Vcs Quotes

I just invented an Applause Machine. You turn it on by clapping. I figure I'll have no trouble securing Venture Capital funding, because VCs love congratulating themselves, and this time when they do, my machine will respond by adding to their self-kudos.

As VCs invest more and more money in each company, they have to wait longer and longer before they can exit.

VCs must find the handful of companies that will successfully go from 0 to 1 and then back them with every resource.

VCs are slow, until they think they're going to lose the deal

Exits are the least understood part of investing—as often by the investors themselves as by the entrepreneurs. This book is about the large number of other exits—the ones that are not driven by the VCs.

Ben Horowitz uses the difference between a vitamin and an aspirin to articulate this point. Vitamins are nice to have; they offer some potential health benefits, but you probably don’t interrupt your commute when you are halfway to the office to return home for the vitamin you neglected to take before you left the house. It also takes a very, very long time to know if your vitamins are even working for you. If you have a headache, though, you’ll do just about anything to get an aspirin! They solve your problem and they are fast acting. Similarly, products that often have massive advantages over the status quo are aspirins; VCs want to fund aspirins.

Whatever the evidence, the fundamental question VCs are trying to answer is: Why back this founder against this problem set versus waiting to see who else may come along with a better organic understanding of the problem? Can I conceive

Whatever the evidence, the fundamental question VCs are trying to answer is: Why back this founder against this problem set versus waiting to see who else may come along with a better organic understanding of the problem? Can I conceive of a team better equipped to address the market needs that might walk through our doors tomorrow? If the answer is no, then this is the team to back.

In fact, you’ll often hear VCs say that they like founders who have strong opinions but ones that are weakly held, that is, the ability to incorporate compelling market data and allow it to evolve your product thinking. Have conviction and a well-vetted process, but allow yourself to “pivot” (to invoke one of the great euphemisms in venture capital speak) based on real-world feedback.

He had just the same narrow head, and stubborn mouth, and honest, quick-tempered eyes. It is the type that makes dashing regimental officers, and earns V.C.’s, and gets done in wholesale. I was never that kind. I belonged to the school of the cunning cowards.

Bitcoin is just six years old. It has gone from what was ostensibly one lonely coder’s pet project to a global phenomenon that has sparked the imagination and activism of libertarians, anticorporatists, crypto-anarchists, utopians, entrepreneurs, and VCs. Bitcoin has gone from being essentially worthless to dearly valuable, only to crash and rise again, a wild trading pattern that has few analogues in capital markets. It’s certainly gone from nowhere to somewhere, and where it goes from here may be as messy and chaotic as where it’s been.

A lot of people rely on the same arguments over and over again when negotiating. People who negotiate regularly, including many VCs and lawyers, try to convince the other side to acquiesce by stating, “That's the way it is because it's market.” We love hearing the market argument because then we know that our negotiating partner is a weak negotiator. Saying that “it's market” is like your parents telling you, “Because I said so,” and you responding, “But everyone's doing it.” These are elementary negotiating tactics that should have ended around the time you left for college.

Women getting run out of tech matters, because it’s where so much of the wealth creation and opportunity in the economy is right now. And it purports to be more of a meritocracy. So if it’s not simply a case of needing more women to enter the tech funnel, what gives? Is the tech industry just full of a ton of sexist bigots? Some, sure. Trust me, I know them. But the far more pervasive problem is one of unconscious bias and an overreliance on pattern recognition. VCs tend to rely on a gut feeling about an entrepreneur because they frequently don’t have a business or product yet to evaluate, or in many cases, even a track record to look at. And when you don’t have written-out, quantifiable qualifications to hire based on, bias creeps in.

The overall data shows that more than twice the money flows into venture capital from LPs than comes back to them in a given year. I wanted to hold onto something positive from this industry—after all, I’ve met a few brilliant people in it—but looking at the data, it’s hard, if not impossible. In a Freudian sense, it's worth remembering that sometimes a cigar is just a cigar—not everything has a deeper psychological meaning. VCs have made it look like magic, but the illusion disappears once you turn on the lights. At its core, venture capital isn’t as much a unique asset class as it is a troubled one. The industry survives by injecting more and more capital each year, while leaving the majority of limited partners stuck at the losing end of a pay-your-bid auction.

Here’s What I Believe about Good VCs Good VCs help entrepreneurs achieve their business goals by providing guidance, support, a network of relationships, and coaching. Good VCs recognize the limitations of what they can do as board members and outside advisors as a result of the informational asymmetry they have with respect to founders and other executives who live and breathe the company every day. Good VCs give advice in areas in which they have demonstrated expertise, and have the wisdom to avoid opining on topics for which they are not the appropriate experts. Good VCs appropriately balance their duties to the common shareholders with those they owe to their limited partners. Good VCs recognize that, ultimately, it is the entrepreneurs and the employees who build iconic companies, with hopefully a little bit of good advice and prodding sprinkled in along the way by their VC partners. If VCs remain good, they won’t become dinosaurs.

The VCs were prolific. They talked like nobody I knew. Sometimes they talked their own book, but most days, they talked Ideas: how to foment enlightenment, how to apply microeconomic theories to complex social problems. The future of media and the decline of higher ed; cultural stagnation and the builder’s mind-set. They talked about how to find a good heuristic for generating more ideas, presumably to have more things to talk about. Despite their feverish advocacy of open markets, deregulation, and continuous innovation, the venture class could not be relied upon for nuanced defenses of capitalism. They sniped about the structural hypocrisy of criticizing capitalism from a smartphone, as if defending capitalism from a smartphone were not grotesque. They saw the world through a kaleidoscope of startups: If you want to eliminate economic inequality, the most effective way to do it would be to outlaw starting your own company, wrote the founder of the seed accelerator. Every vocal anti-capitalist person I’ve met is a failed entrepreneur, opined an angel investor. The SF Bay Area is like Rome or Athens in antiquity, posted a VC. Send your best scholars, learn from the masters and meet the other most eminent people in your generation, and then return home with the knowledge and networks you need. Did they know people could see them?

The concept of product/ market fit originates in Marc Andreessen’s seminal blog post “The Only Thing That Matters.” In his essay, Andreessen argues that the most important factor in successful start-ups is the combination of market and product. His definition couldn’t be simpler: “Product/ market fit means being in a good market with a product that can satisfy that market.” Without product/ market fit, it’s impossible to grow a start-up into a successful business. As Andreessen notes, You see a surprising number of really well-run start-ups that have all aspects of operations completely buttoned down, HR policies in place, great sales model, thoroughly thought-through marketing plan, great interview processes, outstanding catered food, 30" monitors for all the programmers, top tier VCs on the board—heading straight off a cliff due to not ever finding product/ market fit. Unfortunately, it’s far easier to define product/ market fit than it is to establish it! When you start a new company, the key product/ market fit question you need to answer is whether you have discovered a nonobvious market opportunity where you have a unique advantage or approach, and one that competing players won’t see until you’ve had a chance to build a healthy lead. It’s usually difficult to find such an opportunity in a “hot” space; if an opportunity is obvious to everyone, the chance that you’ll be the one who succeeds is exceedingly low. Most nonobvious opportunities arise from a change in the market that the incumbents aren’t willing or able to adapt to.

There are people who talk about operating experience and there are people who say it’s about risk-taking or process, or due diligence, but it’s about none of that. People have gut feelings about things and there are lots of ways that they rationalize themselves into their investment decisions. Very few people are willing to take the risk and fund some of these things that turn out to be crazy large, whether it’s Amazon (which was a book store), Google (which was the 27th search engine), or Genentech (which really was just a science project). None of those things in 20/20 hindsight were rational decisions you would make. It takes risk-takers to do seed investing, not risk managers.

There are only a few key things most VCs look at to understand and get excited about a deal: the problem you are solving, the size of the opportunity, the strength of the team, the level of competition or competitive advantage that you have, your plan of attack, and current status. Summary financials, use of proceeds, and milestones are also important. Most good investor presentations can be done in 10 slides or fewer.

It is not in the stars to hold our destiny but in ourselves. —William Shakespeare

VCs usually spend even more time on the most problematic companies

Al Alcorn: You know in Silicon Valley if you don’t obsolete yourself somebody else will, right? The Warner guys didn’t really understand that. They were from an East Coast company and thought that they had an evergreen kind of product. They thought that they would just sit back and mint money for the rest of their lives selling the Atari VCS for the next twenty years.

I also believe that you can only get these insights from a fellow traveler. No offense to my VC friends, but they often think that their investments give them the right to lecture entrepreneurs at board meetings, even though many VCs have never been in the combat seat themselves. Having seen things done is not the same as doing them.

Blitzscaling isn't really a recipe for success but rather survivorship bias masquerading as a strategy" Yet the O'Reilly critique is less an indictment of VCs than a warning to founders. If the objective of entrepreneurship is personal autonomy, founders must understand that venture capital comes with conditions. If entrepreneurs want to grow their companies at a measured pace, venture capital may well create unwanted pressures. But while inexperienced founders may need to be told of these realities, venture capitalists understand them all too well: they are the first to proclaim that cautious founders should raise money elsewhere. "The vast majority of entrepreneurs should NOT take venture capital," Bill Gurley tweeted in 2019. "I sell jet fuel," Josh Kopelman of First Round Capital agreed; "some people don't want to build a jet." As these comments indicate, VCs may be capable of backing companies in a broad swath of sectors, but in another sense their competence is narrow. Venture capital is suitable only for the ambitious minority that wants to take the risk of growing fast...

Metcalfe began to take venture capitalists to lunch and solicit their guidance. “If you want money, you ask for advice. If you want advice, you ask for money,” he reflected shrewdly.[27] His goal was to absorb the VCs’ way of thinking, and before long he noticed a pattern. At some point in each conversation, the venture guy would launch into a lecture on the three reasons startups failed: the excessive ego of the founder, too little focus on the most promising products, and too little capital. Having recognized this mantra, Metcalfe started to preempt it. “Here are the three mistakes I am not going to make,” he would announce, before the unsuspecting venture capitalist got a chance to lodge the standard caveats. “A, I have decided that it’s more important that this company succeed than that I run it. Two is, even though I have this business plan that shows a million products, trust me, we’re going to focus on a few of them. And three, I’m here raising money, because we’re not going to be undercapitalized.”[28]

Third, the idea that venture capitalists get into deals on the strength of their brands can be exaggerated. A deal seen by a partner at Sequoia will also be seen by rivals at other firms: in a fragmented cottage industry, there is no lack of competition. Often, winning the deal depends on skill as much as brand: it’s about understanding the business model well enough to impress the entrepreneur; it’s about judging what valuation might be reasonable. One careful tally concluded that new or emerging venture partnerships capture around half the gains in the top deals, and there are myriad examples of famous VCs having a chance to invest and then flubbing it.[6] Andreessen Horowitz passed on Uber. Its brand could not save it. Peter Thiel was an early investor in Stripe. He lacked the conviction to invest as much as Sequoia. As to the idea that branded venture partnerships have the “privilege” of participating in supposedly less risky late-stage investment rounds, this depends from deal to deal. A unicorn’s momentum usually translates into an extremely high price for its shares. In the cases of Uber and especially WeWork, some late-stage investors lost millions. Fourth, the anti-skill thesis underplays venture capitalists’ contributions to portfolio companies. Admittedly, these contributions can be difficult to pin down. Starting with Arthur Rock, who chaired the board of Intel for thirty-three years, most venture capitalists have avoided the limelight. They are the coaches, not the athletes. But this book has excavated multiple cases in which VC coaching made all the difference. Don Valentine rescued Atari and then Cisco from chaos. Peter Barris of NEA saw how UUNET could become the new GE Information Services. John Doerr persuaded the Googlers to work with Eric Schmidt. Ben Horowitz steered Nicira and Okta through their formative moments. To be sure, stories of venture capitalists guiding portfolio companies may exaggerate VCs’ importance: in at least some of these cases, the founders might have solved their own problems without advice from their investors. But quantitative research suggests that venture capitalists do make a positive impact: studies repeatedly find that startups backed by high-quality VCs are more likely to succeed than others.[7] A quirky contribution to this literature looks at what happens when airline routes make it easier for a venture capitalist to visit a startup. When the trip becomes simpler, the startup performs better.[8]

best VCs know that companies are always bought, never sold.

Young guys moving west after college no longer hope to become the next Steve Jobs, they want to become the next Mark Andreassen. The Valley has become a Casino where the VCS and Angel Investprs blindly bumping money into every slot machine hoping to hit the Jackpot. The difference is that the bunter who gets lucky on a slot machine doesn’t walk away convinced he is a Genius. Instead of writing about tech, the industry‘s bloggers now write about venture deals and who raised how much at what valuation. The Valley has become obsessed with money, and there is a lot of it around.

VCs who force the timing—who give you a term sheet to sign right here, right now—to make you feel panicked. A VC once gave me a term sheet as I was walking out of the meeting and pushed me to sign it on the spot. I asked if this was a used car dealership and told him I’d only sign after I read the terms.

Looking back, Wallace concluded that instead of raising funds from VC firms, Quincy could have sought financial backing from a clothing factory. That would have solved two problems: A factory with an equity stake in Quincy would have expedited orders and worked harder to correct production problems, and factory owners with deep industry experience would have known how to set an optimal pace for the growth of a new apparel line—in contrast to Quincy’s VCs, who pressured the founders to grow at full tilt.

Investors move in herds, and as a result, venture capital is prone to boom-bust cycles. When a sector is hot, VCs scramble to add startups from that sector to their portfolio. But sentiment can turn sour—quickly—and when it does, investors may shun even healthy startups.

VCs care about their brand image within the community of founders, but much less so among operating executives.

Parker Brothers and other companies sold a billion dollars worth of handheld games in 1979, which didn’t encourage them to look to the much smaller videogame market. In that market, the leading company, Atari, had sales of only $238 million during that same year—and that was after the Atari VCS had been on the market for more than twelve months.

games like Taito’s Space Invaders were not designed with the peculiarities of the Atari VCS in mind. Sprites were different in many post-1977 arcade games. Most important, there were often more than two per screen! When faced with the rows of aliens in Space Invaders or the platoon of ghosts that chases Pac-Man, VCS programmers needed to discover and use methods of drawing more than two sprites, even though only two one-byte registers were available.

Kamangar sometimes thought the team was in way over its head. He couldn’t believe the way Brin and Page would behave. They would go into VC meetings and refuse to answer questions. Even a basic query such as how much traffic was on the site would be stonewalled. What’s more, says Kamangar, “Larry and Sergey didn’t have the language to say things nicely. They’d be kind of blunt and say, ‘We can’t tell you.’ And the VCs would get very frustrated.” One VC actually stormed out of the room. Salar would go to Page and Brin and say, “Did we really want to do that? These are major figures in the Valley, and they seem really pissed off at us. Isn’t this bad?” But Larry and Sergey had complete confidence. They’d tell Salar that the VCs didn’t need to know the figures unless they were going to commit the money. Page was working the “hiding strategy” even before he had something to hide.

Outside board members are usually compensated with stock options—just like key employees—and are often invited to invest money in the company alongside the VCs.

The VCs did not care to make these sort of colossal bets on the future.

The VCs could tolerate companies’ going bust—they had so many of them—but they could not tolerate missing out on the new new thing.

start-ups are created when a trusted relationship and line of communication is established between the visionary (entrepreneur) and the pattern recognizer (investor) for two-way knowledge transfer.

Whether it is a great product, start-up, or a book, anything meaningful that touches many comes together when a remarkable team strokes together in great harmony with a common mission.

There are many shiny objects out there, and if we focus on those (or on impressing the VCs who are focused on them) to the neglect of usefulness, we might find ourselves in a situation similar to that of only a few years ago, when we built Flash intros on every site just because we could.

Perhaps because of the special nature of the TIA, or perhaps because of the limitless human capacity for technical fascination, programmers have continued to hack at and develop original VCS games. There is a thriving hobbyist community that has picked up the Atari VCS, using and refining emulators, writing disassemblers and development tools, and even manufacturing cartridges and selling them, complete with boxes and manuals. This “homebrew” scene could be seen, strictly speaking, as continuing the commercial life of the Atari VCS, but the community is not very corporate. It operates on the scale of zines and unsigned bands, with most recent ROMs offered for free online—even if they are also sold in limited releases of a few hundred copies in cartridge form.

Nike, Microsoft Amazon and similar companies went public relatively early in their growth cycles. As a result, public investors had the opportunity to participate in 95 to 99% of their overall price appreciation. Founders, early employees and VCs took all the risk. Most of the reward was left for grabbing – anyone could’ve bought those stocks on the secondary markets.   As the Federal Reserve prints more money and interest rates remain low, an increasing percentage of capital is flowing into risky asset classes like venture capital and “angel investing.” This capital has chased up valuations in the pipeline preceding IPOs, making the IPOs feel more like the end of the journey, not the beginning. Thus,

Although continual sound effects were common in VCS games, it is hard to produce anything that sounds like Western music on the machine. The frequencies that the TIA can generate miss most of the chromatic scale. When Garry Kitchen was working as a programmer for Activision, he went through and marked the notes that the Atari VCS could hit. He then asked a professional composer of jingles to put something together using only those notes.

Livingston: Didn't you also insult them by describing publicly what it was like to have VCs run your company? Greenspun: Only after they sued me. I said it was like watching a kindergarten class get into a Boeing 747 and flip all the switches and try to figure out why it won't take off. That was before I got my pilot's license. Now I know how apt it was.

Livingston: I know it was your sixth company, but was there anything that you found you were better at? Greenspun: I think I was probably mostly worse at things than I thought. The VCs had a point when they said people remember how you made them feel more than what you said.

This implies two very strange rules for VCs. First, only invest in companies that have the potential to return the value of the entire fund. This is a scary rule, because it eliminates the vast majority of possible investments. (Even quite successful companies usually succeed on a more humble scale.) This leads to rule number two: because rule number one is so restrictive, there can’t be any other rules.

This implies two very strange rules for VCs. First, only invest in companies that have the potential to return the value of the entire fund. This is a scary rule, because it eliminates the vast majority of possible investments.

The key characteristic is the desire to solve a problem for the customer. That is the driving passion, not “I think this is going to be a billion-dollar company and I want to hop in because I can get rich.” We’re looking for people whose ideas get floated around. People who fight over the chance to work on solving a problem rather than passing the buck.

Digital India needs: 200 VCs, 5K angels top courses on entrepr. no cap gain, foreign listing, low cap cost, celebratory founders, less rules

Venture capitalists’ job is to invest in risky projects. But after shying away from risk for years, VCs finally found there was no longer anybody willing to found a risk-taking company.

You can have lots of plausible theories about what venture capitalists as a class can do to get good returns, until you take the 1980s into account. Then you can only have one: the only thing VCs can control that will improve their outcomes is having enough guts to bet on markets that don’t yet exist. Everything else is noise.

Nor can it be argued that VCs somehow programmed irresponsibility into these companies when they were in their cradles

Today, if VCs are to finance capital-intensive projects, they need to recall their past. They can supply large sums of capital if they are allowed to own a large share of the resulting company.

The flourishing of this syndrome has helped cultivate another tech myth: that of “exceptionalism,” in which unicorn founders, execs, early hires, and certain VCs, who have all drunk deeply from the Kool-Aid, believe that because the world is a meritocratic place, they and they alone are responsible for their success, due to the fact that they are smarter and work harder than anyone else. The trouble with that theory is that it is demonstrably untrue in the vast majority of cases, not least because while, yes, they may be smart and work hard, they are also the beneficiaries of a once-in-a-century alignment of circumstances, ranging from the development of the internet itself to the Wild West–style “lawlessness” of the Valley, which was left free to roam far ahead of governments, regulators, and tax codes, to today's unprecedented surfeit of venture capital and scale culture.

Don’t move to Silicon Valley. Even before 2020, I would have said, “Don’t quit your job, don’t move to SF, don’t pass go, and don’t collect $200 (from VCs).” After all, San Francisco is expensive, traffic-heavy, and not a great place to raise your children—or even a dog. Now, post-COVID, remote work is the new normal, and that means you can stay where you are. Sam Altman, the former CEO of Y Combinator, said that he was “very excited to see SF have to compete with other cities.” Me too. Not only is it cheaper and less competitive to build your company in a smaller town or city, but it’s also better for the local community, which as we’ve learned can pay dividends for your business.

One of the more irritating habits VCs have is "pattern matching," making recommendations and suggestions based on what other supposedly successful companies were doing. No two companies are alike, and just because another company is doing it, doesn't make it right.

The idea was for the government to invest $100 million to create ten new venture capital funds. Each fund had to be represented by three parties: Israeli venture capitalists in training, a foreign venture capital firm, and an Israeli investment company or bank. There was also one Yozma fund of $20 million that would invest directly in technology companies. The Yozma program initially offered an almost one-and-a-half-to-one match. If the Israeli partners could raise $12 million to invest in new Israeli technologies, the government would give the fund $8 million. There was a line around the corner. So the government raised the bar. It required VC firms to raise $16 million in order to get the government’s $8 million. The real allure for foreign VCs, however, was the potential upside built into this program. The government would retain a 40 percent equity stake in the new fund but would offer the partners the option to cheaply buy out that equity stake—plus annual interest—after five years, if the fund was successful. This meant that while the government shared the risk, it offered investors all of the reward. From an investor’s perspective, it was an unusually good deal.

If you start a startup, don’t design your product to please VCs or potential acquirers. Design your product to please the users. If you win the users, everything else will follow.

VCs will argue that many female entrepreneurs are guilty of underselling themselves. Investors have told me that women often focus on pitching their skills, data, and metrics rather than selling a big vision, something men are more comfortable doing. That vision may be grandiose and nearly impossible to achieve, but it sure sounds good. Investors want to fund outsize successes, and telling a good story is critical. That’s why you will often hear investors say they fund people instead of ideas.

VCs want to believe in an entrepreneur’s idea, but they want to believe even more in that entrepreneur’s willingness to think big and drive to succeed at any cost.

VCs want to hear a visionary pitch, the story of a billion-dollar opportunity that will justify the financial risk required to make it happen. But if a woman does make a visionary pitch, VCs are prone to doubt that she will be able to bring that vision to life. With men, they are more willing to believe that the sky’s the limit.

So how do you evaluate a founding team? Different VCs of course do things differently, but there are a few common areas of investigation. First, what is the unique skill set, background, or experience that led this founding team to pursue this idea? My partners use the concept of a “product-first company” versus a “company-first company.” In the product-first company, the founder identified or experienced some particular problem that led her to develop a product to solve that problem, which ultimately compelled her to build a company as the vehicle by which to bring that product to the market. A company-first company is one in which the founder first decides that she wants to start a company and then brainstorms products that might be interesting around which to build one.

The equivalent in founder evaluation for VCs is founder-market fit. As a corollary to the product-first company, founder-market fit speaks to the unique characteristics of this founding team to pursue the instant opportunity. Perhaps the founder has a unique educational background best suited to the opportunity. We at a16z saw this with

Greedy VCs who will invest only if they can take an outsized piece of your company. Typically a VC needs between 18 and 22 percent to make their model work—step carefully if they begin asking for more. And don’t assume they’re the only game in town—if your gut is telling you to keep looking, then keep looking.

VCs who promise everything under the sun to get you to sign, then don’t deliver. Often they’ll repeat themselves over and over, telling you just how much personalized attention you’ll get, how much help, how much this or that. Make sure to talk to other startups who’ve worked with them to find out what they actually offer when they’re not in sales-pitch mode.

Sometimes a potential investor sees something interesting in your company—maybe you haven’t received money from the right VCs, or you’re tight on cash, or you have an incredible breakout success. So they’ll propose a really sweet deal, but their terms will screw the other investors who have gotten you this far. We see lots of big and small VCs trying to gain an edge by not playing fair—they may overdilute previous investors or put terms in your deal that scare off new ones. And if things aren’t going well a couple of years down the road, they’ll have no qualms about screwing you, too. So be careful when the terms aren’t standard or seem too good to be true—sometimes it may appear that you’re only giving away a small thing, but if it doesn’t feel right in your gut, it may be that they’re trying to get a foot in the door to start turning the tables against everyone else. They want to control your company sooner or later.

Chinese founders no longer had to tailor their startup pitches to the tastes of foreign VCs. They could now build Chinese products to solve Chinese problems. It was a sea change that altered the very texture of the nation’s cities and signaled a new era in the development of the Chinese internet. It also led to an overnight boom in production of the natural resource of the AI age.

Capital-intensive ventures expect the industry to grow rapidly and seek to spend large amounts of capital to dominate it. These expenses and investments are made ahead of revenues, causing losses and negative cash flow. This negative cash flow is hopefully funded by angel capitalists and VCs.

Unlike VCs, corporations usually prefer to invest in evolutionary products due to the lower risk and compatibility with existing corporate businesses, structures, practices, systems, and channels. Revolutionary technologies can disrupt the corporation’s business strategies, markets, and channels. Although there now is greater awareness of the existential dangers to corporations from disruptive innovations and revolutionary technologies, due to the work of researchers such as Clayton Christensen, the problems many corporations face include the high risk to executive careers from high-risk ventures and the potential for cannibalization of existing cash flow. Other hurdles to corporate adoption of revolutionary technologies are the lack of sales history for the products, and uncertainty about the timing for takeoff and the strategy that will succeed.

Kick-starting this ecosystem will require a shift in mentality for VCs who participate. The very idea of venture capital has been built around high risks and exponential returns.

Startups require a a freewheeling environment, devoid of any stifling policies where angel investors and VCs can put up capital to nurture wild dreams of young inexperienced entreprenurs. Policy framework has to acknolwledge that. Indian bureaucracy is a successor to British Civil Service, who job it was to suppress Indian spirit and extract revenues.

Venture capital has succeeded mainly when high-potential industries are emerging. Historically, VCs earned high returns from emerging, high-potential industries such as semiconductors, personal computers, biotechnology, and telecommunications in the 1970s and 1980s; Internet 1.0 in the 1990s; and Internet 2.0 in the 2000s. When there are no major industries at the emerging stage, VC returns have fallen.

VCs have shown a preference for ventures that sell directly to users and customers. In the pre-Internet era, most VC-funded ventures sold directly to businesses (B2B) due to the relative ease of identifying and targeting potential customers. The Internet changed this by allowing direct sales to national and global consumers. VC-funded ventures in the Internet age include very successful ones that sell online to national and global consumers

Unlike corporations that prefer evolutionary advances, VCs often prefer products or services that are based on emerging, revolutionary technologies.

Making the movie” is the term that a venture capitalist friend applies to the process of building a start-up. In my friend’s tech-company-as-movie analogy, the VCs are the producers and the CEO is the leading man. If possible, you try to get a star who looks like Mark Zuckerberg—young, preferably a college dropout, with maybe a touch of Asperger’s. You write a script—the “corporate narrative.” You have the origin myth, the eureka moment, and the hero’s journey, with obstacles to overcome, dragons to slay, markets to disrupt and transform. You invest millions to build the company—like shooting the movie—and then millions more to promote it and acquire customers. “By the time you get to the IPO, I want to see people lined up around the block waiting to get into the theater on opening night. That’s what the first day of trading is like. It’s the opening weekend for the film. If you do things right, you put asses in the seats, and you cash out.

was whining the war,

The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined. This implies two very strange rules for VCs. First, only invest in companies that have the potential to return the value of the entire fund. This is a scary rule, because it eliminates the vast majority of possible investments. (Even quite successful companies usually succeed on a more humble scale.) This leads to rule number two: because rule number one is so restrictive, there can’t be any other rules.

But no matter how unambiguous the end result of the power law, it doesn’t reflect daily experience. Since investors spend most of their time making new investments and attending to companies in their early stages, most of the companies they work with are by definition average. Most of the differences that investors and entrepreneurs perceive every day are between relative levels of success, not between exponential dominance and failure. And since nobody wants to give up on an investment, VCs usually spend even more time on the most problematic companies than they do on the most obviously successful.

The key with the VCs is to show them you know your stuff. You need to explain it in a way that makes sense but also take it a little further, so they are slightly confused and don’t want to look stupid. You need to make sure they know that you know what you’re doing.

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Getting to fifty-fifty is incredibly complex and nuanced, requiring many detailed solutions that will take decades to fully play out. To accelerate the process, change needs to start at the top. Like Stewart Butterfield, CEOs need to make hiring and retaining women an explicit priority. In addition, here is the bare minimum of what we can do at an individual and a systemic level: First of all, people, be nice to each other. Treat one another with respect and dignity, including those of the opposite sex.That should be pretty simple. Don’t enable assholes. Stop making excuses for bad behavior, or ignoring it. CEOs must embrace and champion the need to reach a fair representation of gender within their companies, and develop a comprehensive plan to get there. Be long-term focused, not short-term. It may take three weeks to find a white man for the job, but three months to find a woman. Those three months could save three years of playing catch-up in the future. Invest in not just diversity but inclusion. Even if your company is small, everything counts. And take the time to educate your employees about why this is important. Companies need to appoint more women to their boards. And boards need to hold company leadership to account to get to fifty-fifty in their employee ranks, starting with company executives. Venture capital firms need to hire more women partners, and limited partners should pressure them to do so and, at the very least, ask them what their plans around diversity are. Investors, both men and women, need to start funding more women and diverse teams, period. LPs need to fund more women VCs, who can establish new firms with new cultural norms. Stop funding partnerships that look and act the same. Most important, stop blaming everybody else for the problem or pretending that it is too hard for us to solve. It’s time to look in the mirror. This is an industry, after all, that prides itself on disruption and revolutionary new ways of thinking. Let’s put that spirit of innovation and embrace of radical change to good use. Seeing a more inclusive workforce in Silicon Valley will encourage more girls and women studying computer science now.

Finally, it was Evan’s turn. Showtime. He approached the front of the room like the entrance to a party, strutting confidently to show the crowd what he, Reggie, and Bobby had been working on tirelessly for the past six weeks. Confident and comfortable, Evan enthusiastically explained to the other thirty students, two professors, and half a dozen venture capitalists that not every photograph is meant to last forever. He passionately argued that people would have fun messaging via pictures. The response? Less than enthusiastic. Why would anyone use this app? “This is the dumbest thing ever,” seemed to be the sentiment underlying everyone’s tones. One of the venture capitalists suggested that Evan make the photos permanent and work with Best Buy for photos of inventory. The course’s teaching assistant, horrified, pulled Evan aside and asked him if he’d built a sexting app. The scene was reminiscent of another Stanford student’s class presentation half a century earlier. In 1962, a student in Stanford’s Graduate School of Business named Phil Knight presented a final paper to his class titled “Can Japanese Sports Shoes Do to German Sports Shoes What Japanese Cameras Did to German Cameras?” Knight’s classmates were so bored by the thesis that they didn’t even ask him a single question. That paper was the driving idea behind a company Knight founded called Nike. The VCs sitting in Evan’s classroom that day likely passed up at least a billion-dollar investment return. But it’s very easy to look at brilliant ideas with the benefit of hindsight and see that they were destined to succeed. Think about it from their perspective—Picaboo’s pitch was basically, “Send self-destructing photos to your significant other.” Impermanence had a creepy vibe to it, belonging only to government spies and perverts. With the benefit of hindsight, we can see that Facebook developed the conditions that allowed Snapchat to flourish. But it wasn’t at all obvious watching Evan’s pitch in 2011 that this was a natural rebellion against Facebook or that it would grow beyond our small Stanford social circle.

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If one asks how exactly VCs do that they do, it is not clear that the answer today is much different from half a century ago. The dominant form of organization is still the limited partnership with an ephemeral fund life, even though this places constraints on the time scale of investment returns. Although there have been some organizational structure and strategy innovation, these have been paradoxically rare in an industry that finances radical change.

VCs and entrepreneurs are considered by many to be thinkers these days, their commercial utterances treated like ideas, and these ideas are often in the future tense: claims about the next world, forged by adding up the theses of their portfolio companies or extrapolating from their own start-up’s mission statement. That people listened to their ideas gave them a chance to launder their self-interested hopes into more selfless-sounding predictions about the world. For example, a baron wishing to withhold benefits from workers might reframe that desire as a prediction about a future in which every human being is a solo entrepreneur. A

VCs mostly invest in ventures that exploit revolutionary technologies that are not easily imitated by large corporations and after the basic research is done. This means that they exploit attractive basic research findings when the industry is emerging. In this emerging stage, the industry is growing and competitors are often newer and weaker. Although the risk is high due to the newness of the industry, the potential and the prospects for growth attract VC investment.

Colossal Cave (also known as Adventure—not to be confused with the Atari VCS game of the same name) was developed by assembly-language programmer William Crowther

the idea of radical equality Kassar cited in response to Crane’s request—programmer being equal to assembly line worker—had a precedent. In the early days, Bushnell maintained a policy that no one would be fired (although they might be denied a raise) and ensured that everyone, from executives to assembly line workers, had the same health care plan. But with VCS development organized along a model of the lone programmer who was almost completely, individually responsible for a sometimes very lucrative game, it became less tenable to claim that the programmer was no more important than any other human resource.

By the early 1980s, VCS development was still largely the same, although some changes were brewing. At Atari and Imagic, the first artist-programmer teams were created, allowing artists to focus on sprite and screen visuals.

I am not saying that VCs are despicably evil (that would be investment bankers), but you would be better spending more time on building your business than building and polishing the pitch deck.