Highlights from “Secrets of Sand Hill Road: Venture Capital and How to Get It”
Attached are the best excerpts (and summarized texts from yours truly) from the book “Secrets of Sand Hill Road: Venture Capital and How to Get It” by Scott Kupor
The markets can remain irrational longer than you can remain solvent — John Maynard Keynes
Venture capitalists raise investment funds from a broad range of limited partners (LPs), such as endowments, foundations, pension plans, family offices, and funds of funds. The capital raised from LPs is then invested in great entrepreneurship with breakthrough ideas.
Founder = product visionary [product/engineering types] + drives company’s strategy and resource allocation decisions
Make new mistakes = take informed risks + iterate on product/service offerings + learn from previous mistakes and avoid repeating them
Three categories of qualitative heuristics that VCs use to evaluate prospects for an investment: people, product, and market.
In a strange way, sometimes familiarity can breed contempt — and conversely, the distance from the problem that comes from having a completely different professional background might actually make one a better founder.
To make the decision to be a founder, an individual needed to be so confident in her abilities to succeed, that she would border on being so self-absorbed as to be truly egomaniacal. You have to partly delusional to start a company given the prospects of success and the need to keep pushing forward in the wake of the constant stream of doubters.
Good VCs invest in good ideas that look like bad ideas — hidden gems that probably take a slightly delusional or unconventional founder to pursue.
Will this product solve a fundamental need in the market (whether or not that need is known currently to customers) such that customers will pay real money to purchase it?
Founder’s idea maze: how did she get to the current product idea, incorporating which insights and market data to help inform her opinions?
New products won’t succeed if they are marginal improvements against the existing state of the art. They need to be ten times better or ten times cheaper that current best in class to compel companies and consumers to adopt.
Accredited investor = someone who has a $1 million net worth, or have amn ongoing prospecting of earning — and have an ongoing prospecting of earning at least $200,000 annually annually.
Types of LPs (Limited Partners):
- University endowments
- Foundations (required to pay out 5% of their funds every year)
- Corporate and state pension funds
- Family offices
- Sovereign wealth funds
- Insurance companies
- Funds of funds
