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The new edition of the definitive guide for venture capital practitioners-covers the entire process of venture firm formation & management, fund-raising, portfolio construction, value creation, and exit strategies


Since its initial publication, The Business of Venture Capital has been hailed as the definitive, most comprehensive book on the subject. Now in its third edition, this market-leading text explains the multiple facets of the business of venture capital, from raising venture funds, to structuring investments, to generating consistent returns, to evaluating exit strategies. Author and VC Mahendra Ramsinghani who has invested in startups and venture funds for over a decade, offers best practices from experts on the front lines of this business.


This fully-updated edition includes fresh perspectives on the Softbank effect, career paths for young professionals, case studies and cultural disasters, investment models, epic failures, and more. Readers are guided through each stage of the VC process, supported by a companion website containing tools such as the LP-GP Fund Due Diligence Checklist, the Investment Due Diligence Checklist, an Investment Summary format, and links to white papers and other industry guidelines. Designed for experienced practitioners, angels, devils, and novices alike, this valuable resource:





Identifies the key attributes of a VC professional and the arc of an investor's career

Covers the art of raising a venture fund, identifying anchor investors, fund due diligence, negotiating fund investment terms with limited partners, and more

Examines the distinct aspects of portfolio construction and value creation

Balances technical analyses and real-world insights

Features interviews, personal stories, anecdotes, and wisdom from leading venture capitalists



The Business of Venture Capital, Third Edition is a must-read book for anyone seeking to raise a venture fund or pursue a career in venture capital, as well as practicing venture capitalists, angel investors or devils alike, limited partners, attorneys, start-up entrepreneurs, and MBA students.

The Business of Venture Capital, Third Edition - The Art of Raising a Fund, Structuring Investments, Portfolio Management, and Exits

Foreword xiii





Preface xv





Acknowledgments xxvii





Part One The Making of a VC





1 The Business of Cash and Carry 3





2 Why Choose a Career in VC 11





3 Attributes of Successful VCs 15





4 Welcome to the Land of Ad-Venture 21





5 Developing Your Investment Career 41





6 A Business Where Enemies Accumulate 57





7 Generational Transfer and Succession 63





Part Two Raising Your Venture Fund





8 LP Universe 73





9 LPs of Choice: Fund of Funds 89





10 How LPs Conduct Fund Due Diligence 95





11 Defining Your Fund's Investment Strategy 99





12 Investment Team Diligence 119





13 Fund Size and Portfolio Construction 129





14 Performance Analysis 137





15 Terms of Fund Investment 155





16 The Venture Firm's Ethos, Culture, and Values 173





17 Raising Your First Fund 193





18 The Fundraising Roadshow 205





19 Why LPs Seek First-Time Funds 221





20 Sourcing Investment Opportunities 229





Part Three Building Your Portfolio





21 Due Diligence Cheat Sheet 255





22 Diligence 259





23 Management Team Diligence: Assessing the Intangible 269





24 Market, Product, and Business Model Analysis 293





25 Terms and Conditions Apply 303





26 Structure of the Term Sheet 309





27 Buy Low, Sell High 317





28 The Closing Process 353





Part Four The Art of Value Creation





29 Serving on Boards 357





30 Board Culture and Orientation 367





31 Let Me Know How I Can Be Helpful: Value Creation 377





32 Challenges in the Boardroom 391





Part Five Exits: Liquidity Events and Champagne





33 Exit Strategies 407





34 Acquisitions 417





35 Initial Public Offering 435





36 Secondary Sales 449





Notes 451





Index 485