I recently finished reading the newly released Secrets Of Sand Hill Road. It's a book that covers the entire VC process - why VC came about, the role VC plays, the deal and term sheet, and finally the exit scenarios.
One of the big insights I took away (and there were a few) was the role of VC historically and how big of an impact it has had on the US economy. Today, all 5 of the top 5 listed companies are VC funded (Apple, Microsoft, Facebook, Google, Amazon), and 42% of all IPOs since 1974 were venture backed accounting for 63% of the total market capitalisation of companies formed since 1974. That can't be coincidence. It also helped put the financial world into a different perspective, showing how dynamic it is and how it works with given economies to extract value where the opportunities are highest.
As a sidebar, this is also one of the reasons I love capitalism: an opportunity exists and you are free to try your luck. You fail and pick yourself up again, or you succeed and create massive value. The value created is for you, for the companies that directly benefit, and then for all the companies that use your invention in the future.
The VC process was then examined in detail. For many years I felt daunted when thinking about the VC process - like I had to find the golden ticket and get invited to the secret factory to get my chance at “success”. As I got more involved in the financial world fundraising became clearer. After reading this book, everything that was still left uncertain was clarified - it feels like all the gaps have been filled in. A major benefit of this is the demystification of the process, allowing for a plan of action to be constructed. At the end of the day the VC business is a business with associated incentives, risk models and profit seeking events. Knowing this helped me to understand the approach as well as to not take things personally.
Understanding that VCs are more incentivised to take a chance on a company that might be winner, and not on companies that won't be losers, sheds light on investment selection. Taking a walk through the term sheet was massively helpful due to the insight you get around where the risk lies for both parties, where the incentives are and how to protect yourself, your employees and your company. This helps entrepreneurs to prepare for the inevitable questions, as well as understand to know what the bounds are that they can negotiate within.
Finally, the exit scenarios are covered and while most stories in the press are around the massive acquisition or IPO, there is a lot more to be covered to give a realistic grounding on what potential outcomes could be.
All in all I would highly recommend this book to any entrepreneur, whether you are raising, planning to raise or have no plans to do so at all. It gives a lot of great insight into an industry that is shrouded in secrecy.