Mastering the VC Game
A Venture Capital Insider Reveals How to Get
from Start-up to IPO on Your Terms
By Jeffrey Bussgang
This book, written by an entrepreneur turned venture capitalist, is aimed at company founders who want to raise money for their business. More specifically, it is targeted at US entrepreneurs chasing finance for a technology or healthcare project.
Jeffrey Bussgang writes from experience. In 2001, he co-founded a business called Upromise, a sort of loyalty marketing club that helps consumers save for their children’s college education; later the company was successfully sold to Sallie Mae. For the past seven years he has been a partner at Flybridge Capital Partners, a Boston investing firm that backs early-stage technology companies. So, he should know what he’s talking about.
Mastering the VC Game is a fairly practical volume, covering in detail subjects such as how to find a venture capitalist, deliver a pitch, structure a deal, manage a board and finally how to cash out.
There are plenty of real examples from Bussgang’s own experiences, combined with the sort of optimism and confidence you might expect from a Harvard Business School graduate who became a paper millionaire at the age of 26. That was as a result of Open Market, the internet start-up he worked at before Upromise, which went public with a valuation of more than $1bn (in spite of having just $1.8m in revenue).
Naturally, I like writers who are business practitioners. Rather than just observe and comment, they have participated, and really know what it is like to close a sale, score a big win – and back a flop.
So three cheers to the author for taking the effort to put his advice down on paper. I think perhaps he had some ghost writing help – but why not; he’s obviously a busy man, and this book wasn’t the day job.
I have quite a library of similar volumes. There is Zero Gravity by Steve Harmon, Financing Your Business with Venture Capital by Frederick Lipman, Inside Secrets To Venture Capital by Brian Hill and Dee Power – and, best of the lot, David and Laura Gladstone’s Venture Capital Handbook.
Compared to Bussgang’s guide, the latter is more user-friendly, more comprehensive, and has a broader focus than institutional venture capital and tech deals, covering angel investing and established companies in traditional sectors.
Bussgang’s book, however, has the advantage of being bang up-to-date. For anyone out there looking for professional capital for their idea, it is a great investment.
However, only a tiny number of early-stage businesses receive venture capital financing since many more get money from angel investors. In the US, and increasingly in Britain, there are thousands of wealthy individuals who put their savings into new private companies. As with all such angel investing, most such ventures fail, but occasionally they get a hit – where the returns might be 10 or even 50 times the original stake. Venture capital investing is all about such big, big successes.
If our economies are truly to recover from the recession, we need fresh commercial breakthroughs in areas such as technology and energy. Most research shows that in the past couple of decades, almost all new private sector job creation has come from companies that are less than five years old.
The only real way to defeat unemployment and tackle endless state deficits is to fuse entrepreneurs and intelligent capital in a formidable combination that is capable of generating spectacular tales such as those of Apple, Google, Intel and FedEx.
This needs enlightened government policies on issues such as capital gains tax and employment legislation. Politicians would be advised to read more books like this and see how wealth creation actually takes place.
The reviewer runs Risk Capital Partners, a private equity firm, and is chairman of the Royal Society of Arts
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