Yesterday I shared a few takeaways from reading The Power Law: Venture Capital and the Making of the New Future. The book does a great job of describing some early-stage venture capital investments that had outsize returns (Cisco, Apple, Google, eBay, Alibaba, Facebook, Uber, etc.). There’s a story behind each of these deals, and the book tells each story in an interesting way and even gives specific financial details on some of these investments.

These deals were all different, but they had one thing in common: the companies were early into new markets that quickly became massive. Most ended up dominating their markets (for better or worse).

Markets matter a lot. They have a material impact on outcomes. Founders should be aware of this and be honest with themselves about the market they’re going after. If you’re solving a problem in a slow-growth or declining market, an already difficult journey will likely be many times harder.

I just finished reading The Power Law: Venture Capital and the Making of the New Future. I’d pieced together the history of venture capital, but this was a fascinating chronological account of the industry with lots of details. A few takeaways:

• Family office origins – 1946 was the year venture capital investing was begun by wealthy families. The Rockefeller and Whitney families started to experiment with investing in risky early-stage businesses. It took time for others to embrace this model and put the right structure behind it.
• Angel investing – Google raised $1 million from individuals in 1998, which was unheard of at the time. This contributed to the rise of angel investing.  
• Sequoia – Founded in 1972 by Don Valentine, this firm has been at the top of its game for many decades. It has continued to evolve and expand the ways it invests by being curious and intentional. There’s an entire chapter dedicated to Sequoia because of the impact it’s had on the industry.
• China – The evolution of China’s venture capital industry is well chronicled. China’s tech industry was heavily influenced by American venture capitalists who found work-arounds to invest in promising companies.
• Ownership – In the early days of venture capital, investors would routinely own a significant percentage of companies in early founding rounds. A six- or low seven-figure investment for 40% of the company was not outside the norm. Over the years, these figures have come down as more capital has flooded the industry.
• Larger funds – Funds have exploded in size. The book details the impact of this fact on the industry and on founders.
• Networks – The industry was (as still is) highly dependent on who you know, for better or worse.
• Disruption – Even though it invests in disruptive companies, venture capital didn’t evolve until it was forced to because of disruption. Love them or hate them, investors such as Yuri Milner (DST Global), Chase Coleman (Tiger Global), and Masayoshi Son (Softbank Vision Fund) forced the industry to change. It’s likely time for more disruption in the industry.

This book is full of details and information about the industry and the most prolific investments over the last few decades. This book filled a lot of gaps for me, and I highly recommend it to anyone curious about the industry and how it evolved to what we see today.

Over the holiday, I finished reading Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork. I’ve read stories here and there about the WeWork saga, but it was good to get a chronological account with more details. Here are a few takeaways:

• Pitch – Adam wasn’t good at a lot of things (he didn’t even manage his own emails), but he was a great storyteller and pitchman. WeWork wasn’t a tech company, but venture capital funds specializing in tech invested in Adam. Their thinking was that he was the best salesperson they’d ever met, so they wanted to bet on him. They wanted to be along for the ride, wherever it took them.
• Softbank – Adam and Masayoshi Son bonded over their shared ability to think bigger and be more ambitious than everyone else. That bond served them well at first, and Softbank invested a gargantuan amount of money (almost $17 billion in debt and equity) at eye-popping valuations. Ultimately, WeWork became detached from reality. The relationship changed when WeWork came crashing back to earth after its IPO failed and it was in danger of running out of cash.
• Profitability – WeWork escaped having to be a profitable company for many years, but when the day of reckoning came, it wasn’t pretty. Companies can’t be unprofitable forever.
• Culture – The tone is set at the top. WeWork had a bad culture that began with Adam. It was a Game of Thrones environment where people burned out after 18 months or so.
• Husband/wife – This story is a cautionary tale of what can go wrong when there are no clear boundaries between spouses at work.
• Accountability – Adam’s accountability was minimal, which enabled him to do many of the things he did.
• Hypergrowth – The company was focused on growth and tried to achieve it at all costs. The end result was a ridiculous amount of capital burned to fuel expansion.

This was a great read. It’s such a crazy story that it’s hard to believe it’s true—but it is. It’s a cautionary tale of what can go wrong when too much capital is put in the wrong hands. WeWork is now a public company. I’m curious to see how the company will progress with its new CEO.