There are books and then there are books that you can’t stop reading till you are done with it.
Mastering the VC Game belongs to the second category.
Written by Jeffrey Bussgang (General Partner at Flybridge Capital Partners), the book walks you through the VC mind and helps one understand the entire investing process better.
The book mixes few stories of entrepreneurs (like Jack Dorsy of Twitter), and mashes up with how VCs work, why they invest in certain entrepreneurs and most importantly, what sort of homework does an entrepreneur need to work on, before meeting VCs.
The book unlike several other books written on the same subject stands out from the crowd for a very simple reason – Bussgang has seen both sides of the world (he was an entrepreneur for 10 years and is now a VC) and brings practical insights..
Jack Dorsey and Fascination for Courier
One of the most interesting story in the book is of Jack Dorsey, cofounder of Twitter. He had an obsession for courier service, right from his childhood and even started a bicycle courier service at the age of 16.
You had this transfer of physical information happening throughout the city and the world. Someone picking up the package, putting it in a bag, going somewhere, taking it out of the bag, giving it to someone else. I thought that was so cool. I wanted to map it, to see that flow on a big screen. When I did some research into how courier systems worked, I found that there was a parallel information transfer that was digital, and it was called ‘dispatch,’ which was just a coordination effort.”
Similarly, LinkedIn’s Reid Hoffman who made a fortune out of Paypal acquisition wanted to make an impact by helping people easily connect with friends/colleagues to improve their lives and professional activities. He couldn’t raise fund in the early stage because VCs were looking for ‘that specific thing’ in the business plan.
How VCs work
The book nicely explains how VC industry works. What ‘carry’ means (and why is it important!), what sort of homework does an entrepreneur needs to do before approaching a VC fund etc.
If one is looking for $2-3mn, does it make sense to talk to a VC of fund size of more than $100mn?
Is it ‘okay’ to do cold calls to VCs? From a VC perspective (as per Bussgang), if an entrepreneur makes a cold approach to a VC, it marks him an outsider.
fThe guy doesn’t know anybody? IF he can’t figure out a way to reach out to a VC (which is such a small industry), how will he reach out to a customer?
What is important to understand is that the book isn’t a personal opinion of Bussgang, but he has interviewed several other VCs (like Fred Wilson) as well as startus (who raised funds) and has presented a perspective on the VC industry.
What are the terms that impacts the deal pricing? Pre-money? Option Pool? Liquidation Preference?
Essentially, if you are an entrepreneur planning to build a long term business, this book is for you. Written in a easy-yet-serious fashion, the book nicely demystifies the VC force. The book completely stays from regular BS about strategy and focuses on how/why certain deals go through and a lot do not.
Also, what I really appreciate about this book is the focus on VCs who are really passionate about technology, who are actually geeky in certain way and aren’t just the typical MBAish type. Book brings insights/perspectives on questions that every entrepreneur has
- How much money should I raise?
- Which VC firm to go ahead with?
- When is the time to exit?
Strongly recommended for entrepreneurs as well as waannabepreneurs.
[Disclosure: I was provided free copy of the book by Penguin Group, the publisher of this book].