What are venture capitalists saying about your startup behind closed doors? And what can you do to influence that conversation?
If Silicon Valley is the greatest wealth-generating machine in the world, Sand Hill Road is its humming engine. That's where you'll find the biggest names in venture capital, including famed VC firm Andreessen Horowitz, where lawyer-turned-entrepreneur-turned-VC Scott Kupor serves as managing partner.
Whether you're trying to get a new company off the ground or scale an existing business to the next level, you need to understand how VCs think. In Secrets of Sand Hill Road, Kupor explains exactly how VCs decide where and how much to invest, and how entrepreneurs can get the best possible deal and make the most of their relationships with VCs. Kupor explains, for instance:
- Why most VCs typically invest in only one startup in a given business category.
- Why the skill you need most when raising venture capital is the ability to tell a compelling story.
- How to handle a "down round," when startups have to raise funds at a lower valuation than in the previous round.
- What to do when VCs get too entangled in the day-to-day operations of the business.
- Why you need to build relationships with potential acquirers long before you decide to sell.
Filled with Kupor's firsthand experiences, insider advice, and practical takeaways, Secrets of Sand Hill Road is the guide every entrepreneur needs to turn their startup into the next unicorn.
Sand Hill Road is for Silicon Valley in the same way as Hollywood is for Actors, Wall Street is for investment bankers, Music Row is for country music artists. The name of the book is catchy. The book was a recommended read by a fellow angel investor.
I liked the sections on term sheet dynamics, VC-LP relations, and VC as an alternative asset class.
Term sheet dynamics: Entrepreneurship is not seen as a career. Term sheet knowledge is not a natural part of most curriculum. VC financiers gain an unfair advantage while negotiating term sheets with entrepreneurs. The book intends to help entrepreneurs build a mental model around the balance of economic and governance terms with the VC financier.
VC-LP relation: If an entrepreneur understands the VC-LP relation, then she can be mindful while entering this marriage.
VC as an alternative asset class: The book mentions David Swensen and his influence on private investing by large institutional investors in the chapter Mighty Bulldog. For those who want to read about Swensen's contribution, read this : I was pleasantly surprised with his mention in the book. His alternatives-heavy (often dubbed as Yale-model) style of investing cannot be a template for sound investing - it drives even Swensen crazy as per this article.
Another pleasant surprise included mention of the 2015 Stanford study (by Ilya Strebulaev). The reference was used to emphasize the fact that VC-funded companies are important for continued US economic dominance.
Even though the book title includes 'secrets', I hardly found any secrets. However, the value is in forming a compendium of 320 pages in an easy-to-consume format.
The book would have exceeded my expectations to get the 5* rating instead of 4* rating if it touched upon the topic of dispersion of talent across the globe and how VC capital is forced to chase such talent in EMs (Emerging Markets)
This book is a must read for: 1. every aspirant, who wants to join the VC industry 2. every entrepreneur who wishes to secure VC financing
For a serious entrepreneur pursuing VC finance or an aspirant to join VC industry, I will post further reading on my upcoming linkedin blogpost. You can follow me at: https://www.linkedin.com/in/emanik/
Having being intrigued by the world of VCs lately, especially Sequoia and a16z, this was a good introduction into how their world works. The book explains why and how different stakeholders do what they do, and how the landscape is evolving.
Would have appreciated the book more if it wasn't so US centric and dealt less with the legality of things.
Great book. I started this with worries that much of the stuff might be a complete repetition as I read a bunch of other books on the subject. However, I feel that it had enough new content for me to justify the time spent reading.
There are three books that I want to read about the VC and start up culture. "The hard thing about hard things: building a business when there are no easy answers" by Ben Horowitz, Secrets of Sand Hill Road: Venture Capital and How to Get It by Scott Kupor) and "What you do is who you are" by Ben Horowitz.
I have already written a review about The hard thing about hard things book which I think is probably the best entrepreneurial management book I have ever read. This book (Secrets of Sand Hill Road) has not disappointed either.
When I first bought this book, I discussed it with a startup founder who just had raised a Series A in Silicon Valley. He was disappointed by how his investors were not pulling their weight in the partnership and he sounded disenchanted with the VC world. He had started reading the book, but his negative take on VC made me put the book away for some months until I made myself read it.
This is a book that anyone starting their carrier in VC or launching a venture bankable startup needs to read. It is an easy and very clear read about the main topics around fund raising. Being honest, even when I have working in investment management for over 20 years, this book was able to bring some clarity in several aspects of venture financing.
The book starts with a generic introduction to venture capital, but rapidly gets the reader thinking about different aspects of the VC financing industry. For example, Scott mentions that the VC world is undemocratic as only winners seem to get richer, but also because a limited number of players are allowed to ultimately compete. For me, this is an invitation for all entrepreneurs to get their act together and make sure they are able to participate in the VC financing industry by making sure to raise money from these funds over their lifetimes.
The firs book I read this year was "VC an American History" which goes into details about different investment philosophies among VC funds. Fore example, some of them are more interested in the technology aspect of the company, some others are more keen about the team and finally other funds are more interested about the size of the addressable market. What I like about Kupor's book is that it addresses all the aspects of what makes a startup VC backable, which should be enough for any founder to get excited about how to position their company.
Instead of going into detail about the topics in this book, I believe that this is the type of book where people need to have it handy and consult it overtime. The good news is that is accesible and well written, which will make this a key book for anyone interested in VC financing. Long are the days that books were written by academics, which did a great job, but lacked the constant practice of a real investor.
Well, it’s a useful book. Especially for those who are new to VCs. But.... although useful, I found the style somewhat arrogant. And yes, a16z, can afford it, but it isn’t classy. Also found the comments about the wife somewhat chauvinistic and diminishing to smart women out there. Obviously a smart *wife* may know as much about working for a startup vs paycheck/mortgage/kid as a smart man (“I passed the IQ test”). Especially when a startup is a VC with two very established men. Survival bias + path dependency. And all these baseball analogies, in 2019 really?.. If you don’t mind the style (and don’t know much about VC), the content is good. I personally find “Venture Deals” book (and related online course) to be as useful (or more) with better style
Poorly written but rich in content. A 101 & 201 on how to read term sheets.. but just as boring as it sounds. Fell far short of Horowitz style of utilizing narratives to make a point, as Kupor gives tactical advice on how to raise money, theoretically
Back in college we did a Silicon Valley trip that involved visiting a16z and hearing Scott talk for 30 minutes. Probably because my college endowment invested in a16z, but I can't be sure. I found him to be very insightful especially in a room filled with such expensive modern artwork. So when I saw that he published a book I resolved that I would one day read it. It was actually really boring and though this space is far from crowded I don't see what it added on top of Venture Deals, which was the book we were "required" to read prior to the trip.
Good comprehensive overview of how venture capital works. Would recommend for any participant in early-stage universe.
One area that jumped out as not covered in the book was how VC firms function day to day on sourcing and deciding on deals. Would have been interested to hear Scott’s view of the typical interaction between entrepreneur and VC in fundraising process - e.g. number of meetings, number of people at the firm that you meet, deal approval process, role of junior / mid-level people, how operations teams help, etc. Know processes vary widely and most are case by case so hard to generalize though.
Well written introduction to venture capital: reasons for the existence of the industry, incentives for its players, structure of a standard term sheet and the overall lifecycle of a fund and the impact of that in its investments. Scott Kupor's text is easily digestible (except some overly technical legal aspects in the term sheet) and the tone resembles that of a VC 101 class.
The best book on VC's that I have read so far, written by a managing partner at Andreessen Horowitz. It covers the VC lifecycle from selection until cashing out and what considerations are important in every phase of this journey. For example when planning how much money to raise then a startup should already foresee the next funding round and then plan for sufficient runway, detailed breakdown of term sheets, also many thoughts about ownership structures and effects of dilution.
“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.”
"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” based on real-world feedback.”
“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.”
Since I advise startups on strategy I need a ton of context to everything connected to it. Fundraising, finance, law, corporate governance are sometimes part of it. Since I'm no expert in those topics I often refer founders to lawyers, accountants, and VCs to help. But sometimes that's not possible and therefore I need to educate myself to serve my clients better.
That was my purpose to read this book. It's clearly a part of a "We are a media company monetizing through venture capital" approach of a16z. If you intend to raise capital from VCs you should read it alongside "Venture deals". It's not the most fun to read book I can recommend but not all things in business are fun. It serves the purpose to educate founders and startup executives in all things venture and for that, I give 5 stars.
I've listened to the audiobook on audible which is okay - but without a PDF attached would be really hard to figure out.
A good introduction to venture capital. I especially liked the use of court cases to demonstrate the weight of fiduciary duties
The term sheet chapters were a little hard to get through but he made things fairly clear
I wish he had expanded on the last part, though... He points out that companies are staying private longer, meaning that regular people who want to buy public stock lose out on a lot of the major growth (as companies are getting initial funding from investors in the private market) and so the future of VC should move towards democratizing access to capital.
How do we go abt doing that? Is it even enough? Time to find another book I guess lol
I learned so much from this. It’s a process that start-ups go through that I didn’t even know existed! Very unique book for me.
The key message in these blinks:
With the advent of countless new tech start-ups in the early 2000s, the relationship between venture capitalists (VCs) and entrepreneurs changed significantly. Nowadays, one of the main characteristics VCs look for in companies is a founder who has unique insight into the problem his product is trying to solve. Key to getting VCs on board with your product is mastering the art of the pitch, which involves exhibiting a willingness to adapt while still being 100 percent committed to the validity of your idea. Once you get funding from VCs, the challenge then becomes maintaining positive relationships with them; a good term sheet can help with this. And if you make it through to an IPO or acquisition, you’ll have joined the small club of founders who made it.
What to read next:
Venture Deals, by Brad Feld and Jason Mendelson
Now that you’ve got a good overview of the VC life cycle, it’s time to home in on some specifics. One of the main areas of contention when it comes to securing capital from VCs is negotiating the specifics of the term sheet.
Luckily, our blinks to Brad Feld and Jason Mendelson’s Venture Deals is the logical next step in expanding your knowledge of how to negotiate a good term sheet. Here, you’ll gain insight into how to get the best possible deal from VCs and learn a few tricks you should have up your sleeve while negotiating.
Scott Kupor writes in a fluid, easy-to-understand language, and explains the incentive structure of the venture capital industry and most of the other stakeholders in the formation and existence of a venture-backed company. I think it does a good job at what it set out to do, and points to interesting cases while discussing the duties and obligations of board members in the context of a private company.
Would recommend for aspiring entrepreneurs - the book might be a bit too US (and Silicon Valley)-centric, but probably still worth a read to get a broad idea of the VC world.
This is probably the best book in the entrepreneurship/business category that I've read thus far, and should be mandatory reading for any startup founder who is looking for funding. The technical twists and turns of venture capital financing are explained in a very clear and approachable manner, and the economic incentives of different stakeholders start to make sense. The focus is on the VC industry specifically in the US, but that's understandable given the author's background, and it also helps to keep the book relatively short and concise.
A comprehensive (even to me) book on VC. Could be helpful as a reference book if ever wanted to start your own business one day. I also got somewhat enlightened, and start to gain a bit of understanding about VC as part of a complex system in the commercial world. I'm sure the bigger machine is yet completely out of my mental reach, but nice to have a glimpse through a book as sincerely written as this one.
The challenge with this book was that I read Venture Deals by Brad Feld just a week before reading this book, so the first half felt super repetitive - but page 170 onwards brought in some fresh perspective and examples that added great insight.
The best Venture Capital playbook I have read so far. Very helpful for those who want to venture in the venture world (oh no I didn't) and understand the WHY, WHAT and HOW. I will go back to it many times.
This is worth reading for anyone wishing to be involved in venture or a venture backed start-up. Helpful nuances are explained, and pages are seldom wasted. I would estimate about a quarter of the book focused on legal issues, which I particularly enjoyed.
Nice practical knowledge on the influence and interests from different parties in venture deals. From term sheet to exit, the book discusses how GPs and LPs interests have a key role in the decision making process of a company.