Book Review: The Power Law: Venture Capital and the Making of the New FutureBack to home
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.