Secrets Of Sand Hill Road: Venture Capital And How To Get It By Scott Kupor
Hardcover Also Available Formats :- Kindle, Audiobook, Paperback
The Main Idea
In 2017, US-based venture capital (VC) firms injected around $84 billion into companies and startups. The most prestigious and successful of those VC firms operate in Silicon Valley, and the most influential of those headline VC firms have their offices on Sand Hill Road — not too far away from Stanford University.
So what are the secrets of securing venture capital?
To access venture capital funding, you have to know and take into account:
- How venture capital works
- The necessary company formation decisions
- The process of negotiating with VC firms
- The constraints you will be working under
- The plan for how returns will be realized
Align your funding requirements with the VC life cycle, and you have a shot at securing the funding you need to grow a company. Miss that alignment and there's no realistic chance that a venture capitalist will be able to work with you. As in most things in business, timing is everything.
Entrepreneurs and VCs are not on opposing sides, the way one soccer team tries to crush another in the World Cup. Rather, we are partners, and once we agree to work together (and even if we don't), we are on the same side. What we share is a desire to create benign businesses, see them have an impact on and improve the world, and together realize some financial benefit along the way. We need you. We need your ideas and your guts. We need your companies and your commitment to growth. I hope to shine a light on how VC works and why, in order to create more and better company-building opportunities
… Scott Kupor
The Venture Capital Life Cycle
1. Learn how venture capital works . Every VC firm has investors who fund them, and incentives and constraints which are specified by those investors. To understand how VCs make their decisions, start by understanding the motivations of the firm's backers first.
2. Make good formation decisions . Whether or not you can seek VC funding will depend to a large extent on the decisions you make when founding your enterprise. Make sure you make all the right allowances when you form your company, otherwise VC funding won't be an option in the future.
3. Understand the VC finance process . Pitching VC firms is one challenge but ultimately any negotiations will center around the term sheet, the Magna Carta of the VC industry. Know what to include in a good term sheet and you're ready to hunt bear when you talk to VC firms.
4. Operate to agreed constraints . Any funding a VC firm provides will come with a set of economic and governance constraints. Make certain everyone knows and abides by those constraints, particularly your board of directors who will be at the coalface of compliance.
5. Plan how returns will flow back . Money has to ultimately flow back to VC firms (and their backers) in order for the VC cycle to keep operating. Plan how that will happen in your case in great detail. If enough money doesn't make it through the full cycle, the financing hydrant will dry up and disappear.
About The Author
Scott Kupor is managing partner of venture capital firm Andreessen Horowitz. He joined the firm at its inception in 2009 and has overseen the firm's growth from $300 million in assets to more than 150 employees and over $7 billion in assets under management. Scott Kupor also teaches courses in venture capital and corporate governance at Stanford Law School and at UC Berkeley's School of Business and School of Law. Scott Kupor previously worked at Lehman Brothers, Credit Suisse First Boston and as business development manager at LoudCloud. He is a member of the investment committees of several nonprofits. Scott Kupor is a graduate of Stanford Law School and Stanford University.
Summaries.Com Editor's Thoughts
This week's summary focuses squarely on venture capital and what's involved. It's an interesting topic — although admittedly it will appeal more to entrepreneurs than to salespeople or managers. I've always heard great stories of venture capitalists who put $2 or $3 million into early-stage companies like Facebook or Amazon and end up with a stake which is worth $1 billion or more but how that happens has always just been a mystery. Were they just lucky? Do they invest in lots of companies but only talk about their success stories, not their failures?
Secrets of Sand Hill Road fills that gap and talks about venture capital from both sides of the equation. It explains how venture capital funds work and the pressure venture capitalists are in from their limited partners to generate results. I also liked learning about the highly structured way potential investments are negotiated including the written term sheets which put on paper how an investment would work. There are good business practices to pick up on here and run with even if you never come face-to-face with a venture capitalist.
Their track record suggests venture capitalists are doing something right. Secrets of Sand Hill Road is a great insight into the way they think and make investment decisions. Well worth a read.
Amazon.com
A Wall Street Journal Bestseller!
What are venture capitalists saying about your startup behind closed doors? And what can you do to influence that conversation?
If Silicon Valley is the greatest wealth-generating machine in the world, Sand Hill Road is its humming engine. That's where you'll find the biggest names in venture capital, including famed VC firm Andreessen Horowitz, where lawyer-turned-entrepreneur-turned-VC Scott Kupor serves as managing partner.
Whether you're trying to get a new company off the ground or scale an existing business to the next level, you need to understand how VCs think. In Secrets of Sand Hill Road, Kupor explains exactly how VCs decide where and how much to invest, and how entrepreneurs can get the best possible deal and make the most of their relationships with VCs. Kupor explains, for instance:
• Why most VCs typically invest in only one startup in a given business category.
• Why the skill you need most when raising venture capital is the ability to tell a compelling story.
• How to handle a "down round," when startups have to raise funds at a lower valuation than in the previous round.
• What to do when VCs get too entangled in the day-to-day operations of the business.
• Why you need to build relationships with potential acquirers long before you decide to sell.
Filled with Kupor's firsthand experiences, insider advice, and practical takeaways, Secrets of Sand Hill Road is the guide every entrepreneur needs to turn their startup into the next unicorn.
Editorial Reviews
"Worth far more than its cover price... I wish I'd had it available to me when I was first looking for startup funding."
Eric Ries, bestselling author of The Lean Startup and The Startup Way, from the foreword
"As someone who’s helped a small company become a huge, valuable company, I know firsthand the power of the startup ecosystem and entrepreneurship. This book is the definitive book on navigating VC as part of that."
Eric Schmidt, former executive chairman and CEO of Google; technical advisor, Alphabet
“I’ve observed thousands of founders and thought a lot about what it takes to create something important and to achieve outlier success. Kupor’s book takes founders who want to do both through everything from how VCs raise money and evaluate deals, to how to think about term sheets and set up boards. It’s a valuable resource for any founder who wants to work with VCs.”
Sam Altman, partner and president Y Combinator; co-founder of OpenAI
“As more and more startups consider an IPO, it is exciting for us to play a part in giving millions of new investors the opportunity to share in the value and future growth of these seminal companies. But it all begins with the early investors who ‘venture’ into uncharted territory to help make these companies possible, by backing the entrepreneurs behind them. Secrets of Sand Hill Road is the definitive guide to how to engage the VC community, including governance and other best practices in a startup’s journey to a successful public company.
Adena Friedman, President and CEO of Nasdaq; former managing director and CFO, Carlyle Group
“From acquiring startups, to leading a company, to working to select the next leader of an iconic company, I’ve seen it all. It’s become clear to me that startups drive the kind of innovation that big companies can’t easily do. Secrets of Sand Hill Road provides a useful overview for the next generation of leaders seeking to start such companies.”
John W. Thompson, chairman, Microsoft; former CEO of Symantec
“Despite its explosive growth, the world of venture capital remains mysterious to many entrepreneurs seeking funding and to the public more generally. Scott Kupor provides an informative account of the way in which these investors select and nurture young companies.
Josh Lerner, head of the Entrepreneurial Management Unit at Harvard Business School
Andreessen Horowitz’ managing partner Scott Kupor has written an indispensable guide for anyone with a big idea and an even bigger dream. Just as important, he gives the best explanation yet for policymakers about how entrepreneurs and venture capital together create the deep magic that generates technological progress, economic growth, and a better world for more people.
James Pethokoukis, fellow at the American Enterprise Institute; former columnist at Reuters Breakingviews
About The Author:- Scott Kupor is the managing partner of Andreessen Horowitz. He has overseen the firm's rapid growth to one hundred fifty employees and more than $7 billion in assets under management. He is also a cofounder and codirector of the Stanford Venture Capital Director's College and teaches venture capital and corporate governance courses at Stanford Law School and the Haas School of Business and Boalt School of Law at UC Berkeley. He is vice-chair of the investment committee for St. Jude Children's Research Hospital and was previously the chairman of the board of the National Venture Capital Association.
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