Mastering the VC Game: A Venture Capital Insider Reveals How to Get from Start-up to IPO on Your Terms
Few people can offer the type of insight that author Jeffrey Bussgang can offer into the murky world of venture capitalists—or “VCs” as they’re commonly known. Bussgang has sat on both sides of the negotiating table; first as an executive at Open Market as well as a co-founder of online/offline juggernaut Upromise, before becoming a general partner at venture capital firm Flybridge Capital Partners, where he currently works.
As the book notes, fully 18% of U.S. gross domestic product, as well 10% of all U.S. jobs, and 50% of all U.S. job growth comes from VC-funded companies. And yet few of us have any idea about how VC firms work and what, exactly, they do.
In a nutshell, in exchange for a percentage of business control, VCs offer two valuable items to entrepreneurs: (a) capital and (b) active leadership participation. But just like most things that can be easily explained, the venture capital game is one that has layers of seemingly neverending complexity.
On that point, one thing that Bussgang does particularly well—and arguably the most arcane aspect of venture capital as a whole—is explaining how VCs actually make money. In particular, the author spends several pages detailing the dreaded term sheet, which “is essentially a preliminary, nonbinding document between the entrepreneur and the VC that outlines the material provisions of the financing deal.” It is this term sheet that is often the stuff of both dreams and nightmares for the hopeful entrepreneur.
Bussgang also notes that, while all VC firms offer the aforementioned two valuable items, each one is quite different; a VC firm with a solid technology bent will be looking for the next Yahoo, while a VC firm with an interest in medical companies is looking for the next Viagra. Moreover, there are locational issues as well—a New York City-based startup is often, but not always, going to find more interest from an East Coast VC firm versus one elsewhere. These tiny nuggets of information are worth more than their weight in gold for entrepreneurs ever on a quest to know more about the people and process of institutional funding.
Along with simple and practical advice, Bussgang also liberally peppers Mastering with both personal anecdotes as well as stories of other VCs and entrepreneurs. Jack Dorsey, founder of Twitter, Reid Hoffman, founder of LinkedIn, and Gail Goodman, founder of Constant Contact, all make appearances, as do a number of other eminent modern businesspeople—complete with pictures.
The only negative thing this reviewer has to say about this otherwise well written and well researched book is Bussgang’s overuse of parentheticals (which, once noticed, become greatly distracting) rather than utilizing footnotes or simply doing away with the parentheses altogether. Still, it’s a small (albeit annoying) price to pay for a fascinating glimpse into his world.
If you’re an entrepreneur or have any interest in ever being one this is a must read.
Reviewer Logan Lo is a small business consultant under the guise of an intellectual property attorney and a certified general real estate appraiser. He is currently an associate at the commercial litigation firm Woods & Lonergan in their Intellectual Property and Real Estate Practices.