For instance, the book vividly relates how Yuri Milner, a quiet, unassuming Russian digital oligarch who started Russian clones of Amazon, Yahoo, and eBay, changed Silicon Valley by beating out the incumbent venture capitalists to take a major early stake in Facebook. At a variety of key points in the historic narrative, however, The Power Law goes strangely silent. The detailed stories of how the most iconic companies of the current era, from Apple to Facebook and Google, got financed in the first place make for a compelling read. Where The Power Law is most enlightening is in its detailed descriptions of the diverse approaches of the most storied venture capital firms: Accel emphasized specialization and research Kleiner Perkins incubated its own startups Sequoia was brutally disciplined with both its partners and its founders Benchmark stayed small and highlighted its coaching and advising role Founders Fund took a completely hands off approach. Mallaby calls "finance without finance" - and success is ultimately about identifying and attracting the only real asset these enterprises have: talented entrepreneurs. In the absence of any track record, this process of selection does not lend itself to traditional economic analysis - what Mr. Venture startup investors back "businesses" that can sometimes be little more than a concept, but they need conviction that, if the idea works out, it will create massive value. ![]() "Each year brings a handful of outliers that hit the proverbial grand slam," Mallaby writes, "and the only thing that matters in venture is to own a piece of them." A certain number of complete failures are to be expected, and precisely how well the rest that aren't home runs do is almost beside the point. The "power law" of the title refers to the fact that venture funds cannot achieve success without at least one bet so extraordinary that its gains return the entire value of the fund to investors, like Sequoia's early investment in Apple. Mallaby sheds important light on the structures and processes behind what has become a powerful (and cloistered) force in American life.īut although the accounts of the key figures that established modern venture capital are often fascinating, his own excellent reporting does not fully justify the observations and policy proposals in support of the industry - like providing tax breaks for venture investors and government incentives for startup employees. In his new book, The Power Law: Venture Capital and the Making of the New Future, respected journalist Sebastian Mallaby has paired a deeply researched history of the venture capital industry with a full-throated polemic in defense of the social value of a venture market that doubled in size in 2021, as over $600 billion dollars in funding pumped into startups around the world.Ĭoming just weeks after the conviction of Theranos founder Elizabeth Holmes reinforced the public's worst preconceptions of Silicon Valley arrogance, greed, and deceit, the book will undoubtedly spark vigorous debate. Account icon An icon in the shape of a person's head and shoulders.
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