей.

Надо всегда быть готовым к новым возможностям и выходам на новые рынки для инвестиций.

Ключевое преимущество фонда, к которому всё сводится, отвечает на вопрос - "Почему основатели захотят работать с нашим фондом?"

Выстраивая свое конкурентное преимущество надо определиться со следующими вещами:
Как мы будем привлекать лучших основателей.
В какие сектора мы идем.
На каких стадиях инвестирования мы заходим.
Наша география.
Где у нас самая качественная сеть связей.
Какой у нас инсайт по индустриям.

На более поздних стадиях доступ к сделкам становится ключевым фактором. В этот момент уже все знают про успешные компании и начинают соревноваться за то, у кого основатели возьмут деньги.

Правильный выбор индустрии и сегмента для инвестирования очень важен.

VC с мощным нетворком - основная ценность в фонде для LP.

Мы не просто инвестируем в компании, мы выстраиваем свой портфель. Качество GP определяется качеством его портфеля.

Как и у любой компании у венчурного фонда должна быть своя индентификация бренда(brand identity).

Надо говорить стартапам, чтобы они принимали во внимание не репутацию фонда, а компетенции и опыт конкретного человека.

Мы хотим создать такую фирму, от которой бы сами взяли деньги, если были бы основателями стартапа.

Opportunity cost of raising capital for venture fund is very high. You should be prepared for two years without paycheck.

У каждого LP надо обязательно спросить про его ожидания от вложений в фонд, какую коммуникацию он ожидает, что для него хорошее партнёрство, как он определяет успех.

Market timing is very important. The question each LP will ask - “Why should I invest in your fund NOW?”

Sector, geography, stage. These are 3 main points about a fund.

Хороший VC - это хороший продавец. Сначала продаёшь свой тезис LP, потом борешься за хорошие проекты и убеждаешь предпринимателей взять твои деньги, а потом должен помогать поднимать новые раунды и продавать стартап стратегам и другим фондам.

ЧТО Я БУДУ ПРИМЕНЯТЬ:
Сделаю elevator pitch и 1-pager для своего фонда.

ЕЩЕ НА ЭТУ ТЕМУ:
Brad Feld and Jason Mendelson «Venture Deals»
Displaying 1 - 30 of 37 reviews

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