Venture Capital Strategy: How to Think Like a Venture Capitalist

The great benefit of adopting the discipline of profitability at the outset is that you do not have to learn it later on. All too frequently, even when they are led by experienced managers, enterprises that are venture funded for long periods of time fall into a “welfare state mentality,” losing their sense of urgency, and looking for their next pa

Today, if VCs are to finance capital-intensive projects, they need to recall their past. They can supply large sums of capital if they are allowed to own a large share of the resulting company.

Let’s use an example to illustrate how this works. Imagine a $300 million fund that wants to invest in twenty companies. VCs normally use a portion of their investments for their very first investment (called de novo capital), but the rest they keep as reserves (called follow-on capital) to maintain ownership in their companies in subsequent rounds

You might be wondering why VC firms don’t focus on lower-risk, lower-return companies. Instead of looking for a rare 10x, why not look for ten, 3x deals with more certainty? That idea is interesting in theory, but startups die for a million different reasons—co-founder conflict, founder loss of interest, departure of a co-founder, losing a key cust