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Library of Congress Cataloging-in-Publication Data
Names: Ramsinghani, Mahendra, author.
Title: The business of venture capital : the art of raising a fund, structuring investments, portfolio management, and exits / Mahendra Ramsinghani.
Description: Third edition. | Hoboken, New Jersey : John Wiley & Sons, Inc., [2021] | Series: Wiley finance series | Includes bibliographical references and index.
Identifiers: LCCN 2020030565 (print) | LCCN 2020030566 (ebook) | ISBN 9781119639688 (hardback) | ISBN 9781119639718 (adobe pdf) | ISBN 9781119639701 (epub)
Subjects: LCSH: Venture capital.
Classification: LCC HG4751 .R36 2020 (print) | LCC HG4751 (ebook) | DDC 332/.04154068–dc23
LC record available at https://lccn.loc.gov/2020030565
LC ebook record available at https://lccn.loc.gov/2020030566
Cover Design: Wiley
Cover Image: © piranka/Getty Images
Author Photo: Courtesy of Mahendra Ramsinghani
In the memory of my parents,who reminded me to putknowledge above wealth,people above profits,truth above power,and service above self
For Amar and Geeta, who gave me wings&for Deepa and Aria, who bring the light and the song
Foreword
Now in its third edition, The Business of Venture Capital builds on the foundational best practices in venture investments, offering new, valuable tools along with some wit and wisdom. The scope of the venture capital business is wide, and often opaque. For example, how do our investors (limited partners or LPs) make decisions? What challenges do they encounter, and how should a general partner (GP) understand their universe? How can a practitioner build a “point of view” on the market, identify emerging trends, compete to win the best opportunities, and nurture them to success? What biases and cognitive traps spring up in our business? How should we think probabilistically? What skills are critical to our business, and how does one develop such skills? Which parts of our business are at the mercy of the markets?
In this book, you will find answers to many of these questions. But, as with any good book, it will leave you thinking about many other questions. You'll ultimately need to figure out how to apply many of the mental models about which Mahendra writes to your own situation.
Over the past decade, Mahendra has had to answer many of these questions, both as an investor and a practitioner. When the first edition was released nearly a decade ago, there was no book on VC and the blogosphere was just in its infancy. So, he heeded Nobel Prize winner Toni Morrison's advice: “If there's a book that you want to read, but it hasn't been written yet, then you must write it.”
This book includes views of over 50 leading LPs and GPs, compiled in a jargon-free, digestible format to benefit all those exploring VC as a path, whether you're a solo-GP getting ready to raise a fund or a venture partner on your first board.
This book covers the arc of investment and blends lessons from Silicon Valley as well as other parts of the country. Over the past decade, much has evolved — the amount of capital flowing in venture has increased tenfold by some estimates. Besides mainstream LPs, hedge funds, sovereign wealth funds, and corporate VC funds have helped shape this growth trajectory. At the same time, the presence of new and large players, including Softbank, have impacted the nature of the venture business overall.
Indeed, our business is changing rapidly and, with it, we continue to evolve. But our singular goal remains the same — to help entrepreneurs in their journey to build important and lasting businesses, along the way generating superior returns for our investors. It is my hope that this book will not only set the foundation for you but make a meaningful impact in your journey as a practitioner.
Scott Kupor
Author, Secrets of Sand Hill Road: Venture Capital and How to Get It
Managing Partner, Andreessen Horowitz (A16Z)
Former Chair, National Venture Capital Association (2017–2018)
Preface
WHY SHOULD YOU READ THIS BOOK?
Thank you, dear reader, for arriving at the doorsteps of this somewhat lengthy tome. I hope you reached here, at the doors of this career after some thought and planning,
