Jeffrey Bussgang confesses at the onset of his new book, Mastering the VC Game, that venture capital was “never in my life plan,” and that “VC” as a business has traditionally not been as attractive for the entrepreneur because after all, “What budding entrepreneur would volunteer to play Robin instead of Batman?” Nevertheless, Bussgang, a founding partner of Boston’s Flybridge Capital Partners, makes a convincing case that even in its supporting role, venture capital can be an exciting business and a force for positive change.
Harry Hoagland, officer at the first publicly owned venture capital corporation, American Research & Development Corp., once said, “If I rejected 100% of the projects that came across my desk, I’d be 95% right.” It’s a sobering reminder that venture capital, though an important engine for the American economy, is a business frought with many of the same risks as investing in the stock market, or, in a more extreme sense, a gambling casino. Though due-diligence is emphasized in selecting investments, intangibles still play a significant part in if and when an investment is made.
Jeff Bussgang, armed with both a hyperactive BlackBerry and a fat Rolodex, has drawn extensively on each as he chronicles his own experiences and those of his colleagues – entrepreneurs and VCs – to produce an authentic insider’s perspective of what it’s like to be on the forefront of new and exciting businesses. Being in it for the money, Bussgang asserts, is not the primary goal; rather it’s the thrill of discovery: for example, a business that may detect some forms of cancer sooner, or one that makes dentistry much easier and less invasive.
Bussgang’s credibility is enhanced from having been in both the entrepreneurial and VC camps. He is the founder of UPromise, an organization that “partners” with businesses to help those who purchase through those partners to save money for college, as well as an original executive of Open Market, a firm started to make the Internet a safer business environment.
Bussgang conducted numerous interviews with notable VCs and entrepreneurs: the former including Tim Draper of Draper, Fisher, Juvetson; David Hornik of August Capital, and Patricia Nakache of Trinity Ventures. LinkedIn’s Reid Hoffman, Twitter’s Jack Dorsey and Sirtris Pharmaceuticals’ Christoph Westphal add significant ballast to the entrepreneur’s arguments. And what’s refreshing is that Bussgang doesn’t shy away from shining the spotlight on himself to give a “warts and all” account of his own dealings – often successful, but with the occasional embarrassing moment.
Venture capital firms, Bussgang maintains, “have invested more than $441 billion in some 57,000 companies in the United States,” where more than 12 million people (or 12% of the U.S. workforce) hold jobs in venture-backed companies. Additionally, through his profiles of VCs like China’s Quan Zhou and Vietnam’s Henry Nguyen, Bussgang shows how venture capital has become one of America’s greatest exports – helping to develop the developing world.
Even with the aforementioned statistics, the venture capital “industry” consists of “fewer than seven thousand people working for less than a thousand firms,” according to Bussgang. And from these firms, featuring a disproportionate number of graduates of Harvard, M.I.T. and Stanford business schools, decisions leading to the funding/aiding of companies are made by a relatively small number of people. By Bussgang’s estimation, decisions to back businesses that account for 20% of the American Gross Domestic Product are made by fewer than one thousand individuals shuttling back-and-forth between Boston, New York and Silicon Valley.
Although the number of female entrepreneurs is relatively small, Bussgang notes that they are relatively non-existent in venture capital. Numerous reasons for this have been suggested, but regardless, Bussgang has made concerted efforts to both interview and discuss the achievements of several influential women in both fields. They are obviously possessed by the same hyperactive drive to succeed in business as their male counterparts, and Bussgang treats them with the due respect they have earned.
Mastering the VC Game proceeds methodically through all stages of the VC process: from selecting the appropriate firms to approach, to making “The Pitch,” to strategies the entrepreneur might employ once VC funding is achieved, to the potential “soap opera” that can develop among the entrepreneur(s), Board of Directors, and the VC firms, to exit strategies in which one ”cashes out” of investments.
Though the relationship between the VC and the entrepreneur may often be a tense one, complicated by numerous financial and interpersonal challenges, Jeffrey Bussgang remains an irrepressible evangelist for the potential of venture capital to “change the world” in meaningful and progressive ways.
