Customer Reviews

The Venture Capital Cycle

5 star:		(4)
4 star:		(3)
3 star:		(5)
2 star:		(4)
1 star:		(0)

 

 

We used this book in an MBA course on Venture Capital here at the University of Michigan b-school. I think this is an excellent book.

First, do NOT expect to be a book full of venture capital anecdotes. While that is always intersting, this book is a serious treatment of what the venture capital business is about: how funds are raised, how venture capitalists arrange deals to ensure adequate compensation for their risk, how investments are staged, how the investments are managed, exit strategies and methods, and more.

This is a lot to cover in a book of approximately 350 pages, but it is all covered very well. The writing is quite clear and readable. Though this is not a book for the general reader, it is not difficult to read if you have some background understanding of business theory and a touch of finance.

What is so helpful about reading this book is that people seeking venture capital will understand more about why things are structured they way they are. It isn't just arbitrary greed and control. It is a business deal that requires an expected positive return - you know - making money (which does concern self-interest (greed) and structure (control) - but with slightly more reasoning).

While people seeking to make venture investments will immediately understand why they need something like this book and a whole lot more, I believe it is essential for people seeking investment money to also have a significant understanding of this process. Why? Because the venture capitalists understand this process completely and the people seeking investments usually don't do enough of these deals to really know what is going on. And if they are too blind they will be sheared like sheep. They need to understand all the interests involved so they can argue on their own behalf and make the deal as favorable as they can.

In any case, while this isn't the only book you should read on the subject it is certainly a good one. It is of manageable length with a great deal of clear and helpful information. I find this topic fascinating.

The authors are two Harvard b-school academics who carried out a rigorous, disciplined, statistical analysis of a venture capital deal database. Their research identified a variety of patterns -- some of them interesting, others predictable.

Frankly, the conclusions could've been handily summarized in a SHORT article written for the Harvard Business Review. Therefore, I recommend that VC practitioners skim each chapter's conclusions, and skip over the rest.

Only if you love the blow-by-blow minutiae of academic statistical analysis, would you feel impelled to slog through the book's dry, methodical expositions of hypotheses, statistical procedures, and summary tables.

Besides, a substantial portion of the book betrays an academic's fascination with why VCs do things the way they do, rather than with identifying profitable new alternatives. All in all, not a practical book for VCs.

Loved the book. It won't appeal to someone not accustomed to reading academic work, but is thoroughly informative. They've really gone the extra mile to bring to you detailed information about this secretive industry. They leave no stone unturned. I also appreciated the non-judgemental approach. They explore all reasonable hypothesis of each question or topic - and back up their conclusions with real analysis. This is not a book of some opinionated gurus telling you thoughts off-the-cuff. Everything is substatiated.

I agree with some of the previous reviewers in that this volume is extremely well researched. The analyses performed are data rich, which, in general, is difficult to do in the venture capital industry where data are sometimes hard to come by. However, I was a bit disappointed in that 10 of the 16 chapters were based on previously published material. If their objective was to truly study the venture capital cycle (and the interrelationships between the various stages), then the volume would have benefitted greatly by having a third author (or editor) who could take the results and present them in more of a "What does this mean?" format. More frameworks and more figures (diagrams) would have helped this volume dramatically. I think this should have been anticipated and acted upon by the publisher.

This book requires quite a bit of digging as you read. I found myself making notes in the margin, which is perfectly fine...except for the fact that the book is positioned as "excellent reading for veterans as well as anyone exploring this...industry for the first time." If the intention was to provide an introduction, then more Figures such as those in Chapter 14 would have been helpful. I was VERY disappointed in Chapter 15 (only 3 pages?)...this last chapter could have been an opportunity to step back and look at the entire cycle (with a figure) and explore how their findings fit within the cycle framework and help readers understand the cycle.

This book is ideal for entry-level Ph.D. graduate students who are looking for a rigorous introduction to the field and are perhaps considering dissertation work in this field. MBAs or other finance professionals who have extensive experience in non-linear regression may also benefit. Those searching for an introduction to the venture capitla industry should turn elsewhere.

An excellent review of the academic side of venture capital investing. Topics are current, although the data tends to be dated. A must-have reference for anyone in the VC industry.

The Venture Capital Cycle is a thorough overview of the venture capital market that will be edifying to those who know little about the mysterious methods of private equity financiers, but self-evident to those with a background in corporate finance. Readers who have worked in or studied finance already are familiar with the tidal cycles that govern the flow of capital into early-stage companies, as well as the process through which money moves from institutions and individuals to fledgling enterprises. But we [...] strongly recommend that entrepreneurs read this book, which provides an exhaustive tour that will answer many - if not all - of your questions about where venture capital comes from, how you can get a hold of some, and how your life and business will change after you do. And if, along the way, you think that the authors sound too much like professors with their dense, academic prose, you're right.

Considering the fact that this book was written by 2 professors at the Harvard Business School and was published by a prestigious academic press (the MIT Press), it should seem obvious to anyone with some degree of intellectual sophistication that this book was intended to be an academic/research take on the venture capital industry. On that level, this book scores a solid 5 stars (especially since there is nothing like this book out there). For some strange reason people have gotten the impression that this book should be filled with 'war stories' of VCs and entreprenuers, sayings of business gurus, and other back-slapping, feel good cliches instead of rigourous scientific evidence. When these people find themselves disappointed (despite the obvious fact that this is a research oriented book) they accuse this book of being "not practical" or being only for eggheads. While it is true that this book is not going to be full of bar room banter about how one can get rich quick, keep in mind the fact that most VCs and entrepreneurs are in the business of sophisticated and highly technical ideas. If VCs and entrepreneurs have a great deal of intellectual sophistication, wouldn't they find a book full of empirical and deductive evidence about their field be interesting and possibly valuable? Food for thought.

Reviews note the book is "academic" but don't always capture how tedious this is or what it feels like. For example, a chapter "how on VCs oversee companies" spends about 20 pages showing that (A) VCs are more likely to have members on the boards of nearby companies than far ones, and (B) VCs are more likely to add a couple board members to companies when the company is passing a crisis like doing poorly and changing the CEO. Those two points, very very carefully explained, I don't need twenty pages to explain them. I'd rather leave, say, 18 of the 20 pages, for an explanation of customary ways VCs control or influence the startups. This could still be objective - perhaps vignettes of 10 major decision points in 10 companies, and the role VCs (versus company managment) played in the choices, and some summary comments. But that's not what's in the chapter on "how VCs influence companies." Some of the other chapters are not so incredibly dry, but, whew. It's like someone spending 30 minutes telling you how they got from the parking lot to the terminal, (which could be, ahem, left to the imagination let's say) and leaving 5 seconds for the trip to Paris that followed.

This book is an awesome read for those who want to enter the world of Venture Capital. It explains more than what VC's do, it elaborates on the "how,when,why" of the entire process. From mathematical and data support (which is a bit complex for the average reader), its value in the book substantiates it's position on everything from timing funding, to VC experience (or lack of), and even firm or entreprenuerial behavior. Great first book in my opinion!

This was one of the better books I've read on VC. Extremely well researched, very informative, though it took awhile to read. Recommended.