What’s more, they have a powerful grip on the nation’s collective imagination. In addition to analyzing the current venture-capital system, the author offers practical advice to entrepreneurs thinking about venture funding. Given a typical portfolio of 10 companies and a 2,000-hour work year, a venture capital partner spends on average less than two hours per week on any given company. And they structure their deals in a way that minimizes their risk and maximizes their returns.Īlthough many entrepreneurs expect venture capitalists to provide them with sage guidance as well as capital, that expectation is unrealistic. ![]() In reality, they invest in good industries-that is, industries that are more competitively forgiving than the market as a whole. The myth is that they do so by investing in good ideas and good plans. Venture capitalists must earn a consistently superior return on investments in inherently risky businesses. They are the linchpins in an efficient system for meeting the needs of institutional investors looking for high returns, of entrepreneurs seeking funding, and of investment bankers looking for companies to sell. ![]() They have carved out a specialized niche in the capital markets, filling a void that other institutions cannot serve. Today’s venture capitalists are more like conservative bankers than the risk-takers of days past. But today things are different, and separating the myths from the realities is crucial to understanding this important piece of the U.S. Venture capitalists who nurtured the computer industry in its infancy were legendary both for their risk-taking and for their hands-on operating experience. venture-capital industry derives from a previous era. ![]() The popular mythology surrounding the U.S.
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