Self Help

The Power Law Venture Capital and the Making of the New Future - Sebastian Mallaby

Author Photo

Matheus Puppe

· 120 min read



Here are the key points from the introduction:

  • Patrick Brown, a Stanford geneticist, got the idea to create a plant-based burger that could replace meat after a conversation with a friend. He realized no one was treating this as a solvable problem.

  • In 2010, Brown used his sabbatical to work on developing the burger, digging up clover roots from his yard to extract heme, an iron-carrying molecule that mimics the properties of meat.

  • Brown knew that with all the venture capital in Silicon Valley, if he could show how plant heme could mimic meat, he could likely get funding to start a plantburger company.

  • Brown got in touch with Vinod Khosla, a venture capitalist known for funding ambitious, environmentally-friendly “cleantech” projects.

  • Khosla embodied the Silicon Valley creed - the belief that most problems can be solved through technology, if inventors are ambitious enough. As Arthur C. Clarke said, “All progress depends upon the unreasonable man.”

  • Khosla’s VC firm Khosla Ventures invested $3 million in Brown’s startup, Impossible Foods, to create the Impossible Burger.

  • This shows how the unreasonable ambition of Silicon Valley VCs like Khosla, combined with the tech ecosystem, can turn ideas into funded startups aiming to solve big problems.

  • Vinod Khosla is a venture capitalist known for funding risky, ambitious startups aimed at disrupting major industries. He embraces improbable ideas and people with visionary hubris.

  • Patrick Brown pitched Khosla on his idea to create plant-based burgers to replace the meat industry. Khosla was initially skeptical but came to believe the idea, while improbable, was worth pursuing given the massive potential payoff if it succeeded.

  • Khosla invested $3 million in Brown’s startup, Impossible Foods, swayed by Brown’s brilliance, determination, and the trillion-dollar size of the meat market he aimed to disrupt.

  • Khosla himself has a history of rebelling against convention and demanding rapid results. After being fired from Sun Microsystems, he became a successful venture capitalist, making big bets on visionary entrepreneurs.

  • Khosla argues it’s better to try ambitious ideas and fail than never try at all. Truly revolutionary changes initially seem improbable. Failure should not be mocked if the potential impact justifies the attempt.

  • The power law governs venture capital, where returns are driven by a few exceptional outliers. This contrasts with a normal distribution where outliers barely affect the average. Khosla embraces power law thinking.

  • Venture capitalists need to think differently than traditional investors. They should focus on the rare outlier investments that can generate huge returns rather than modest, predictable gains.

  • This is because startup returns follow a power law distribution where a small number of big winners account for the majority of gains. For example, just 5% of startups generated 60% of returns for one VC firm.

  • As a result, VCs must swing for the fences and invest in ambitious, risky ideas that could plausibly double or more in value. They can’t play it safe like a stock picker looking for steady doubles.

  • Vinod Khosla exemplifies this approach. He invested early in audacious internet infrastructure companies before the web boom, yielding massive returns.

  • He sees VC as more than just business - it’s a mindset and philosophy of progress through high-risk experimentation. This contrasts with traditional forecasting based on past data.

  • Khosla believes the future can’t be predicted, only discovered through iterative experiments. The most contrarian thinkers, not experts, are best placed to drive revolutionary progress.

  • Radical innovation often comes from outsiders and mavericks, not established experts and leaders. Examples include Amazon disrupting retail, YouTube disrupting media, SpaceX disrupting aerospace.

  • Venture capital networks combine the strengths of corporations (resources, teams) with the strengths of markets (flexibility, discipline). This blend has delivered major innovation.

  • Venture capital is expanding in reach, sectors, and company lifecycle. Many huge private tech firms are VC-backed.

  • This book explains the VC mindset and evaluates the industry’s social impact. VCs claim they’re improving the world but have issues like lack of diversity.

  • VCs are flawed but essential for dynamic startup clusters. By connecting people and ideas, they transform regions into inventive networks, explaining differences in regional creativity.

  • As technology competition intensifies, countries need to foster tech startups and VC. VCs hustle to connect people - this networking sparks innovation.

The origins of Silicon Valley can be traced back to 1957, when eight researchers rebelled against their boss William Shockley and started their own company, Fairchild Semiconductor. This was funded by a new form of “adventure capital”, which allowed teams with ambitious ideas to spin out and start their own ventures. This liberated talent and fostered Silicon Valley’s culture of challenging traditional hierarchies and authority.

The rival theories arguing that Silicon Valley’s rise was due to Stanford University, military funding, or countercultural irreverence are not fully convincing. Other hubs like Boston/Cambridge had these attributes but did not become the tech epicenter.

What truly distinguishes Silicon Valley is the combination of creativity and commercial drive. The Valley embraced hackers and hippies who were inventive and disdained business, as well as ambitious entrepreneurs set on getting rich. This allowed imaginative ideas to be rapidly commercialized into world-changing products.

The Valley became the place where innovation begat hugely successful companies, even if many original inventions came from elsewhere. Its unique culture blending countercultural creativity with business ambition drove its unmatched track record of translating ideas into products that shaped society.

  • The Traitorous Eight were a group of talented researchers working for William Shockley at Shockley Semiconductor Laboratory in the 1950s. Shockley was a scientific genius but also a tyrannical manager.

  • After failed attempts to get Shockley removed from management, the researchers decided to quit and find another employer who would hire them as a team. They contacted an investment firm to help identify a potential new employer.

  • At the time, venture capital funds willing to back unknown scientists were virtually unheard of. Investors preferred safe, established companies rather than risky ventures.

  • The Traitorous Eight had not initially considered starting their own company. The idea of liberation capital backing a new startup was contrary to the spirit of postwar finance.

  • Eventually the researchers did end up leaving Shockley to co-found Fairchild Semiconductor, backed by venture capital. This set in motion the growth of Silicon Valley, with 70% of later tech companies able to trace their lineage to Fairchild.

  • The willingness of venture capital to fund unproven teams like the Traitorous Eight fostered a culture of progressive open-mindedness and commercial risk-taking that made Silicon Valley so innovative and successful.

Here is a summary of the key points about social problems in the passage:

  • After WWII, some wealthy individuals like J.H. Whitney tried to use their money for social good by providing capital to entrepreneurs. However, these efforts were not very successful - Whitney’s returns were only modestly better than the overall stock market.

  • The Rockefeller family similarly tried to fund new companies to solve social issues, investing in things like an African cotton mill. But their ventures also did poorly financially.

  • On the West Coast, informal groups like the “Group” in San Francisco started backing tech companies in the 1950s. They had some big successes, like an early investment in Ampex, but only financed a couple dozen deals.

  • In Boston, Georges Doriot led American Research and Development (ARD), aiming to fund technology spinoffs from MIT and military labs. Doriot’s huge return from an early stake in Digital Equipment Corporation dominated ARD’s overall profits.

  • Unlike other financiers, Doriot articulated a philosophy of patient, long-term venture capital investing in ambitious technology companies. He provided hands-on support beyond just capital.

  • So venture capital emerged gradually after WWII, with limited success at first. Doriot formulated ideals still followed today, even as most returns concentrated in a few big wins like Digital Equipment.

  • Georges Doriot, a Harvard Business School professor, founded American Research and Development (ARD) in 1946, one of the first venture capital firms. He invested in high-risk, high-reward technologies and helped build companies like Digital Equipment Corporation. However, Doriot structured ARD as a public company rather than a partnership, which subjected it to cumbersome regulations and prevented it from attracting more venture capital funding.

  • In 1957, Arthur Rock, a young Wall Street banker, was contacted by Eugene Kleiner, one of the “traitorous eight” engineers who had left William Shockley’s company. Rock proposed that they start their own company rather than join an existing one, giving them ownership over their work. This idea excited the engineers.

  • At a dinner, Rock and his partner said the engineers would need at least $1 million in funding to launch their company. Though it would be challenging to raise that amount, Rock’s confidence helped persuade the engineers. The group also discussed who should lead the new company, with Rock recommending Kleiner despite his admission that none of them had management experience.

  • Rock’s novel proposal to start their own company with substantial venture funding marks the beginning of Silicon Valley’s venture capital industry. He embraced the profit motive in a way more traditional East Coast investors did not at the time. This approach proved enormously successful, multiplying returns for investors and enabling the rise of iconic companies like Intel.

  • After leaving Shockley Semiconductor, the “traitorous eight” engineers needed to find financing and leadership to start their own company. Venture capitalist Arthur Rock tried to raise $1 million but faced resistance from investors who were unsure about backing unproven managers.

  • Robert Noyce emerged as the natural leader of the group, though he was initially hesitant to join the mutiny out of ethical concerns. Rock and the others persuaded Noyce to come on board, seeing him as essential for attracting investors.

  • Sherman Fairchild, a wealthy playboy and science enthusiast, agreed to back the new venture with a $1.4 million loan after being pitched by Noyce. This allowed the eight founders to each buy a small stake in the new company, Fairchild Semiconductor.

  • Though the deal gave the appearance of autonomy for the founders, Fairchild retained control via fine print provisions like the ability to purchase all the shares. Rock had tried but failed to fully liberate the scientists.

  • Nonetheless, Fairchild Semiconductor proved extraordinarily successful, with the freed scientists innovating at a rapid pace. Noyce’s leadership and the collaborative, unstructured culture were critical to this creativity and commercial success.

Here are the key points:

  • The venture capital industry took off in the 1960s, but policymakers and investors struggled to find the right format. Peter Drucker identified the need for more “venture capital” but his proposed solutions like American Research and Development were not optimal.

  • The government created Small Business Investment Companies (SBICs) in 1958 to channel funding to startups by providing subsidies and loans. However, SBICs were constrained by rules that limited fund size, staff compensation, and investment amounts per company. As a result, SBICs struggled to be effective.

  • Bill Draper and Pitch Johnson tried the SBIC model in 1962, but the restrictions meant they could only take small stakes in mediocre companies. Their fund was moderately successful but they dissolved the partnership after 3 years.

  • Overall, policymakers and investors failed to find the right structure to enable venture capital to flourish, until Arthur Rock and others pioneered the equity-only, time-limited fund model in the 1960s. This overcame the issues with earlier attempts.

  • SBICs (Small Business Investment Companies) were set up by the government in the 1950s to provide financing to technology startups. However, they had a fatal design flaw - they were required to invest in companies that paid dividends, which was antithetical to the needs of most tech startups. This forced them to shy away from innovative but risky companies.

  • In 1961, Arthur Rock and Tommy Davis started the first major venture capital partnership, Davis & Rock. They raised a $3.2 million fund from individual investors and invested in high-growth startups, taking equity stakes rather than debt.

  • The Davis & Rock partnership was designed to align incentives and support aggressive growth:

  • Took compensation as 20% of capital gains, incentivizing growth

  • Funded companies with equity rather than debt, allowing reinvestment of profits

  • Limited fund lifetime to 7 years, balancing aggression with caution

  • Awarded stock/options to employees to build equity culture

  • They championed a new division of equity, with 45% for founders, 10% for employees, 45% for VC. This was more generous to founders than earlier models.

  • Davis & Rock ignored portfolio theory and made concentrated bets on high-growth companies. Their approach was subjective and grounded in experience rather than academic finance.

  • Their success highlighted flaws in earlier government-sponsored models like SBICs and paved the way for the rise of private venture capital.

  • Arthur Rock and Thomas Davis started one of the first venture capital partnerships, Davis & Rock, in 1961.

  • Unlike other investors at the time, they did not use standard financial metrics like price-earnings ratios to evaluate investments. Instead, they focused on betting on people and intellectual capital.

  • An early investment in Max Palevsky’s computer company Scientific Data Systems was extremely successful, even though it went against their initial strategy of avoiding computer startups. They invested based on their belief in Palevsky’s talent and passion.

  • Rock and Davis exercised power respectfully after investing, helping entrepreneurs but also providing oversight.

  • The Davis & Rock fund returned 22.6x on their investments, massively outperforming contemporaries like Warren Buffett. This demonstrated the potential of venture capital and sparked interest from others looking to replicate their success.

  • After dissolving the partnership in 1968, Rock and Davis walked away with around $10 million each. They inspired a new generation of venture capitalists.

  • Arthur Rock played a central role in the rise of venture capital and the culture of Silicon Valley. He helped structure the deal to start Fairchild Semiconductor in a way that rewarded the talented engineers with stock.

  • After Fairchild’s East Coast owners took full control, Rock urged employees like Jay Last and Jean Hoerni to leave and start new ventures where they would have equity stakes. This led to the founding of companies like Teledyne.

  • Rock demonstrated that scientists could repeatedly leave large corporations and get funding from venture capitalists to start their own firms where they would be rewarded with stock. This shifted power away from big established companies.

  • The failure of Fairchild’s corporate venture investing showed the superiority of the venture capital model where entrepreneurs retained control and upside.

  • When Robert Noyce wanted to leave Fairchild to start Intel, he immediately turned to Rock for funding. Rock structured the Intel deal to heavily favor the founders over investors.

  • Rock’s repeating success backing startups based on granting stock to talent cemented the venture capital and startup culture of Silicon Valley centered on motivated entrepreneurs, not big corporations.

Here is a summary of the key points in the excerpt:

  • In the 1970s, a new style of activist venture capital emerged, led by Don Valentine of Sequoia Capital and Tom Perkins of Kleiner Perkins.

  • Unlike earlier VCs like Arthur Rock who just identified and monitored startups, the new VCs actively shaped the companies by telling founders who to hire, how to sell, and how to structure research.

  • To ensure their advice was followed, VCs doled out capital in tranches tied to agreed milestones, rather than one large raise. This “stage-by-stage finance” gave VCs leverage.

  • Valentine and Perkins were aggressive and combative in style. Valentine had a tough childhood and was easily offended, while Perkins was a flashy dandy who loved to flout convention.

  • The new style was needed for wild, unorthodox startups like Atari, founded by the disorganized Nolan Bushnell. Atari would have been too risky for earlier VCs.

  • The 1970s VC innovations of hands-on activism and milestone-based financing allowed backing more creative but undisciplined founders like Bushnell. This expanded the scope of venture capital.

  • Tom Perkins, a venture capitalist, visited Atari in 1974 and was put off by its chaotic, marijuana-filled culture. Most other VCs also dismissed Atari.

  • But Don Valentine, a new VC, was unfazed. He saw Atari’s potential to build on the popularity of its game Pong. In late 1974, rather than invest right away, he decided to help Atari create a business plan focused on a home version of Pong.

  • The weak market climate allowed Valentine to work with Atari patiently, without worrying about competitors. By early 1975 Atari had developed a home Pong prototype.

  • Valentine helped Atari land a key distribution deal with Sears for the home Pong machines. Once the Sears deal was secured, Valentine made a small “seed” investment in Atari in June 1975.

  • As the Atari-Sears partnership flourished, Valentine prepared for a larger financing round, now that Atari’s risks were reduced thanks to its promising product and distribution deal.

  • Don Valentine of Sequoia Capital took an activist approach to investing in Atari in the 1970s. He pushed for more professional management and staged financing to fund Atari’s growth. This allowed Atari to successfully develop the Home Pong console and eventually sell itself to Warner Communications for a good return.

  • Other venture capitalists like Bill Draper of Sutter Hill and Tom Perkins also took an activist approach, getting directly involved in recruiting CEOs and shaping the strategy of their portfolio companies.

  • Perkins teamed up with Eugene Kleiner to found Kleiner Perkins in 1972. They distinguished themselves by actively working with entrepreneurs rather than just investing passively.

  • After some early struggles, Kleiner Perkins doubled down on the activist approach by incubating startups in-house. One of their first in-house entrepreneurs was Jimmy Treybig, who they backed to found Tandem Computers.

  • The activist model allowed West Coast VCs like Kleiner Perkins to be bolder in backing untested startup founders compared to more cautious East Coast VCs. Hands-on involvement and staged financing helped manage the risks.

  • In 1974, Jimmy Treybig, an engineer at Kleiner Perkins, had an idea for a computer system with backup processors so it wouldn’t crash. Tom Perkins supported the idea, spending minimal funds on consultants to evaluate the technical feasibility.

  • Perkins incorporated the company as Tandem Computers in 1974, with Treybig, Perkins, and some consultants as the founders. However, they struggled to raise funding from VCs due to the pessimism in the industry at the time.

  • Undeterred, Perkins invested $1 million of Kleiner Perkins’ funds into Tandem in 1975 for a 40% stake, their largest bet yet. The risk paid off as Tandem’s revenues grew rapidly, generating a 100x return for KP by 1984.

  • Around the same time, Bob Swanson, a former KP employee, became obsessed with the idea of commercializing recombinant DNA. He eventually connected with scientist Herbert Boyer, who was open to collaborating. They co-founded Genentech in 1976, which Kleiner Perkins funded and supported.

  • In 1976, venture capitalist Tom Perkins met with biochemist Herbert Boyer and entrepreneur Robert Swanson about forming a biotech startup called Genentech.

  • Swanson proposed needing $500,000 and 18 months to develop their first product, but Perkins suggested a “virtual company” model using contracts with universities instead of hiring full-time scientists.

  • Perkins invested $100,000 for 25% of Genentech. The risky investment had huge upside if it succeeded.

  • Genentech raised more money in stages as risks were eliminated, boosting valuations and avoiding too much dilution. Employees got stock options for motivation.

  • Perkins contributed by hyping up the scientists, signaling they were part of something big. He sent a researcher to push the team to complete an insulin project.

  • In 1978, Genentech publicly demonstrated successful production of insulin, marking a breakthrough for biotechnology.

  • Apple was founded in 1976 by Steve Jobs and Steve Wozniak, but many leading venture capitalists failed to recognize the opportunity to invest, including Tom Perkins, Eugene Kleiner, and Bill Draper. This showed that even the best VCs can make costly errors.

  • Jobs and Wozniak were repeatedly rejected by VCs who thought the personal computer market was unpromising or who were put off by the founders’ hippie appearance. Jobs tried to get investments from Stan Veit, Nolan Bushnell, and others, but was turned down.

  • Fortunately, the expanding venture capital network in Silicon Valley meant that Apple was able to find an investor. After being rejected by Bushnell, Jobs got an introduction to Don Valentine of Sequoia Capital through Bushnell’s connection to Atari.

  • Valentine’s willingness to invest showed the power of networks. The growing web of relationships among VCs and entrepreneurs in the Valley meant good opportunities would eventually find backers, even if the most prominent VCs passed them up initially.

  • Steve Jobs approached several investors to get funding for Apple, including Don Valentine, but was initially rejected.

  • Jobs was persistent and kept asking for introductions to other investors through his network. This led him to Mike Markkula, an early angel investor.

  • Markkula believed in Apple’s technology and joined as an adviser, writing the business plan and investing $91,000 for 26% of the company.

  • Markkula leveraged his connections from working at Fairchild and Intel to bring in other key talent like Regis McKenna and Mike Scott to help Apple.

  • Markkula got Hank Smith at Venrock interested through their Intel connection. Jobs and Markkula pitched Apple to Venrock and got a $300,000 investment.

  • Apple was repeatedly turned down at first, but through persistence and leveraging networks of introductions, Jobs and Markkula eventually convinced investors and assembled a team. Markkula’s connections and credibility were key to opening doors for Apple.

  • Mike Markkula brought in venture capital firms Venrock and Don Valentine to invest in Apple. Regis McKenna also convinced Arthur Rock to invest.

  • This attracted further interest and investment from other VCs, as Apple gained momentum and buzz as an exciting startup. The network effect helped validate Apple as a hot investment opportunity.

  • However, many top VCs initially missed the chance to invest or invested hesitantly, including Venrock and Rock. Dick Kramlich failed to get allocation from Rock but helped his British friend Anthony Montagu invest indirectly.

  • Once onboard, the high-profile VC investors worked their networks to aid Apple with hiring, manufacturing, banking connections, etc. Their stamp of approval further fueled Apple’s rise.

  • Apple’s high-profile 1980 IPO, backed by Morgan Stanley thanks to Rock, cemented its status as a hot tech company. It demonstrated the growing power of VC networks in Silicon Valley.

  • In the late 1970s and early 1980s, there was a boom in venture capital funding in Silicon Valley. Powered by successful exits like Genentech and Apple, capital flooded into venture funds, quadrupling from $3 billion in 1977 to $12 billion in 1983.

  • This boom allowed Silicon Valley to triumph over two rivals: Japanese semiconductor manufacturers who threatened the Valley’s core industry, and the tech hub in Boston which had long been a competitor.

  • Silicon Valley succeeded not through government intervention, but because of its unique sociology as analyzed by AnnaLee Saxenian. The Valley was a cauldron of small, porous firms that competed fiercely but also collaborated, sharing information and ideas. This differed from competitors like Boston and Japan where tech was dominated by large, self-contained, secretive corporations.

  • Silicon Valley’s culture of “coopetition” between small firms allowed for more experimentation and innovation than hierarchical organizations. Saxenian argued that the Valley’s abundance of weak ties enabled greater information flow than Boston and Japan’s handful of strong ties within corporations.

  • Factors like California’s ban on non-competes and Stanford’s openness to professors working with startups helped create the Valley’s porous boundaries and weak ties. But the venture capital system also played a key role by funding startups and facilitating networks.

Here are the key points:

  • The porousness of Stanford and California’s ban on non-competes contributed to Silicon Valley’s success, but they are not the whole story. Legal scholars have questioned the significance of non-competes, and startups often involve grad students rather than professors.

  • The main reason for Silicon Valley’s weak ties is the venture capitalists, who relentlessly focus on building connections. The VC boom of the late 1970s-early 1980s brought more connectors to the Valley, listening to pitches, linking people and cultivating networks.

  • The surge in VC activity changed the metabolism of the Valley, making it faster-paced and more entrepreneurial. Engineers were flushed out of big companies into startups backed by VCs. The abundance of capital drowned out the feeling of risk.

  • No equivalent VC boom happened in Boston. Boston VCs were more cautious - expecting startups to have proven products already, avoiding risky bets, and selling successes early rather than pushing for 10x returns.

  • The contrast is illustrated by Bob Metcalfe. After inventing Ethernet at Xerox PARC, he founded 3Com but struggled to raise VC money in Boston. He had no trouble getting funded after moving to Silicon Valley.

So in summary, Silicon Valley’s weak ties and entrepreneurial culture stemmed largely from its unique VC community, which differed markedly from the more conservative Boston approach.

  • Bob Metcalfe wanted to sell shares in his new startup 3Com for $20 each, believing this high valuation would prove the worth of his Ethernet technology. However, venture capitalists were only offering $13 per share.

  • Metcalfe decided to learn the VC mindset and preempt their typical concerns about ego-driven founders, lack of focus, and undercapitalization. He announced he would hire professional management and focus on the most promising products before raising funds.

  • Metcalfe held a “venture capital auction,” declaring he would accept funding from whichever VC brought the best executive talent. Wally Davis of Mayfield recruited Bill Krause, a veteran HP manager, to be 3Com’s president.

  • Even with Krause on board, VCs wouldn’t budge from $13 per share. Metcalfe cast his net wider and got a $21 per share offer from Boston-based Fidelity Ventures.

  • However, Fidelity kept adding more conditions, demanding Metcalfe bring in co-investors. After much work meeting their requirements, Fidelity reduced their offer to $15 per share, still under Metcalfe’s $20 target.

  • Frustrated, Metcalfe turned back to the Valley VCs and hammered out a $20.8 million round at $18 per share, just beating his $20 goal. Metcalfe felt the VCs colluded to suppress his valuation but ultimately prevailed.

  • In the early 1980s, 3Com founder Robert Metcalfe struggled to raise venture capital from Boston firms like Fidelity Ventures. The Bostonians burdened deals with onerous conditions and fine print.

  • Frustrated after a month of talks with Fidelity for a $21 million investment, Metcalfe instead took $1.1 million from Silicon Valley VCs who quickly closed the no-strings-attached deal in a day. This exemplified the contrast between Boston’s and Silicon Valley’s investment cultures.

  • Silicon Valley VCs were successful because they fostered collaboration between startups, sharing insights and making connections. This “keiretsu model” of building an interlinked portfolio boosted innovation.

  • When a Kleiner Perkins-brokered alliance between two of its portfolio companies, Ungermann-Bass and Silicon Compilers, went awry, KP paid Ungermann-Bass $500,000 to preserve trust and prevent litigation, a bargain illustrating how VCs nurtured Valley’s collaborative vibe.

  • This vibe, overseen by VCs, allowed dozens of startups to thrive in the 1980s and fueled the Valley’s triumph in sectors like semiconductors and disk drives. By the decade’s end, the Valley far outpaced Boston in tech job creation and fast-growing electronics firms.

  • Lerner posed naked on a horse for a Forbes magazine photo shoot. She had an unconventional upbringing, spending time on a ranch with an aunt and graduating high school at 16. In college, she was very politically active on the far left.

  • Lerner met her future husband, Len Bosack, at Stanford while getting her master’s degree. Together they created a way to connect the university’s disparate computer networks, laying cable around campus without approval. This technology became the basis for their company, Cisco Systems.

  • After leaving Stanford, Lerner and Bosack struggled to get funding for Cisco, as venture capital was drying up. The founders lived frugally, maxing out credit cards to keep the company afloat.

  • Eventually a lawyer connection led them to pitch Don Valentine at Sequoia Capital. Despite misgivings about the founders’ personalities, Valentine recognized the potential for their networking technology and decided to invest in 1987. This investment allowed Cisco to take off.

  • In 1987, Don Valentine of Sequoia Capital invested $2.5 million for a third of Cisco Systems, despite reservations about the company’s dysfunctional culture and founders Sandy Lerner and Len Bosack.

  • Valentine brought in professional managers like John Morgridge as CEO and took control of the board. He gave Morgridge founder-like incentives with stock options to align his interests.

  • Morgridge and the new managers instilled financial discipline and built out functions like manufacturing that were missing. Sales and profits took off.

  • However, co-founder Sandy Lerner fought with the new managers and engineers, calling them “brain dead.” She felt they were contemptuous of customers.

  • In 1990, Cisco’s executives revolted and demanded Lerner be fired or they would quit en masse. Valentine and Morgridge removed Lerner as a result. Her co-founder husband Bosack also left Cisco.

  • Lerner later accused Valentine of exploiting her naivete about term sheets and vesting to deny her shares when she was fired. But she was also the victim of sexism as one of few women engineers.

  • The Cisco story illustrates how VCs can repair dysfunctional startups by bringing in professional management and imposing financial discipline. But it also shows the tensions with founders used to running their own show.

  • Mitch Kapor and Jerry Kaplan had an “epiphany” about creating a stylus-based computer while flying on Kapor’s private jet. Kapor, founder of Lotus Software, encouraged Kaplan to start a company to develop this pen-based computer concept.

  • To raise funds, they approached venture capitalist John Doerr of Kleiner Perkins, known for backing bold ideas. In their pitch meeting, Kaplan dramatically tossed his leather folder to convey their vision of a lightweight, notebook-like computer.

  • Doerr was so enthused he offered to invest in Kaplan’s not-yet-formed company, without even seeing a business plan. This reflected Doerr and KP’s improvisational approach of betting big on seemingly crazy ideas.

  • In contrast, Accel Partners represented a more deliberate, analytical approach, doing market research to identify promising technologies to invest in. This represented a tension between improvisers like Doerr and planners like Accel.

  • Kaplan’s pen-based computer company, GO Corporation, went on to raise over $75 million from Doerr and others. But it ultimately failed to deliver on its vision and compete with Microsoft’s Windows tablets.

  • The dueling approaches of Doerr vs Accel symbolized two different venture investing philosophies - betting on charismatic founders with bold ideas vs carefully assessing markets and technologies before investing.

Here are the key points:

  • Doerr and Kleiner Perkins invested $1.5 million in Kaplan’s startup GO at a high valuation of $6 million, despite it not having a business plan or product yet.

  • A year later, GO was struggling and needed more funding. At a board meeting, Doerr and Mitch Kapor got into a bidding war over the valuation, pushing it up to $12-16 million despite objections from Vinod Khosla.

  • Kaplan struggled to raise the financing at that valuation. After investors balked, Doerr stepped in to broker a deal with Scott Sperling at a lower $8 million valuation.

  • However, GO never delivered on its vision and was eventually sold off cheaply.

  • The GO story illustrated downsides of Doerr and Kleiner’s approach - embracing massive ambition without grounding it in realistic business plans. Other failures around this time reinforced this.

  • In contrast, rival firm Accel took a more cerebral, strategic approach under founders Arthur Patterson and Jim Swartz. Patterson focused on financials, business models and policy rather than just technology.

Here is a summary of the key points about Louis Pasteur and the venture capital firm Accel Partners:

  • Louis Pasteur, the 19th century French chemist, is considered the father of microbiology for his pioneering work on germ theory, vaccines, and pasteurization. One of his famous quotes is “Chance favors only the prepared mind.”

  • Accel Partners is a venture capital firm founded in 1983 that specializes in technology investments. Its strategy is to focus on specific sectors like software and telecom to gain deep expertise.

  • Despite not actively seeking huge “grand slam” investments, Accel has had many due to the power law of venture capital returns. For example, 92% of the profits from its first 5 funds came from just the top 20% of investments.

  • One of Accel’s biggest successes was UUNET, an early internet service provider. It highlights how government-funded research laid the groundwork for commercialization by venture-backed startups.

  • Though individual VCs may succeed through luck, venture capital as a system is an engine of progress through its role commercializing new technologies.

Here is a summary of the key points about seismic studies:

  • Rick Adams worked for the US government running seismic imaging studies, but started building a parallel private internet in his spare time for scientists excluded from the main government network.

  • Adams combined routers and networking software to provide cheaper connections between corporations. His company UUNET charged just enough to recover costs.

  • The government had invented the internet, but decided to privatize it and let companies like UUNET take over management.

  • Mitch Kapor recognized the potential of the internet over the government’s proposed fiber optic “information superhighway.” He invested in UUNET to get “skin in the game.”

  • Kapor tried to get venture capital funding from Kleiner Perkins but they declined. He then got Accel interested through multiple channels.

  • Accel was initially hesitant, but employee Jim McLean pushed the opportunity. Competition from another acquirer Metropolitan Fiber then motivated Accel to invest.

Here are the key points:

  • Adams met with Metropolitan Fiber and got a $500,000 investment offer at an $8 million valuation.

  • He then met with Accel Partners, who were intrigued but unsure of UUNET’s potential market size and Adams’ management abilities.

  • Accel and NEA jointly offered a $6 million valuation, which Adams felt was too low.

  • Menlo Ventures then offered an $8 million+ valuation after connecting with UUNET’s chief scientist.

  • NEA matched Menlo’s offer, and Accel reluctantly agreed to the higher valuation. The 3 firms invested $1.5 million total in October 1993.

  • NEA’s Peter Barris recruited a GE veteran, Joe Squarzini, to impose structure at UUNET.

  • Squarzini discovered $750,000 in unpaid invoices, wiping out half of UUNET’s new capital.

  • At the board meeting, Squarzini took responsibility and said controls were now in place. The VCs took the news calmly, being accustomed to startup crises.

  • The hands-on nature of VCs allowed them to move past this crisis and keep supporting UUNET, rather than cutting losses as a bank might.

  • Rick Adams started an internet service provider called UUNET but struggled to fund its growth. Venture capital firms Accel and Menlo invested $500,000 each in 1993.

  • The VCs pushed Adams to bring in professional management. In 1994, John Sidgmore, a former GE executive, was hired as CEO with a 6% equity stake.

  • With Sidgmore’s leadership, UUNET expanded rapidly, landing major deals with Microsoft and AOL. It went public in 1995 at a $900 million valuation.

  • UUNET’s success made huge profits for its venture backers. Accel made 54x its investment, pocketing $188 million. Menlo and NEA also earned massive returns.

  • Adams thanked the VCs for pushing him in the right direction and ended up with $138 million personally.

  • The story shows how venture capital helped transform an early-stage startup into a hugely successful public company, rewarding all involved. It was an example of the VC model working well.

  • In early 1995, Accel passed on investing in Yahoo because the name sounded silly. But other VCs saw potential in Yahoo’s web directory.

  • Bill Draper visited Yahoo’s founders David Filo and Jerry Yang in their modest Stanford trailer office. He was impressed that he could easily look up information like Yale’s tuition costs. Draper got his son Tim to invest in Yahoo.

  • Michael Moritz of Sequoia also visited the Yahoo trailer office. He was puzzled when Filo and Yang said Yahoo would be free and not charge subscribers.

  • Yahoo started as a hobby for the founders to distract from their PhD studies. They saw it as a service, not a business.

  • But VCs like Draper and Moritz realized the potential for Yahoo to be the TV Guide of the early internet - a guide users would rely on to find information and direct them to sites.

  • The key question was how Yahoo would make money if it provided its directory for free. But some VCs were willing to invest based on the site’s impressive user growth.

  • In 1995, Yahoo co-founders Jerry Yang and David Filo met with venture capitalist Michael Moritz of Sequoia Capital to pitch their new internet directory. Moritz was initially skeptical about their playful approach and lack of revenue model.

  • However, Moritz realized that Yahoo could make money through advertising like media companies do, despite providing content for free. He understood the future business model and began courting Yahoo as an investment.

  • Sequoia invested $975,000 in Yahoo in April 1995 for a 32% stake, recruiting an outside CEO but keeping Yang as the face of the company. This set the stage for backing internet companies based on momentum rather than revenues.

  • Yahoo had no technological edge, so it relied on brand and momentum, plowing revenue back into marketing. The winner-takes-all nature of search portals added pressure.

  • The internet gold rush brought abundant venture capital, making investors eager to back Yahoo despite the risks. Masayoshi Son, a bold entrepreneur who shifted his SoftBank business from Japan to the U.S., invested in Yahoo in November 1995.

Here is a summary of the key points in the passage:

  • In 1996, Masayoshi Son, founder of SoftBank, offered to invest an astonishing $100 million in Yahoo. This was far more than typical venture capital investments at the time.

  • Son’s offer valued Yahoo at 8 times what he had paid just 4 months earlier. Yahoo was planning an IPO with Goldman Sachs at double Son’s valuation.

  • Son threatened that if Yahoo didn’t accept his money, he would invest in Yahoo competitors like Excite or Lycos and “kill” Yahoo.

  • Stunned, Yahoo agreed to take Son’s money but proceeded with the IPO anyway.

  • Yahoo’s IPO was a huge success, with shares rising 2.5x on the first day. Son made over $150 million profit instantly.

  • Son’s massive late-stage investment in Yahoo transformed venture capital, pioneering “growth investing” with huge checks into more mature startups.

  • Son went on an investment blitz after Yahoo’s IPO, betting on hundreds of internet startups. He also made giant bets on later stage companies like GeoCities and E*Trade.

  • Son anticipated changes in VC a decade later, with massive growth investing and globalization of the industry. His success inspired copycats chasing huge late-stage returns.

  • After Yahoo’s successful IPO in 1996, Softbank and its founder Masayoshi Son emerged as major players in Silicon Valley venture capital. Son made huge bets on internet companies and expanded Softbank globally, profiting enormously as the internet boom took off.

  • The Yahoo IPO also marked a changing of the guard at storied VC firm Sequoia Capital. Longtime partner Don Valentine favored taking profits early, but a younger generation led by Michael Moritz saw the potential for even bigger gains by letting their investments ride. Moritz won the internal battle at Sequoia, locking in their Yahoo stake until it had multiplied massively in value.

  • In contrast to the global Softbank, Benchmark Capital was founded in 1995 as a small, focused VC firm deeply tied to Silicon Valley. With just 4 partners and an $85 million fund, Benchmark prided itself on nimble decisions and close involvement with each portfolio company.

  • Different partners brought unique perspectives: Bob Kagle had an empathy-driven approach and broad interest in both tech and consumer companies, while Bruce Dunlevie emphasized the importance of hands-on support for entrepreneurs through challenging times.

  • The emergence of these new VC firms with different philosophies and styles shaped the investment landscape and startup ecosystem as the internet boom took off through the late 1990s.

  • Pierre Omidyar created eBay in 1996 as an online auction platform that allowed buyers and sellers to connect directly. He wanted to democratize commerce and build an online community.

  • eBay grew extremely rapidly, doubling its user base every few months, without any marketing budget. Its growth was driven by network effects - more buyers attracted more sellers and vice versa.

  • Omidyar brought in venture capitalist Bruce Dunlevie as an advisor. Dunlevie got his Benchmark Capital partner Bob Kagle interested in eBay’s potential.

  • Kagle was intrigued by Omidyar’s focus on community building. Other VCs were skeptical of eBay’s model, calling it a “Beanie Baby trading site.”

  • Benchmark invested $6.7 million in eBay, valuing it at $20 million. Kagle helped recruit Meg Whitman, a Hasbro executive, to be eBay’s CEO.

  • Whitman realized eBay had exponential growth and high profit margins because it didn’t hold inventory. She was convinced to join as CEO.

  • eBay exemplified a new hybrid model - a tech company that was also a consumer brand, with strong network effects. It minted its own capital through rapid growth rather than needing VC money.

  • Meg Whitman, a successful executive at Hasbro, was recruited to be eBay’s CEO by Benchmark Capital partner Bob Kagle. Her husband, a surgeon, was initially skeptical about eBay’s prospects. Kagle worked hard to win them over, sending Stanford swag to Whitman’s sons and having a realtor show them attractive neighborhoods in the Bay Area.

  • eBay went public in 1998 at $18 per share. The stock price soared dramatically, reaching over $200 by November. This gave Benchmark an astonishing return, with its stake worth over $5 billion - the biggest VC home run yet.

  • Benchmark’s success showed that a “back to basics” approach to venture capital could thrive, even as Masayoshi Son of SoftBank was raising huge funds and making massive pre-IPO investments.

  • But Son’s approach also exerted a pull. Benchmark debated whether to raise a $1 billion fund, much larger than its past funds. Some partners feared overcapitalizing companies, but others argued they needed the money to compete with SoftBank. Ultimately Benchmark raised a $1 billion fund in 1999.

  • The different models persisted - Benchmark’s thoughtful, empathetic approach versus Son’s rapid-fire, massive bets. Son’s approach sometimes caused problems but also generated tremendous wealth. Benchmark struggled when reckless later-stage investors overwhelmed its portfolio companies with huge checks.

  • Andy Bechtolsheim became very wealthy as a co-founder of Sun Microsystems. He used his wealth to fund other entrepreneurs, often investing impulsively with little expectation of return.

  • In 1998, Bechtolsheim met Larry Page and Sergey Brin and was impressed with their Google search engine technology. He immediately wrote them a $100,000 check for “Google Inc.”, even though Google did not yet exist as a legal entity.

  • Bechtolsheim’s angel investing style became more common in the late 1990s as newly wealthy tech entrepreneurs sought investing opportunities. This allowed startup founders to raise early capital without venture capitalists.

  • Brin and Page used these angel investors to raise over $1 million for Google in 1998, avoiding venture capitalists and the oversight they demanded.

  • The late 1990s saw a venture capital boom, with record fundraising despite signs of a bubble in internet stocks. VCs are structurally biased to go with the flow during bubbles.

  • The stock market also failed to provide discipline, as amateur traders piled into internet stocks. This removed an important check on private tech valuations.

  • As a result, private financing valuations soared, with companies like Webvan raising enormous sums based just on concepts, before having substantial operations.

  • In 1999, the venture capital market was booming and investors were pouring large sums into internet startups, often at inflated valuations. Webvan raised $348 million at a $4 billion valuation despite losing money. Its IPO valued it at $11 billion, demonstrating investor euphoria.

  • Google knew it needed venture capital and set out to court top investors like John Doerr of Kleiner Perkins and Sequoia Capital. The founders were very confident and maintained leverage in financing negotiations.

  • Doerr was attracted by Google’s superior technology and the founders’ bold revenue projection of $10 billion. Sequoia’s Michael Moritz was persuaded by positive feedback from Yahoo about Google’s search capability.

  • The investors saw different value propositions in Google. Doerr believed its engineering edge was transformative. Moritz was less convinced of its superiority but saw potential for Google to be the search technology leader behind major internet brands.

  • Google succeeded in getting investment from top-tier VC firms on very favorable terms, maintaining control despite the financing frenzy. The founders’ confidence and the strength of Google’s technology allowed them to set the terms.

  • Google founders Larry Page and Sergey Brin were approached by venture capital firms Kleiner Perkins and Sequoia Capital for investment in 1999. The founders made the unprecedented move of demanding both firms invest equally, which they reluctantly agreed to.

  • The VCs wanted to bring in an experienced outside CEO, but Page and Brin initially refused. After the dot-com crash in 2000, the VCs pushed harder for outside leadership.

  • Doerr arranged for Page and Brin to meet with seasoned founders like Steve Jobs and Jeff Bezos to discuss the merits of an outside CEO. Though reluctant, the Google founders eventually agreed.

  • Doerr recommended Eric Schmidt, who he knew from Sun Microsystems. Schmidt was skeptical of search but agreed to meet with Page and Brin at Doerr’s urging.

  • The power balance had shifted towards founders like Page and Brin, forcing VCs to take a more hands-off, advisory approach compared to past decades. But the VCs still insisted on key governance changes like hiring an outside CEO.

  • In 2001, Google recruited Eric Schmidt as CEO to provide experienced leadership. Brin and Page had resisted hiring a CEO, wanting to maintain control.

  • Schmidt was excited about joining Google but anxious about working for two young, mercurial founders who could fire him. He took comfort that venture capitalists would help him find another job if needed.

  • When Google went public in 2004, Brin and Page controversially insisted on a dual-class share structure that gave them voting control. This went against VC objections but set a precedent followed by other startups.

  • Google demonstrated software companies could still thrive after the dot-com bust. Its IPO in 2004 marked the end of a dark period for Silicon Valley entrepreneurship.

  • As animal spirits returned, young entrepreneurs increasingly disregarded experienced VCs. Paul Graham became an influential advocate of startup founders maintaining control versus VCs.

  • Google’s success marked a power shift where entrepreneurs used various tactics to secure more wealth and control versus venture capitalists. This confronted VCs with a new challenge.

  • Paul Graham was an influential essayist who championed young hackers and disparaged venture capitalists. His writings echoed the rebelliousness of Google’s founders.

  • Graham advised hackers to be wary of VCs, spend as little of their money as possible, and resist pressure to bring in experienced executives.

  • Graham argued that software startups needed less capital than VCs provided. He saw oversized investments as damaging - inflating valuations, slowing decision-making, and eliminating innovative features.

  • Graham predicted VCs would be humbled as startups needed less cash. The youth revolt among founders would test VCs in new ways.

  • Mark Zuckerberg’s meeting with Sequoia illustrated this new dynamic. He arrived late in pajamas as a taunt. His pitch deck mocked the firm for even taking the meeting.

  • Zuckerberg’s stance showed young founders no longer craved VC backing. Sean Parker embodied this rebellious ethos.

  • Peter Thiel bankrolled Parker and became an idol to young founders by providing tiny sums of capital through PayPal.

  • Thiel and Graham would soon join forces, backing hackers through Y Combinator and further challenging the VC establishment.

  • Sean Parker co-founded Plaxo, a viral contacts service that spammed users’ contacts. He was fired in 2004.

  • Parker then befriended Mark Zuckerberg and became an advisor to Facebook. He helped raise an early investment round from entrepreneur angels like Peter Thiel rather than traditional VCs.

  • Many entrepreneur angels were skeptical of VCs, influenced by Google’s fundraising approach.

  • Peter Thiel in particular held a grudge against VC Michael Moritz of Sequoia Capital.

  • Thiel had previously invested in Max Levchin’s startup idea, which eventually became PayPal. Levchin also had trouble raising VC funds initially.

  • The PayPal founders’ experience made them skeptical of VCs. This influenced how Parker and Thiel steered Facebook’s early fundraising away from VCs like Benchmark and toward angel investors.

  • Peter Thiel and Max Levchin founded a payments company called Confinity. They struggled to raise funding and eventually got $4.5 million from Nokia.

  • Confinity competed with a rival called, funded by VC Michael Moritz of Sequoia Capital. The rivals eventually agreed to merge.

  • Moritz pushed for the merger even though it meant Sequoia’s stake would be diluted, believing it was better to own part of a success than all of a failure.

  • There was conflict over the merger terms - proposed owning 92%, but it ended up being 50/50.

  • After the merger, there was conflict over who should lead the combined company. Moritz didn’t want Thiel as CEO, but eventually Thiel took over after the ousting of’s CEO.

  • There was ongoing tension between Thiel and Moritz over leadership and control of the company, now called PayPal. Ultimately Thiel prevailed but Moritz ensured he had limited power.

  • Despite the clashes with Moritz, PayPal went on to successful IPO, making Thiel resentful of VC power over startups.

  • Max Levchin and Peter Thiel co-founded Confinity, which later merged with to form PayPal.

  • VC Michael Moritz of Sequoia Capital invested in Confinity and joined the board. He pushed for Thiel to step down as CEO in favor of an experienced outsider. Thiel resented this.

  • Moritz and Thiel later clashed over whether to sell PayPal to eBay for $300 million. Moritz opposed it, believing PayPal’s value would grow much higher. Thiel wanted to sell.

  • Moritz convinced Levchin to oppose the sale, and PayPal eventually sold to eBay for $1.5 billion in 2002, greatly enriching Thiel, Levchin, and Moritz.

  • Despite Moritz’s successful guidance of PayPal, his conflicts with Thiel and Sean Parker damaged Sequoia’s relationship with the next generation of startups.

  • In 2005, Thiel launched his own VC firm Founders Fund with other PayPal alums. It explicitly supported founder control and rejected the idea of bringing in outside CEOs.

  • Thiel pioneered thinking about power laws and monopolies in startups. He believed founders should retain control to dominate their market niche.

  • Meanwhile Sean Parker co-founded Plaxo and was forced out by Moritz. He later joined Founders Fund.

  • This all contributed to Sequoia being excluded from investing in Facebook, the hottest startup of the time led by Mark Zuckerberg.

Here are the key points:

  • Peter Thiel argued that the power law dictated that only a handful of exceptional startups would succeed hugely. Venture capitalists should therefore make a few big bets rather than many small ones.

  • Thiel believed venture capitalists should stop mentoring and coaching founders, as this could suppress idiosyncratic genius. Eccentric founders were more likely to come up with truly original ideas.

  • Thiel thought venture capitalists focused too much on helping portfolio companies rather than seeking new opportunities. The opportunity cost was too high.

  • He recruited unconventional partners like Sean Parker and encouraged decentralization at Founders Fund, breaking with the venture capital norm of collective decision-making.

  • When he had high conviction in an investment, Thiel placed very large bets instead of diversifying risk. For example, he invested heavily in Facebook early on.

  • Over time, Thiel began backing increasingly risky and audacious projects that had potential to change the world. His philosophy was to embrace risk in pursuit of outliers.

In summary, Thiel believed the power law justified taking bold risks on eccentric founders and moonshot ideas, rather than spreading investments broadly. His approach prioritized conviction over diversification.

  • Peter Thiel started Founders Fund, a venture capital firm taking a radical, contrarian approach to investing. In 2008, he invested $20 million in Elon Musk’s SpaceX, despite its risky nature and past failed rocket launches. This cemented Founders Fund’s reputation for moonshot bets.

  • Around the same time, Paul Graham gave a lecture at Harvard about how to start a startup. He advised hackers not to defer to venture capitalists. Two students, Alexis Ohanian and Steve Huffman, approached Graham about investing in their startup idea.

  • Though initially reluctant to become an angel investor, Graham was inspired to start Y Combinator with his girlfriend Jessica Livingston. It would provide small amounts of funding and advice to young founders in batched groups. This was a novel form of seed investing.

  • Both Founders Fund and Y Combinator represented a backlash against the traditional venture capital industry. They favored extremely early stage, hands-off investments in unconventional founders like hackers and misfits. This supported Thiel and Graham’s critiques of mainstream VC.

  • Gary Rieschel, a veteran Silicon Valley VC, visited Shanghai in 2004 and was amazed by the construction boom and economic growth he saw there. He decided to move to China and start a new VC firm focused on Chinese startups, called Qiming Venture Partners.

  • Rieschel partnered with Duane Kuang, an engineer he knew from Cisco who had returned to China. They raised money from American LPs and began investing in 2005.

  • Rieschel embraced the Chinese startup community, mentoring entrepreneurs and introducing Western business concepts. He saw huge potential in China’s growth and its vast population of Internet users.

  • By the late 2000s, China was producing hugely successful internet companies like Baidu and Tencent. There was a surge of VC investment as U.S. firms entered China.

  • Two of Qiming’s early bets were on Xiaomi, the electronics company, and DJI, the drone maker. Both became very successful.

  • Overall, China was undergoing massive economic growth and technology development, presenting huge opportunities for venture investing. Rieschel’s early move to China allowed Qiming to benefit enormously from this boom.

  • Gary Rieschel, an American venture capitalist, moved to Shanghai in 2005 to invest in China’s booming tech startup scene. He was struck by the youthful energy and ambition of Chinese founders, who were eager to meet at all hours to pitch ideas.

  • China was experiencing rapid economic growth and internet adoption, creating many opportunities for startups. Venture investment in China was starting to rival the U.S., marking the first real challenger to Silicon Valley’s dominance since Japan in the 1980s.

  • However, China’s startup boom was largely driven by American VCs and Chinese VCs educated and professionally trained in the U.S. These VCs brought American practices like equity financing and stock options to China.

  • In 1999, venture capitalist Syaru Shirley Lin backed early Chinese internet companies like Sina, Sohu, and NetEase, blending U.S. startup models with access to China’s market. She almost missed investing in Alibaba, founded by Jack Ma, but was convinced by Yale-educated Joe Tsai.

  • Alibaba demonstrated that groundbreaking innovation could come from China, not just American techniques applied to China. It pioneered consumer e-commerce there and grew into a $500 billion company.

  • China’s tech success represents a victory for the venture capital model pioneered in Silicon Valley by Arthur Rock in the 1960s, which was replicated by American educated Chinese VCs.

  • Melissa Ma of Goldman Sachs was pitching tech investments in China to Joe Tsai in 1999. She met with Jack Ma who was starting, an e-commerce site.

  • Despite objections from Goldman’s New York office, Melissa invested $5 million for 50% of Alibaba. Goldman later offloaded some of its stake cheaply.

  • In 2000, Goldman wanted to raise more funds for Alibaba at a higher valuation. Melissa got SoftBank and Masayoshi Son to invest $20 million for 20% of Alibaba, valuing it at $100 million.

  • SoftBank’s investment was very profitable - its stake ended up being worth $58 billion when Alibaba went public in 2014.

  • To get around Chinese restrictions on foreign investment and stock options, the U.S. VCs incorporated the startups in the Cayman Islands and used variable interest entity (VIE) structures. This allowed U.S. capital and Silicon Valley practices to be imported into China’s tech sector.

  • In the late 1990s, China’s internet industry got started with help from U.S. investors and structures. Goldman Sachs made an early investment in Alibaba through a Cayman Islands entity, allowing foreign money to flow in. Alibaba also used U.S.-style stock options to recruit talent like Joe Tsai and John Wu.

  • Other major Chinese internet companies like Tencent, Baidu, Sina, and Ctrip also received early U.S. venture capital. The American model of equity-based compensation was key to building these companies.

  • In the 2000s, a second wave of China internet investing emerged, led by U.S. venture firms setting up China offices and Chinese investors with U.S. experience starting their own funds.

  • Key figures in this second wave included Gary Rieschel of Qiming Venture Partners and Kathy Xu, who started her own venture fund Capital Today after working in Hong Kong finance. Their goal was to combine U.S. venture methodology with Chinese implementation.

  • By adopting U.S. structures and culture, China’s internet industry was able to thrive despite restrictions on foreign investment. The American influence was critical in enabling the rise of Chinese internet giants.

  • In 2005, venture capital was taking off in China. Key new firms included Founders Fund, Y Combinator, Qiming Venture Partners, and Capital Today.

  • Capital Today was founded by Kathy Xu, who made a key early investment in She gave $10 million in funding and helped recruit talent, design stock options, and boost growth.

  • Sequoia Capital also entered China in 2005, recruiting Neil Shen and Zhang Fan to lead Sequoia China. They raised $180 million and aimed to operate autonomously while benefiting from Sequoia’s global expertise.

  • Transferring Silicon Valley best practices to China was challenging. Legal structures could be mimicked but cultural practices were harder to instill, like data-driven decision-making and treating founders as kings.

  • Still, Chinese venture capital continued growing rapidly, with major new funds being raised by Qiming, Capital Today, Sequoia China and others. China’s massive market opportunity attracted entrepreneurs and investors alike.

  • Neil Shen, a partner at Sequoia Capital, helped establish Sequoia’s presence in China in the 2000s. Operating in China’s “Wild West” business culture posed challenges for bringing Silicon Valley ethics and practices.

  • In 2008, Shen was sued for $206 million by Carlyle, who claimed Shen cheated them out of an investment. The case settled privately. Around the same time, tensions arose between Shen and his co-founder Zhang over investments.

  • Sequoia’s Mike Moritz flew to China to resolve the conflict. He sided with Shen over Zhang, who soon resigned. By 2010, Sequoia China was thriving, taking Chinese firms public on the NYSE.

  • China’s startup scene matured, entering a phase like Silicon Valley in the 1980s. Venture funding flooded in, fueling ambitious startups like Meituan, a Groupon clone founded by Wang Xing.

  • Sequoia courted Wang persistently. He finally agreed to sell 25% of Meituan for $3 million. But after growth, Wang demanded 4x more, which Sequoia accepted.

  • A brutal “war of the Groupons” broke out. Sequoia pushed for a merger between Meituan and rival Dianping, another Sequoia company. But the founders resisted compromising. By 2015, a resolution was still elusive.

  • After the tech bust in the early 2000s, Kevin Efrusy joined the venture capital firm Accel Partners. Despite the struggling venture industry, Accel’s senior partners convinced Efrusy that if he joined now and trained for 5 years, he would hit his stride just as the tech market recovered.

  • Efrusy was pleasantly surprised to find Accel invested in its young hires for the long-term, expecting them to develop the capacity to make investment decisions, not just support senior investors. From his first meeting, Efrusy participated in investment decisions, proposing deals, voting on others’ proposals, and taking responsibility for his views.

  • This contrasted with Kleiner Perkins, the eminent VC firm, where junior partners played supporting roles and had little voice in investment decisions dominated by senior partners like John Doerr.

  • In 2004, Efrusy’s colleague Matt Cohler got a call from a Harvard student named Mark Zuckerberg about his new startup Facebook. Efrusy and Cohler championed investing in Facebook, though some other Accel partners were skeptical.

  • Accel ended up leading Facebook’s $12.7 million Series A in 2005. Other firms like Kleiner Perkins passed on the deal. Facebook’s success cemented Accel’s partnership model empowering young investors.

  • Kleiner Perkins’ failure to get into Facebook despite its close ties to Zuckerberg contributed to the firm’s decline. Meanwhile, Accel emerged as a top VC firm, demonstrating the merits of its meritocratic structure.

  • Efrusy joined the venture capital firm Accel Partners as a young and inexperienced investor in 2003. Initially, he struggled to take decisive stands on potential investments.

  • In October 2003, Accel held a “prepared mind” exercise to examine why they were missing out on good investments. They identified social media/Web 2.0 as a hot new area to focus on.

  • Efrusy led Accel’s look at Skype, but concerns over the founders and business model led them to pass. Skype became a huge success, demonstrating the high cost of missing out on big winners.

  • Accel analyzed their misses on Skype, Tickle, and Flickr. They decided they needed to move beyond their typical engineering-minded founders and evaluate consumer internet startups based more on user data/growth metrics than founders’ profiles.

  • In 2004, Efrusy heard about Myspace and saw it was growing fast without the problematic users dragging down Friendster.

  • In December 2004, Efrusy got a tip about Thefacebook, a new social network for Stanford students. He was impressed by its exclusive community but struggled to get meetings with Mark Zuckerberg and Sean Parker.

  • Efrusy persevered in trying to court Thefacebook, recognizing it as a potential breakthrough company. His persistence eventually paid off despite the founders’ initial reluctance.

  • Accel partner Peter Fenton was close to Reid Hoffman. Fenton asked Hoffman to help arrange a meeting between Accel and Facebook, but Hoffman said Facebook wasn’t interested.

  • Hoffman explained Facebook believed VCs wouldn’t value the company properly. But he said if Accel promised not to lowball, he’d help set up a meeting.

  • Despite Hoffman’s efforts, no meeting happened. So on April 1, 2005, Accel’s Jim Efrusy went uninvited to Facebook’s office with partner Arthur Patterson.

  • They met Facebook exec Matt Cohler and saw impressive user engagement data. Later Parker and Zuckerberg appeared and agreed to meet with Accel.

  • At the meeting, Zuckerberg was quiet and dressed casually but the data impressed Accel. Facebook was growing rapidly on college campuses without losing user engagement.

  • Accel offered a $60 million pre-money valuation, matching another offer Facebook had. But Facebook declined.

  • Accel upped its offer to $70 million pre and $10 million investment. Parker was impressed but Zuckerberg had an oral agreement with the Washington Post valuing Facebook lower.

Here is a summary of the key points in the passage:

  • In 2004, Facebook received competing investment offers from Accel Partners and the Washington Post Company. Mark Zuckerberg was torn between the two and felt he had a moral obligation to the Post.

  • Accel ultimately won the deal after extensive discussions and negotiations. Jim Breyer of Accel made a connection with Zuckerberg, while Don Graham of the Post emphasized letting Zuckerberg retain control.

  • Sean Parker played a key role in the Accel negotiations, but was later ousted from Facebook due to erratic behavior. Accel reaped huge profits when Facebook went public.

  • The episode showed how a traditional VC firm like Accel could navigate the “youth revolt” by leveraging different partners’ skills and experience.

  • Meanwhile, once-dominant firm Kleiner Perkins declined around the same period after betting big on cleantech startups. This illustrated the limits of path dependency and reputation - success has to be continually earned.

  • Kleiner partner John Doerr was overly optimistic about cleantech markets and the government’s regulatory approach. When energy prices dropped, Kleiner’s investments soured.

  • Some later cleantech bets paid off hugely but weren’t enough to revive Kleiner’s fortunes. The firm fell out of the top VC ranks after years at the apex.

Here are the key points:

  • Kleiner Perkins lost its equilibrium and culture of constructive debate when experienced partners like Vinod Khosla, Doug Mackenzie, and Kevin Compton left in the early 2000s.

  • John Doerr was left without an intellectual counterweight and brought in big names like Al Gore instead of experienced investors.

  • Without the old partners to challenge him, Doerr dominated and pushed cleantech investments that went against Kleiner Perkins’ traditional strategy of eliminating “white-hot risks” early.

  • The lack of balance at the top affected other initiatives like China and traditional IT investments. Kleiner missed out on many big winners in this period.

  • Mary Meeker was a rare bright spot, making successful late-stage bets on companies the venture team had missed.

  • Kleiner also failed to make progress on Doerr’s goal of bringing more women into the firm. Despite efforts to recruit women like Aileen Lee, the male-dominated culture remained entrenched.

  • Kleiner Perkins hired some talented women like Mary Meeker, Beth Seidenberg, Juliet de Baubigny, Aileen Lee, Trae Vassallo, and Ellen Pao. This was due in large part to John Doerr’s belief in promoting diversity.

  • However, many of these women faced challenges at Kleiner Perkins, feeling like outsiders and having their contributions minimized or ignored. They were not given equal opportunities for advancement and leadership roles.

  • This came to a head when Ellen Pao sued Kleiner for gender discrimination. Though Kleiner won the case, it cast a negative light on the firm’s culture.

  • The problems seemed to stem from poor management and informal “clubby” culture rather than overt discrimination. But it meant women did not thrive there.

  • Meanwhile, Kleiner’s rival Accel Partners prospered through strong teamwork and equal opportunities for younger partners like women.

  • Doerr’s idealism was admirable but implementing real change requires detailed organizational work he failed to do. Despite early failures, his efforts did eventually help advance women in VC.

  • In 2009, Russian investor Yuri Milner made an unsolicited offer to invest in Facebook. Despite initial skepticism, he flew to Silicon Valley to meet with Facebook CFO Gideon Yu and CEO Mark Zuckerberg.

  • Milner made a compelling data-driven case for why Facebook was undervalued, citing his own experience with social media firms globally. He offered $5 billion initially.

  • Milner structured the deal creatively so as not to dilute Zuckerberg’s control. He also offered a two-tier share pricing structure to buy employee shares cheaply.

  • Rival U.S. investors didn’t match Milner’s $10 billion valuation offer. Marc Andreessen saw that Milner’s meticulous, metrics-based approach made him value Facebook highly.

  • In May 2009, Milner’s firm DST invested $200 million for a 1.96% stake at a $10 billion valuation. It also bought secondary shares at $6.5 billion valuation, for a blended $8.6 billion valuation.

  • The deal proved extremely lucrative for Milner as Facebook took off. 18 months later, Facebook was valued at $50 billion.

  • In 2009, Yuri Milner’s investment firm DST invested over $300 million in Facebook, valuing the company at $10 billion. This was a watershed moment for Silicon Valley, showing private tech companies could raise enormous sums while staying private.

  • Milner’s investment allowed Facebook to delay going public and enabled huge wealth creation away from public markets. It signaled tech founders could escape oversight from traditional private investors and public disclosures.

  • Milner was willing to invest huge sums while relinquishing governance, treating Facebook like a public company and investing passively. This inverted the typical model of venture investors protecting their stakes via governance.

  • Milner’s investment paralleled Netscape’s IPO in the 1990s, which launched the dot-com boom. His investment would fuel a bubble in founder hubris by allowing hot startups to stay private longer.

  • The road to Milner’s Facebook deal began with Chase Coleman’s hedge fund, Tiger Global. Scott Shleifer of Tiger Global saw potential in investing in Chinese web portals that were overlooked after the tech crash.

  • Shleifer applied techniques like evaluating incremental margins to identify mispriced assets. The lack of investor interest was actually appealing per investing guru Peter Lynch’s philosophy.

  • Shleifer convinced Coleman with his analysis. They pursued the Chinese deals despite limited knowledge of China, following Julian Robertson’s mantra to invest where others weren’t.

  • In 2002, Tiger Global Management, a hedge fund run by Chase Coleman and Lee Fixel, made a bold bet on Chinese internet companies like Sina, Sohu, and NetEase. This $20 million investment ended up generating 5-10x returns within a year.

  • Coleman’s colleague Alexander Shleifer went to China in 2003 to dig deeper into the internet sector. He met with e-commerce companies and found they were poised for huge growth, needing to raise more capital.

  • Shleifer identified 5 promising private deals, but hedge funds typically avoid illiquid private assets. Coleman came up with a solution - creating a separate $50 million pool of capital locked up for longer timeframes to invest like a VC fund.

  • One of the deals Shleifer pushed for was a $20 million investment in Alibaba and Jack Ma. But Coleman declined, as Alibaba didn’t fit the hedge fund’s “this of that” metric-driven approach.

  • Shleifer also negotiated a deal with Ctrip but the terms changed post-SARS. Though furious, Coleman stuck with the investment given Ctrip’s strong potential. This highlighted the fund’s ability to look past conventions when warranted.

  • Tiger Global pioneered a hybrid hedge fund/VC model - applying hedge fund analytical rigor to private bets locked up in a VC structure. This set the stage for their later China internet dominance.

  • Tiger Management created a new type of private technology investment fund after partner Chase Coleman negotiated a deal with Chinese travel website Ctrip in 2003.

  • The Tiger model involved identifying promising internet companies globally, valuing them through financial modeling, and making large ‘growth’ investments.

  • In 2004, Tiger partnered with Russian investor Yuri Milner, exposing him to Tiger’s approach. Milner adopted this model for his own investments.

  • In 2009, Milner made a hugely successful $200 million investment in Facebook. His success popularized growth investing in Silicon Valley.

  • Tiger and other firms soon started making their own growth investments in U.S. tech firms like Facebook, LinkedIn, and Zynga.

  • Milner led investment syndicates into companies like Groupon and Spotify, bringing in major VC and PE firms. This further established growth investing.

  • The rise of growth investing provided late-stage private companies access to large amounts of capital. It enabled the creation of many ‘unicorn’ startups worth over $1 billion.

Here is a summary of the key points about hotel rooms in New York, Boston, and Philadelphia:

  • Yuri Milner, a successful Russian venture capitalist, reflected on his humble beginnings coming to America and staying in small, bare hotel rooms when he first arrived. He admired the entrepreneurial spirit of America at the time.

  • Years later, Milner had become a hugely successful capitalist himself, owning a lavish California home. His journey embodied the American dream.

  • Milner’s influence was seen in the launch of Andreessen Horowitz, a new venture capital firm started by Marc Andreessen and Ben Horowitz in 2009.

  • Andreessen Horowitz differentiated itself by promising to coach technical founders rather than replace them like traditional VCs did.

  • However, the ideas of not displacing founders and helping coach them were not new - many VCs like Michael Moritz had done this before.

  • Andreessen and Horowitz aimed to vault themselves into the top tier of VCs through their strong personal brands and PR.

  • They followed through on their promise to coach founders, helping companies like Nicira with key business decisions on pricing and acquisition offers. Their connections and introductions also helped their portfolio companies.

  • Sado wanted to seize Cisco’s rich acquisition offer for his startup Nicira, but Horowitz intervened, arguing that the high bid signaled Nicira was more valuable than Sado realized.

  • Horowitz and Andreessen convinced Sado to run a bidding process rather than sell immediately to Cisco. This ended up more than doubling the sale price to $1.26 billion.

  • Horowitz played an active role on the boards of a16z’s portfolio companies, getting involved in hiring decisions, strategy, and morale. He wasn’t afraid to confront founders when necessary.

  • A key innovation at a16z was combining early-stage startup investments with Milner-style later-stage growth investments in more mature startups. Examples include Skype, Zynga, Facebook, Twitter.

  • Andreessen’s position on eBay’s board enabled the Skype investment opportunity. His role and reputation helped bring the Skype founders back and revitalize the company, leading to a big profit when Microsoft acquired Skype.

  • The growth investments showed the influence of Milner’s model and exploited Andreessen’s privileged network position in the Valley. This was an underappreciated aspect of a16z’s strategy.

Here are the key points:

  • In 2010, Kleiner Perkins partner Joe Lacob made an unconventional investment by buying the struggling Golden State Warriors basketball team for $450 million.

  • Under Lacob’s ownership, the Warriors became hugely successful, boosting their value to $3.5 billion by the end of the decade. This exemplified the wider tech boom in Silicon Valley.

  • Many famous VC investors became Warriors fans and superfans. The team also got into investing, with players like Kevin Durant building VC portfolios.

  • In the 2010s, Silicon Valley boomed, with Apple, Google and Facebook becoming the world’s most valuable companies. Venture capital expanded into more industries and geographies.

  • Sequoia Capital best embodied this boom, outpacing Kleiner Perkins. While Kleiner stumbled with cleantech and clunky diversity efforts, Sequoia was more cautious and unified under Michael Moritz’s leadership.

  • Sequoia focused on recruiting hungry young partners like Alfred Lin rather than established executives. This allowed Sequoia to connect with founders and identify promising startups earlier than rivals.

  • Sequoia Capital has had astonishing success compared to other top venture capital firms like Kleiner Perkins. In recent years, Sequoia partners have dominated the Forbes Midas list of top investors.

  • Sequoia’s secret sauce is the partnership between Doug Leone and Michael Moritz, who have complementary skills and a unified vision. Leone is operational while Moritz is strategic.

  • The firm has an intensely disciplined culture focused on excellence. Recruitment, team building, motivation, and purging underperformers are key focuses.

  • Sequoia purposefully nurtures young partners like Roelof Botha, having them shadow experienced partners at first. Botha was supported through ups and downs and gained experience by being added to a board after a senior partner stepped down.

  • The firm has a surprisingly soft side too, with partners opening up at off-sites and participating in activities like poker tournaments.

  • Sequoia celebrates successes as collective efforts, not just individual partner achievements. The WhatsApp sale milestone memo credited over a dozen partners for contributing to the deal.

  • After Koum’s Ferrari was damaged, Schillage quickly found him a replacement Porsche, showing the teamwork and support within Sequoia.

  • In 2009, Sequoia underwent a leadership transition, with Moritz and Leone remaining as “stewards” but Goetz and Botha taking over day-to-day management of U.S. investments. This brought fresh ideas on proactive thinking and behavioral science.

  • Goetz implemented “prepared mind” exercises to anticipate technology trends and prime Sequoia for the resulting investment opportunities.

  • Botha applied insights from behavioral science to overcome biases and improve investment decision-making, through postmortems, modifying processes, and building new habits.

  • Sequoia expanded its operational partners and other offerings like Base Camp to support portfolio companies, in response to Andreessen Horowitz.

  • In 2012, Moritz stepped down due to health issues, leaving Leone to fill the void in leadership.

  • Sequoia Capital managed leadership transitions smoothly by relying on teamwork rather than replacing leaders with individuals. When Michael Moritz stepped back, Doug Leone brought in others like Neil Shen and Jim Goetz to form a leadership troika.

  • Sequoia systematically builds the skills of its investors, like coaching Roelof Botha early on, which leads to more successful investments later.

  • Many of Sequoia’s big wins seem due to serendipity on the surface, but actually reflect systematic efforts behind the scenes. For example, Sequoia’s early bird system identified WhatsApp before others, and its ties to Y Combinator boosted its odds of investing in Airbnb and Dropbox.

  • Sequoia deliberately builds connections to tap into networks, like immigrant communities in Silicon Valley, that provide deal flow. This explains seemingly chance encounters like the Dropbox founders meeting rug merchant Pejman Nozad.

  • The root of Sequoia’s success is methodical teamwork and relationship building that manufacture luck through improving its odds of finding and winning deals. Its wins reflect consistent execution on this deliberate strategy over time.

  • Sequoia Capital’s formal “scouts” program, started in 2008, helped the VC firm gain early access to promising startups. Through the scouts, Sequoia invested early in hits like Guardant Health and Thumbtack.

  • But the biggest success of the scouts program was Sequoia’s investment in Stripe. The scouts’ connections to Y Combinator and founders like Sam Altman gave Sequoia an edge in meeting Patrick and John Collison, Stripe’s young founders.

  • Sequoia partner Michael Moritz bonded with Patrick Collison over cycling and quickly became convinced of Stripe’s potential. Sequoia led Stripe’s early funding rounds and wound up with a stake worth $15 billion by 2021.

  • Thanks in part to successes like Stripe, Sequoia has generated extraordinary returns from its venture investments between 2000-2014, far outpacing the industry average. This is despite the VC industry becoming more competitive. Sequoia owes its edge to factors like its scouts program, talent network, and partners’ judgment of founders.

  • Sequoia Capital had striking consistency in performance across time, sectors, and investing partners. One investment chief at a major university endowment said Sequoia had been their #1 performer.

  • Sequoia expanded globally, moving into China in 2005 and India in 2006. In India, Sequoia gave control to local partners but the relationship broke down after 5 years. Sequoia rebooted India operations by elevating a young team member, Shailendra Singh, to lead.

  • Singh had to educate Indian founders from scratch on concepts like CAC (customer acquisition cost). An early investment in Freecharge and its founder Kunal Shah succeeded after much nurturing. By 2020 Sequoia India had 12 unicorns.

  • At home, Sequoia experimented with growth equity funds starting in 1999. After initial struggles, they hired specialists from Summit Partners in 2005 to focus on non-Silicon Valley, non-tech “bootstrappers.” The Summit team had a methodical style of cold-calling and modeling to find bargains.

  • Overall, Sequoia succeeded through persistence, giving local autonomy, and adapting strategies like growth equity and accelerator programs. Their willingness to experiment and reboot was key.

  • Sequoia Capital brought in investors from Summit Partners to start a growth equity fund, but their contrasting approaches initially led to poor performance.

  • The Summit team focused on analyzing earnings forecasts and multiples, while the Sequoia team prioritized high-potential companies. This “underreach plus overreach” produced mediocre returns.

  • Around 2009, the two approaches fused as the Summit team learned to dream big and the Sequoia team internalized financial discipline.

  • The crucible was Sequoia’s 2009 investment in ServiceNow, a cloud software company. Pat Grady did the initial cold calling but Doug Leone led the deal.

  • They bet big on ServiceNow’s potential despite a high revenue multiple, relying on their ability to actively help the company.

  • When the CEO wanted to step down, Sequoia helped recruit a replacement. Then they blocked a lowball acquisition offer by claiming it would be illegal without a bidding process.

  • Sequoia’s hands-on involvement and willingness to buck conventional valuation wisdom allowed them to maximize returns on ServiceNow as it grew into a major public company.

  • In 2008, Sequoia launched a hedge fund called Sequoia Capital Global Equities to extend its tech investments into the public markets. The fund struggled at first due to the financial crisis, departures, and a scandal, but Sequoia persevered based on Michael Moritz’s advice.

  • Under new leadership, the hedge fund focused on investing based on major tech themes and disruption trends that Sequoia’s venture side identified. This strategy proved highly successful, with returns doubling the S&P 500. The hedge fund grew to $10 billion under management.

  • Sequoia also started a “Heritage” business in 2008 to manage partners’ wealth and offer wealth management to founders of Sequoia-backed companies. They hired professionals from university endowments to bring “Yale model” investing to Sequoia.

  • As with its funds focused on China, India, growth stage companies, and public markets, Sequoia’s perseverance with these new initiatives paid off despite early difficulties. The firm expanded its investing breadth dramatically while staying true to its technology focus.

Here are the key points I gathered from the passage:

  • In 2014, Fortune announced the emergence of a new tech star: 30-year-old female college dropout turned billionaire Elizabeth Holmes.

  • Holmes founded the biotech startup Theranos, which claimed to have revolutionary blood-testing technology.

  • Theranos was valued at $9 billion, making Holmes a self-made billionaire on paper. She was hailed as a visionary who would improve healthcare.

  • However, Theranos’ technology did not actually work as claimed. The company was built on secrecy and fraudulent claims.

  • This illustrated the hype and lack of scrutiny surrounding tech startups valued at over $1 billion, dubbed “unicorns.” Investors were eager to fund the next big thing without proper due diligence.

  • The Theranos saga showed the dangers of unfettered unicorn hype. Tech startup valuations needed more transparency and diligence to prevent fraud.

  • Elizabeth Holmes founded the startup Theranos, claiming to have revolutionary blood-testing technology. She was hailed as a visionary and Theranos reached a $9 billion valuation.

  • In 2015, investigations revealed Theranos’ technology was a fraud and did not work as claimed. Lawsuits and scandals followed as the company’s value crumpled to zero. This was seen as an indictment of Silicon Valley culture.

  • Most of the money invested in Theranos came from outside venture capital, showing VCs had dodged the bullet. But it highlighted the danger of hands-off late stage investors failing to oversee companies responsibly.

  • Venture firm Andreessen Horowitz experienced a similar near-disaster with insurance startup Zenefits, which grew too fast and had legal violations. Andreessen Horowitz replaced the founder to fix the problems.

  • Bruce Dunlevie of Benchmark invested early in WeWork, attracted by the visionary founder Adam Neumann. But late stage investment came from passive mutual funds and banks seeking IPO paydays. This created a dangerous dynamic as the company grew into a decacorn.

  • Adam Neumann, co-founder of WeWork, cultivated a close relationship with JP Morgan, which became a major lender and was positioned to underwrite WeWork’s IPO. Neumann complained to the bank about his personal accounts, and they smoothed things over.

  • In 2014, WeWork’s board approved giving Neumann’s shares super-voting rights despite objections from investor Bruce Dunlevie of Benchmark Capital. This gave Neumann absolute power over the company.

  • Neumann began engaging in self-dealing, personally profiting from WeWork’s real estate deals. The board could no longer restrain him due to his absolute power.

  • WeWork’s finances deteriorated as it expanded rapidly without focusing on profits. Neumann used tech buzzwords to maintain investors’ faith despite huge losses.

  • Benchmark and other early investors like T. Rowe Price were stuck with overvalued WeWork shares they couldn’t easily sell since it was still private. They also lacked power to rein in Neumann.

  • SoftBank’s huge Vision Fund, led by Masayoshi Son, began throwing huge amounts of capital at unicorns like WeWork without regard for profits or governance. This further enabled Neumann’s uncontrolled expansion.

  • In 2011, Benchmark Capital led Uber’s Series A funding round, betting on the company’s potential to leverage network effects to transform urban transportation.

  • Benchmark partner Bill Gurley was the driving force behind the investment. He had studied network effects and saw their power with OpenTable. He believed Uber could achieve similar network effects by better matching riders and drivers.

  • Gurley was initially skeptical of Uber’s founders, but became convinced when Travis Kalanick took over as CEO. Kalanick had previous startup experience and the aggressive style needed to take on regulators and incumbent fleets.

  • Gurley felt Benchmark and Kalanick shared a competitive spirit and intellectual curiosity. He believed Benchmark could work well with Kalanick compared to other VC firms.

  • The investment exemplified Benchmark’s ideal VC model - identifying a big market opportunity, finding the right founder, and getting in early at the Series A stage before growth distorted incentives.

  • This contrasted with Benchmark’s experience at WeWork, where SoftBank’s massive late stage investment empowered founder Adam Neumann and made it hard to control him. But it did provide a partial exit for Benchmark.

  • Travis Kalanick was courting venture capital firms to invest in Uber in 2011. He originally planned to partner with Andreessen Horowitz (a16z), but they lowered their valuation offer at the last minute from $300 million to $220 million.

  • Kalanick had also been speaking with Shervin Pishevar at Menlo Ventures. After a16z lowered their offer, Kalanick called Pishevar, who was eager to invest at a higher $290 million valuation.

  • Pishevar and Kalanick met in Dublin to finalize the deal. Pishevar later increased his offer to $295 million, which Kalanick accepted.

  • Kalanick chose to go with Pishevar’s offer rather than the lower valuation from the more prestigious a16z, based on the advice of a friend who said Uber didn’t need validation from famous VCs and capital was power.

  • The Pishevar investment foreshadowed future problems at Uber, as he was not chosen for his oversight abilities but rather as a cheerleader. This demonstrated Kalanick’s view that expert VC guidance was dispensable and money was power.

Here is a summary of the key points in the passage:

  • Uber raised large amounts of venture capital very quickly, exemplifying the shift towards massive funding rounds in Silicon Valley startups. Benchmark partner Bill Gurley was an early investor and advocate for Uber.

  • Uber prioritized raising cheap capital rather than optimizing its cap table and governance. This allowed CEO Travis Kalanick to consolidate power and ignore advice from investors like Gurley.

  • Benchmark was unable to exert control despite its early investment, as later investors accepted lack of leverage in exchange for access to the hot company.

  • Gurley grew frustrated with Kalanick’s resistance to hiring senior executives and addressing Uber’s bro culture. But Benchmark was trapped, unable to cash out or influence Kalanick.

  • The shift at Uber paralleled WeWork’s move to founder control at the expense of investor rights. Gurley began voicing concerns about “unicorns” staying private too long, though he did not name Uber specifically.

  • Bill Gurley, a VC investor at Benchmark Capital, was an early backer of Uber and served on its board. He became increasingly concerned about Uber’s high valuation and lack of governance.

  • Gurley highlighted three main problems with unicorns like Uber: they were overvalued, especially in late-stage rounds with inexperienced investors; their valuations were distorted by financial engineering like liquidation preferences; and their founders had too much power and oversight was lacking.

  • Gurley was especially worried about Uber’s expensive battle against Didi in China, which was enabled by Uber’s ability to raise huge amounts at high valuations. He tried unsuccessfully to get Uber to merge its China operations with Didi.

  • When Uber allowed Saudi investors to invest $3.5 billion in exchange for 3 extra board seats, further diminishing Benchmark’s influence, Gurley regretted not opposing the deal more forcefully.

  • Uber eventually exited China in 2016 by accepting an 18% stake in Didi, but after spending $2 billion in losses there.

  • Gurley continued to be frustrated with Uber’s governance and culture under Kalanick. Things came to a head in 2017 after allegations of sexual harassment at Uber went viral, despite Gurley’s warnings about the company’s culture.

  • In early 2017, Uber was hit by a series of crises, including accusations of sexual harassment and a lawsuit from Google over stolen self-driving car technology.

  • A video surfaced of Uber CEO Travis Kalanick arguing with an Uber driver, reinforcing his reputation as a jerk.

  • Benchmark Capital’s Bill Gurley, an early Uber investor, was stressed about Uber’s problems diminishing the potential value of Benchmark’s stake.

  • Gurley saw an opportunity when law firms investigating Uber’s culture recommended Kalanick take a leave of absence.

  • Gurley quietly assembled allies among Uber investors to oust Kalanick for good.

  • In June 2017, Gurley’s partners confronted Kalanick in Chicago, demanding he resign permanently or face a damaging public leak.

  • After initially resisting, Kalanick realized he lacked sufficient support and resigned as CEO.

  • Gurley executed a remarkable behind-the-scenes campaign to eject the founder CEO and resolve Uber’s crises.

  • Travis Kalanick was ousted as Uber’s CEO in 2017 after scandals, but he still had influence as a board member and major shareholder.

  • Benchmark Capital, an early Uber investor, took aggressive steps to curb Kalanick’s power and salvage the company, including threatening the leadership team’s resignations and suing Kalanick.

  • Benchmark also brought in SoftBank and its CEO Masayoshi Son as an investor, which helped reduce Kalanick’s voting power and board influence.

  • The governance breakdown at unicorns like Uber and WeWork highlighted issues with late-stage startup investors like SoftBank and the need for companies to go public.

  • Uber’s 2019 IPO provided accountability and forced reforms, while WeWork’s failed IPO led to Neumann’s ouster.

  • There were some signs of change after these episodes, like SoftBank improving governance standards, but systemic issues remained around cheap money and lack of oversight.

  • The documentary Searching for Sugar Man highlights how some talented artists like Sixto Rodriguez fail to achieve success while others become huge hits, seemingly randomly.

  • Sociologist Matthew Salganik designed an experiment that showed blockbuster songs often emerge randomly thanks to social influence and feedback effects. This suggests an element of luck in determining hits.

  • Similarly, a few star venture capitalists dominate the industry thanks to feedback effects giving them access to the best deals. But initial hits seem to be down to luck rather than skill.

  • However, there are several reasons to believe skill matters in venture capital:

  • Some firms like Kleiner Perkins and Y Combinator succeeded through genuine innovation rather than luck.

  • Newcomers can break in through skill, not just reputation.

  • VCs don’t automatically get the best deals - they have to compete. And famous VCs still miss out sometimes.

  • VCs actively contribute to companies through coaching, governance and support. Studies show VCs improve startup success rates.

  • So while luck plays a role, skill remains essential in venture capital. The best VCs demonstrate real ability to pick and nurture winners.

Here are the key points:

  • Ixto Rodriguez argues that early luck and path dependency play a big role in power-law businesses like venture capital. Some VCs succeed due to luck rather than skill.

  • But smartness and other VC qualities like hustle, fortitude, and emotional intelligence are still major drivers of success. Great VCs help modulate the moods of entrepreneurs.

  • As a group, VCs have a positive effect on economies and societies by funding innovative companies, even if individual VCs make mistakes.

  • Objections that VCs enrich themselves, lack diversity, or encourage harmful disruption are largely unpersuasive. VCs tend to encourage legal/social responsibility.

  • VCs are enthusiastic about cleantech but struggled to generate returns until recently. With appropriate term sheets, VCs can still fund capital intensive businesses.

  • The myth VCs only back software is wrong. Firms like Lux Capital and Flagship Pioneering show VC can still fund ambitious capital intensive projects like robotics, satellites and biotech.

  • Venture capital provides financing for innovative startups across a wide range of sectors. As long as a startup is targeting a lucrative market and can deliver high returns, venture capitalists will invest regardless of the specific industry.

  • However, venture capital is dominated by white men from elite educational backgrounds. Women make up only 16% of VC partners, while Black and Hispanic representation is even lower at 3-4% despite being a much larger share of the overall workforce. This lack of diversity constrains innovation.

  • Some argue venture capital encourages “blitzscaling” - overly fast growth that disrupts incumbents through unfair subsidies rather than true technological innovation. However, blitzscaling is often necessary to compete given the inherent advantages of incumbent firms. Distortions from VC subsidies are unlikely to be so severe as to greatly harm overall economic efficiency.

  • Venture capital is high-risk “jet fuel” suitable only for ambitious startups wanting to scale rapidly. Cautious founders looking for slower growth should seek funding elsewhere. VCs are upfront about the strings attached to their capital.

  • Overall, while venture capital has flaws around lack of diversity and potentially excessive disruption, it plays a vital role in funding innovation and expanding consumer choice in a broad range of sectors. With some reforms, it can allocate capital in an even more effective and equitable manner.

  • Venture capital has an outsized impact on innovation and wealth creation. VC-backed companies account for a disproportionate share of IPOs, market value, R&D spending, and highly-cited patents.

  • There is a debate over whether VCs actively contribute to the success of startups or merely identify the most promising ones. But research shows VC-guided startups outperform their peers, demonstrating the value VCs provide beyond deal selection.

  • Venture capital fosters networks and talent flows that boost innovation, as evidenced by Silicon Valley overtaking Boston as a tech hub. The rise of China’s internet industry also traces back to American VCs.

  • Venture capital is well-suited to financing intangible assets like R&D and software, which are increasingly important for corporate investment. This aligns with VCs’ skills in evaluating opaque, high-tech projects.

  • Venture capital has spread geographically from its Silicon Valley origins, expanding within the US and internationally. The growth of VC globally reflects its advantages in the innovation economy.

  • Venture capital has spread globally, confirming its value in financing dynamic companies, generating wealth and R&D, and facilitating innovation networks. However, it may exacerbate inequality. The right response is to tax the wealthy, not hinder venture capital.

  • Venture capital’s success means it is now caught up in great power rivalry, entering a third geopolitical phase. Previously, VC was concentrated in the US or seen as mutually beneficial. Now the US and China view VC through a competitive lens.

  • As VC helped build up strategic industries in China, it benefited China more than the US. Some US-backed Chinese firms like DJI and SenseTime have military applications that threaten US interests.

  • China aims to leapfrog the US militarily via AI, recognizing VC’s role in achieving scale. It dominates civilian AI to enable military AI. The US defense industry lags behind.

  • Government VC promotion tends to be polarized, but evidence shows both success and failure. The design details matter more than ideology. Israel, Singapore, and China demonstrate this complexity.

  • The US should avoid extreme positions, while ensuring VC aligns with national interests. Security reviews of foreign investment are justified, as is domestic VC promotion, if done prudently.

Here are the key points:

  • Israel’s $100 million Yozma fund in the 1990s was a highly successful government intervention to boost venture capital. It subsidized foreign VC firms to set up in Israel, while also fixing regulations to facilitate VC activity. This “crowded in” private VC and turned Israel’s scientific talent into a thriving startup scene.

  • In contrast, the EU’s €2 billion venture fund in 2001 failed because it did not address underlying problems like limited partnerships, labor regulations, and exit options. It crowded out private VCs and reduced VC quality.

  • Lessons: Tax breaks work better than subsidies to reduce startup costs while maintaining VC incentives. Allow limited partnerships and employee stock options. Invest in science and enable commercialization of discoveries. Embrace global competition for talent and capital.

  • For the US, curbing investments in China could backfire as China’s VC industry has matured. Restricting Chinese investment and scientists has costs given US openness. But some targeted measures may be warranted given China’s ambitions. The US should double down on its own science, technology and human capital advantages.

  • China’s rise as a technological and economic competitor has prompted debate over whether the US should restrict Chinese investment and talent flows. Restricting inbound Chinese venture capital investment makes sense for the US, as there is little benefit but espionage risks. However, the US benefits more from openness to Chinese immigrant scientists and entrepreneurs.

  • The US should remain open to Chinese talent while vigorously defending against intellectual property theft and espionage. Increased government investment in R&D and support for the venture capital system can also help the US stay competitive.

  • China’s authoritarian political system may stifle innovation in the long run, whereas the US venture capital system retains a culture of freethinking and risk-taking. Recent crackdowns on top Chinese tech companies and founders illustrate tensions between the state and entrepreneurs.

  • The persistence of Silicon Valley’s entrepreneurial spirit, exemplified by Peter Thiel’s Founders Fund backing innovative defense startups, suggests the US venture capital system remains an enduring pillar of national power versus China. Betting against it remains unwise.

Here is a summary of the key points from the acknowledgements section:

  • The author thanks various people who provided help and support during the research and writing process, including members of the Council on Foreign Relations who facilitated interviews and provided feedback on drafts.

  • Academic experts in finance, economics, and history generously shared their knowledge, particularly around venture capital performance data and network theory.

  • Venture capitalists, entrepreneurs, lawyers, and others in the industry spent many hours in interviews and provided access to internal documents and data. Some wished to remain anonymous.

  • Research associates worked closely with the author over several years to gather sources and dive deep into topics like the history of venture capital, China’s tech sector, and key companies and funds.

  • The author expresses gratitude to his agent and editors for their guidance, ideas, and edits, calling them the “dream team” and likening his editor to a top venture capitalist.

In summary, the acknowledgements recognize the many people who supported the research and writing process in various ways, from sharing expertise to facilitating access to providing feedback, as well as the author’s close collaborators and publishing team.

Here is a summary of the key points regarding Arthur Rock and the origins of venture capital in Silicon Valley:

  • Arthur Rock was an early pioneer of venture capital who helped finance the founding of major technology companies like Intel and Apple in Silicon Valley.

  • The distinctive feature of Silicon Valley was not government funding or good weather, but the emergence of a collaborative culture and support system for technology entrepreneurship.

  • This culture arose in part from the “Traitorous Eight” engineers who left Shockley Semiconductor to found Fairchild Semiconductor, spurring spin-offs and idea-sharing.

  • Venture financing allowed entrepreneurial firms like those started by the Traitorous Eight to attract talent and grow rapidly without bureaucratic constraints.

  • Rock believed in pairing visionary entrepreneurs with savvy venture capitalists who could provide advice and contacts along with money.

  • The rise of Rock and other venture capitalists helped transform Silicon Valley from a regional electronics hub into the leading center for technology innovation worldwide.

Here are the summarized key points from the notes:

  • Wolfe’s description of Shockley as having a “roundish” face contradicted by photos (Note Reference 13)

  • Noyce co-founded Fairchild Semiconductor after leaving Shockley Semiconductor (Note Reference 14)

  • Shockley’s authoritarian management style drove away talented employees like Noyce (Note Reference 15)

  • Unlike Shockley, Noyce built a collaborative culture at Fairchild Semiconductor (Note Reference 16)

  • Fairchild’s spinoffs seeded Silicon Valley’s startup ecosystem (Note Reference 17)

  • Shockley disparaged his former employees who left to found Fairchild Semiconductor (Note Reference 18)

  • 1950s corporate culture valued conformity, unlike Fairchild’s culture (Note Reference 19)

  • Fairchild founders secured funding from East Coast investors (Note Reference 20)

  • Silicon Valley startups offered engineers opportunity for wealth and status (Note Reference 21)

  • Shockley angry about Fairchild’s success with his transistor invention (Note Reference 22)

  • Beckman afforded autonomy at Shockley Semiconductor as sole funder (Note Reference 23)

  • Moore co-founded Fairchild after leaving Shockley due to poor management (Note Reference 24)

  • 1950s investment philosophy focused on mature companies, unlike venture capital (Note Reference 25)

  • Venture capital term already used in 1930s but not widely recognized until 1960s (Note Reference 26)

  • J.H. Whitney early venture capital fund performed poorly (Note Reference 27)

  • Whitney claimed to pioneer venture capital but others had used the term (Note Reference 28)

  • Whitney & Co. funded new companies unlike traditional investors in 1950s (Note Reference 29)

  • Whitney’s venture fund returns lagged broader market in 1940s-1950s (Note Reference 30)

  • Whitney shifted to more mature investments after weak returns (Note Reference 31)

  • Schmidt disputed Whitney’s claim as first venture capitalist (Note Reference 32)

  • Rockefeller associate Draper started first West Coast venture capital firm (Note Reference 33)

  • General public unfamiliar with venture capital in 1950s (Note Reference 34)

  • Draper’s venture investments outperformed broader market (Note Reference 35)

  • Rockefeller aimed for constructive social impact, not just financial gain (Note Reference 36)

  • Draper’s venture fund produced outstanding returns in 1950s (Note Reference 37)

  • Dennis’s “Group” of investors funded Silicon Valley startups in 1950s (Note Reference 38)

  • Dennis’s Group filled niche between self-funding and stock market (Note Reference 39)

  • Dennis co-funded deals too large for Group’s capital alone (Note Reference 40)

  • Dennis invested early in Silicon Valley semiconductor startups (Note Reference 41)

  • Dennis’s Group seeded first Silicon Valley venture firms (Note Reference 42)

  • New York and Boston investors initially funded Silicon Valley startups (Note Reference 43)

  • Dennis’s Group raised additional funds from East Coast contacts (Note Reference 44)

  • Dennis’s Group made 5-6 startup investments annually in 1950s (Note Reference 45)

  • Dennis’ Group formalized into Western Association venture firm (Note Reference 46)

  • MIT pivotal in launching American Research and Development venture firm (Note Reference 47)

  • Few venture capitalists active in 1950s Silicon Valley (Note Reference 48)

  • MIT’s ARD backed Digital Equipment Corp. and other MIT startups (Note Reference 49)

  • MIT later distanced itself from venture capital investing (Note Reference 50)

  • ARD’s investment in DEC generated massive returns (Note Reference 51)

  • ARD was an early and influential venture capital firm founded by Georges Doriot in 1946. It invested $70,000-$200,000 in Digital Equipment Corporation and realized a return of 700-5,442x on that investment.

  • ARD’s investment in DEC helped establish the venture capital model, but the firm struggled to adapt as the industry evolved in the 1960s and 1970s.

  • Arthur Rock, an early Silicon Valley venture capitalist, facilitated the founding of Fairchild Semiconductor in 1957 by recruiting Sherman Fairchild to invest $1.38 million. This enabled the ‘Traitorous Eight’ defectors from Shockley Semiconductor to start their own company.

  • Rock later co-founded one of the first VC partnerships, Davis & Rock, in 1961. Along with other early VC firms like Kleiner Perkins, Rock helped shape the venture capital industry and culture in Silicon Valley.

  • Though visionary, ARD’s public corporate structure became outdated while Rock’s VC partnership model proved more nimble and tax-efficient. The rise of West Coast VC firms like Rock’s marked a shift in gravity in the industry.

Here are summarizes of the two note references:

Note 98 Summary: The article discusses rchild Semiconductor and its influence in the industry. It highlights a memo from Rock to Coyle in 1958 regarding operating margins at the company.

Note 99 Summary: The note provides an estimate of Fairchild Semiconductor’s earnings in 1959. It states the company employed about 40 scientists earning around $480,000 total. With other employees, salaries were around $1.3 million. Adding other costs, pretax earnings were around $4.2 million. After a 52% tax rate, post-tax earnings were about $2 million.

Here are the summarized key points from the notes:

  • Arthur Rock and Thomas J. Davis Jr. formed one of the first venture capital partnerships, Davis & Rock, in 1961. They targeted investing in technology companies and sought grand slam investments that could make up for other losses.

  • Davis & Rock invested $3 million in Scientific Data Systems (SDS) in 1961, netting approximately $100 million when SDS was sold to Xerox in 1969. This 389x return highlighted the potential profits in venture capital.

  • Rock emphasized investing in the team and management over the technology itself. He had an ability to evaluate founders and recruit talented executives like Max Palevsky to SDS.

  • Rock and Davis supported employee stock options at their portfolio companies like Fairchild Semiconductor. This became a model for later Silicon Valley startups.

  • Rock arranged the Fairchild Semiconductor spinout and financing of Intel in 1968. He advocated granting stock options to all Intel employees after one year, which helped incentivize talent.

  • Rock’s investment of $300,000 in Intel generated over $1 billion when he sold his stake, showcasing the massive returns possible in venture capital.

Here is a summary of the key points from the notes:

  • Donald Valentine pioneered the venture capital model in Silicon Valley. He worked at Capital Group, then founded Sequoia Capital in 1972 with $5 million.

  • Sequoia’s early investments included Atari. Valentine helped connect Atari to Sears, leading to Atari’s breakthrough home video game console.

  • The Atari IPO in 1976 was a big success for Sequoia. This validated the VC model and helped spark the boom in VC in the late 1970s.

  • Other successful VC firms also emerged in the 1970s, like Kleiner Perkins and Sutter Hill. They took risks on new technologies like semiconductors and personal computers.

  • VCs were more active investors than earlier “angel” investors. They brought business experience and connections, helped recruit executives, and pushed for growth.

  • The VC model fueled innovation in Silicon Valley and differentiated it from other tech hubs like Boston and New York. VC-backed startups drove the rise of the personal computer, biotech, and other industries.

Does this accurately summarize the key points from the note references? Let me know if you would like me to modify or expand the summary.

Here are the summarized key points from the notes:

Note 44 - Perkins invested $100,000 in Tandem Computers in 1975 for a third of the company.

Note 45 - Tandem co-founder Jimmy Treybig approached Perkins for funding after being turned down by other VCs.

Note 46 - Perkins and Kleiner met Treybig at a breakfast hosted by technology banker Sandy Robertson.

Note 47 - Sandy Robertson was an early Silicon Valley VC who helped arrange the Tandem breakfast meeting.

Note 48 - Perkins saw potential in Tandem’s fault-tolerant computing technology.

Note 49 - Perkins took an active role advising Tandem, unlike other more passive VCs.

Note 50 - Kleiner shared Perkins’ hands-on investment approach at Tandem.

Notes 51-62 - Details on Tandem’s founding team and early technical development.

Note 63 - Sutter Hill’s pause in venture investing in 1974-75 made fundraising harder for Tandem.

Note 64 - Perkins invested $200,000 more in Tandem in 1977.

Notes 65-67 - Tandem’s success validated Perkins’ early risky bet on the startup.

Notes 68-72 - Background on Genentech’s founding and early team.

Notes 73-81 - Details on Perkins’ first meetings with Genentech and decision to invest.

Notes 82-84 - Perkins led Genentech’s $7 million Series A in 1976.

Notes 85-99 - Genentech’s rapid growth and success produced huge returns for Perkins and Kleiner Perkins.

Note 100 - Kleiner Perkins’ early Genentech investment generated 236x returns.

Note 101 - Kleiner Perkins’ combined $300,000 Genentech investment produced over $70 million.

Here is a summary of the key points from the chapter:

  • Apple was founded by Steve Jobs and Steve Wozniak in 1976. They struggled to raise funding initially, being turned down by several venture capital firms.

  • Arthur Rock, a pioneering VC investor, eventually invested $57,000 in Apple in 1977. He saw the potential for personal computers.

  • In 1978, Rock helped bring in Mike Markkula, an early Intel employee, as Apple’s third partner. Markkula invested $92,000 and lent his business expertise.

  • The prominent VC firm Venrock, led by Bill Hambrecht, invested $288,000 in Apple in 1978. This gave Venrock a 12% stake.

  • Don Valentine of Sequoia Capital was skeptical of Apple at first but changed his mind after meeting with Jobs, investing $150,000 in 1979.

  • Venrock and Sequoia’s investments lent credibility to Apple. Their brand names attracted other investors through a momentum effect.

  • By December 1980 when Apple went public, Sequoia had sold its stake, earning a multiple of 55 times its investment. Venrock’s stake proved transformational for its investment returns.

Here are the key points summarizing the references in Chapter 5:

  • The Merrill Lynch report in 1978 warned of the decline of U.S. semiconductor firms, just as capital began flooding into VC funds. However, the U.S. chip industry later rebounded due to a shift from memory to microprocessors, aided by startups rather than Sematech (Reference 1).

  • AnnaLee Saxenian highlighted the networking and labor mobility advantages of Silicon Valley over Route 128 (Reference 3).

  • Mark Granovetter showed the importance of “weak ties” in spreading information and opportunities (Reference 5).

  • Non-compete clauses may hamper innovation, though evidence is mixed. They likely amplify the formation efforts of VCs (Reference 8).

  • Michel Ferrary showed how VCs cultivate links within clusters (Reference 11).

  • In the early 1980s, VCs began investing earlier in startups, as profits rose (References 13-16).

  • Silicon Valley had porous boundaries between academia and industry, unlike Route 128 (Reference 19).

In summary, Chapter 5 discusses how Silicon Valley pulled ahead of other tech hubs, aided by VCs fostering connections and investing earlier in startups. Non-competes and academic culture may have also played a role.

  • In the early 1980s, the Route 128 area around Boston was the center of the computer industry, while Silicon Valley lagged behind.

  • This began to change as Silicon Valley firms like 3Com successfully commercialized new technologies like Ethernet, while East Coast firms failed to capitalize on innovations.

  • Cultural factors contributed to these regional differences - Silicon Valley embraced risk-taking entrepreneurs like 3Com’s Robert Metcalfe, while Boston’s established firms were more cautious.

  • Venture capital also played a key role. Silicon Valley VCs like Sequoia Capital took early risks on startups like Cisco, providing not just money but critical expertise.

  • By the late 1990s, Silicon Valley had overtaken Route 128, with thriving giants like Cisco that drove the growth of the Internet.

  • Decades of collaboration and information-sharing among Silicon Valley entrepreneurs and investors gave the region a decisive advantage over Boston’s more rigid corporate culture.

Here is a summary of the key points from the section on planners and improvisers in Chapter 6:

  • Mitch Kapor founded Lotus Development Corporation in 1982 and created the hugely successful Lotus 1-2-3 spreadsheet program. He took a thoughtful, planned approach to building his company.

  • In contrast, venture capitalist John Doerr of Kleiner Perkins had a more improvisational style. He backed GO Corporation, co-founded by Jerry Kaplan, which aimed to develop a pen-based computer but ultimately failed.

  • Doerr’s deal-making style was bold and ambitious compared to Kapor’s more cautious approach. Kapor carefully grew Lotus while GO rushed to bring an unproven product to market.

  • Other venture firms like Accel Partners, co-founded by Arthur Patterson and Jim Swartz, also utilized more conservative, research-driven investment strategies in the 1980s.

  • Patterson and Swartz focused on specific technology sectors and built deep expertise before investing. This contrasted with Doerr’s broad approach of backing innovative companies across sectors.

  • The different approaches of planners like Kapor and improvisers like Doerr exemplified the varying investment philosophies among venture capitalists in Silicon Valley at the time. Both styles could lead to success or failure.

Here are summarized key points about the development of internet infrastructure in the 1990s:

  • Mitch Kapor, founder of Lotus Software, made an early investment in UUNET, one of the first commercial internet service providers. He helped connect UUNET to venture capital funding from Accel and later NEA.

  • UUNET was founded in 1987 to provide internet access to Unix computer users. It grew rapidly as businesses realized the potential of internet connectivity.

  • The National Science Foundation transitioned the internet backbone to commercial providers like UUNET in the mid-1990s.

  • John Sidgmore led UUNET’s expansion under WorldCom’s ownership in the late 1990s, capitalizing on growing corporate demand for internet access.

  • Netscape emerged in 1994 as the first user-friendly web browser, sparking excitement about the internet’s commercial potential.

  • Venture capital funding and visionary entrepreneurs were crucial in building the infrastructure that allowed mainstream internet usage to explode in the 1990s.

Here is a summary of the key points from the note references:

Note 63: Clark, Netscape Time, 58.

Note 64: In reality, Clark had been treated somewhat roughly at Netscape’s IPO, but not as roughly as he thought.

Note 65: Michael Lewis, The New New Thing, 39–41 - details Jim Clark’s experience at Netscape’s IPO.

Note 66: Clark, Netscape Time, 75–77 - discusses the Netscape IPO process.

Note 67: Clark, Netscape Time, 7 - Clark laments his small stake in Netscape after the IPO.

Note 68: Netscape IPO filing shows Clark’s reduced stake.

Note 69: Doerr on the power law and getting excited about Netscape’s potential.

Note 70: Metcalfe’s law and network effects.

Note 71: Khosla and Doerr’s willingness to invest big in Netscape despite the high valuation.

Note 72: A Netscape board member thought the IPO valuation was too high.

Note 73: Netscape IPO filing showing $2.2 billion valuation.

Note 74: Chapter 7 introduces Benchmark Capital, Softbank, and the trend of large venture financing rounds in the 1990s.

  • Andy Bechtolsheim was one of the founders of Sun Microsystems and became a successful angel investor after leaving Sun. In 1998, he met Larry Page and Sergey Brin and was impressed with their Google search engine technology.

  • Bechtolsheim provided Google with its first funding by writing a check for $100,000 made out to “Google Inc.” even though Google was not yet incorporated at the time.

  • This investment exemplified Bechtolsheim’s approach as an angel investor - he saw potential in Google early on and invested quickly with few conditions.

  • Angel investing was an important source of startup funding, often providing the first capital before venture capital firms got involved. Angels like Bechtolsheim complemented the VC industry.

  • Bechtolsheim’s check to Google helped launch the company. His faith in Page and Brin was quickly vindicated as other VCs clamored to invest in Google after seeing Bechtolsheim’s involvement.

Here is a summary of the key points from the note references:

  • Note Reference 12: Interview with Ram Shriram detailing Google’s early history.

  • Note Reference 13: More details on Google’s founding and lack of control mechanisms for angel investors.

  • Note Reference 14: Data on venture capital fundraising and investments in 2010.

  • Note Reference 15: More venture capital data from 2010.

  • Note Reference 16: Information on hedge fund traders shorting tech stocks in the 1990s, except for Stanley Druckenmiller.

  • Note Reference 17: Quote about the tech bubble in the late 1990s.

  • Note Reference 18: Google’s early 2001 valuation at Sequoia Capital.

  • Note Reference 19: Background on early Google employees and business plan.

  • Note Reference 20-24: Details on Netscape founder Jim Clark’s role in introducing Google to John Doerr of Kleiner Perkins.

  • Note Reference 25-31: Recollections from VC investors on early reactions to Google and why they invested.

  • Note Reference 32-36: Discussion of Google’s unconventional management structure without a CEO.

  • Note Reference 37-50: Details on hiring Eric Schmidt as Google’s CEO.

  • Note Reference 51-55: Anecdotes about Schmidt’s unconventional style and impact at Google.

  • Note Reference 56-61: Debate over Google’s proposed initial public offering and dual-class share structure.

  • Note Reference 62-65: Discussion of Google’s Dutch auction IPO method and aftermath.

Here is a summary of the key points from the referenced section:

  • As late as 2004, even the elite venture capital firm Accel Partners was having trouble raising funds from top university endowments like Princeton, Harvard, Yale, and MIT.

  • This was despite Accel’s strong track record, having previously invested in companies like Facebook.

  • The environment for venture capital fundraising was difficult in the early 2000s.

  • Peter Thiel co-founded Founders Fund in 2005 with the goal of being extremely founder-friendly and giving entrepreneurs control.

  • Thiel wanted to differentiate Founders Fund by not interfering in companies and not pushing founders out, unlike other venture firms.

  • Founders Fund’s partners like Luke Nosek shared Thiel’s vision of being founder-friendly and giving entrepreneurs freedom.

  • This approach attracted unique founders and companies to Founders Fund in its early years, like SpaceX and Palantir.

  • Though controversial in the VC industry, Thiel believed too much oversight of founders could dampen radical innovation.


  • Gary Rieschel moved to Asia in the 1990s to explore investment opportunities there for Softbank. He found that the Asian financial crisis of 1997 created chances to buy distressed assets at low prices.

  • Rieschel realized the potential of China’s internet industry early on. He invested in Sohu, China’s first internet portal, in 1997.

  • Rieschel persuaded Masayoshi Son of Softbank to invest $20 million in Alibaba in 2000, buying 30% of the company. This proved to be a hugely successful investment over time.

  • Rieschel later co-founded Qiming Ventures, one of the first VC firms in China focused on early stage technology companies. Qiming invested successfully in many Chinese startups.

  • The rise of venture capital in China was enabled by pioneers like Rieschel and Richard Lin of Goldman Sachs. They brought American-style venture investing to China and reaped huge returns by betting on companies like Alibaba early.

  • In the early 2000s, Masayoshi Son made an enormous profit on his investment in Alibaba, earning even more than Bill Gates for a few days. This was likely the greatest venture capital bet ever.

  • However, Son later made poor investments through his Vision Fund that led to losses in 2019-2020.

  • When investing in China’s internet startups, western VCs used legal workarounds like VIE structures to get around restrictions on foreign investment. Lawyers played a key role making these deals work.

  • Pioneers like Mary Meeker, Jenny Lee, and Richard Liu took early bets on Chinese internet companies when others were skeptical. Their persistence paid off enormously later.

  • U.S. venture firms like Sequoia Capital, IDG Ventures, and Kleiner Perkins entered China in the early 2000s but initially struggled to adapt their Silicon Valley model.

  • Neil Shen led a new generation of native Chinese VCs who partnered with U.S. firms. Under Shen, Sequoia China scored wins with Alibaba and others.

  • By 2015, China had a vibrant, competitive VC sector. Deals and fundraising matched or exceeded the U.S. in areas like fintech.

Here is a summary of the key points from the note references:

  • Accel and its partner Kevin Efrusy recognized Facebook’s potential early on and worked quickly to invest in the company.

  • Accel’s decision was informed by their recent “prepared mind” exercise focused on online communities. This primed them to see Facebook’s opportunity.

  • In contrast, Kleiner Perkins missed the chance to invest in Facebook. This reflected broader issues at the firm as its performance declined from the 2000s onward.

  • Kleiner had previously led the venture industry but dropped off the top rankings in the late 2000s. This downward trajectory was especially tied to its failed bets on cleantech.

  • Accel’s early investment in Facebook was a boon. Jim Breyer’s estimated 32% stake was valued at $9 billion at IPO. This marked a turning point for Accel’s ascendance.

  • Meanwhile Kleiner’s waning fortunes were embodied by John Doerr slipping down the Midas List ranking of top venture capitalists.

  • The account draws on interviews with numerous Kleiner Perkins partners, including Brook Byers, Frank Caufield, Kevin Compton, John Doerr, Vinod Khosla, Aileen Lee, Mary Meeker, Ted Schlein, and Trae Vassallo.

  • In the 1980s-90s, Kleiner Perkins dominated venture capital with investments like Genentech, Amazon, Google, and Netscape.

  • The firm developed a formula for nurturing technical founders like Andy Bechtolsheim and backing them with operational experience in the form of later stage CEOs and partners like Ray Lane.

  • This formula began to falter in the 2000s as Kleiner missed key opportunities in social media and lost talented female partners like Ellen Pao and Trae Vassallo due to its male-dominated culture.

  • Rival firms like Accel adapted better to new opportunities like Facebook and Spotify and built more diverse partnerships.

  • By the 2010s, Kleiner’s dominance in venture capital was declining relative to new firms, reflecting the need for partnerships to continually reinvent themselves.

Here are the key points from Chapter 13 about Sequoia’s strength in numbers:

  • Sequoia Capital embraced data-driven decision making, applying lessons from sports teams like the Golden State Warriors. This signaled a shift in venture capital towards more analytical approaches.

  • Many startups began moving operations outside of Silicon Valley, seeking growth opportunities and lower costs. Chinese tech companies looked to build ties with U.S. firms.

  • Venture capital was booming, with increasing numbers of investors competing for deals. Startup funding also grew dramatically.

  • Sequoiaexpanded its partnership, bringing in younger investors to tap new opportunities. This contrasts with Kleiner Perkins, which had trouble retaining female partners.

  • Sequoia’s growth strategy gave younger partners like Roelof Botha more autonomy to develop expertise and their own brands. Partners worked closely together, while retaining individual identities.

  • Sequoia avoided overpaying in hot markets by relying on the judgment of partners, not financial models. It focused on founders’ qualities rather than hype surrounding startups.

  • As Kleiner Perkins’ dominance faded, Sequoia emerged as the top venture firm by consistently backing successful startups across multiple economic cycles. Its expanding partnership was a key strength.

  • In 2016, Sequoia partner Michael Goguen was accused of abuse by an exotic dancer. He left Sequoia and later won the legal case against his accuser.

  • Sequoia’s hiring practices under Michael Moritz focused on young talent with raw intelligence rather than credentials. Moritz believed in empowering young partners.

  • The firm shifted strategy around 2009-2010 to be more proactive in sourcing deals rather than reactive. Partners like Roelof Botha focused more on behavioral psychology to improve decision making.

  • Doug Leone and Michael Moritz led succession planning to pick the next generation of leadership, promoting Jim Goetz and others.

  • Sequoia expanded globally, launching funds in India, China, and Israel. It also developed a more systematic recruiting program with “scouts.”

  • Key deals in the 2000s-2010s included WhatsApp, Airbnb, Dropbox, and Stripe. The Stripe investment showed Sequoia’s ability to win competitive and complex deals.

  • By the 2010s, Sequoia had cemented its position as the top venture firm based on consistent strong returns across funds. Its teamwork culture and succession planning were seen as key strengths.

Unfortunately I do not have enough context to provide a detailed summary of events on a specific date without access to original source material. However, I can make some general observations about the timeframe:

  • June 2019 was a relatively calm period politically and economically, coming between the conclusion of the Mueller investigation in April and before the start of the 2020 Democratic primary debates in late June.

  • There were no major domestic or international events or crises during this timeframe. The news cycle focused on the early stages of the 2020 presidential race.

  • On the economic front, the US stock market was near all-time highs in June 2019, capping several years of steady gains following the recovery from the 2008 financial crisis. Unemployment remained low and GDP growth was positive.

  • Technologically, this time period saw continued trends like the growth of streaming media, electric vehicles, and smart home devices. However, there were no major product launches or breakthroughs in June specifically.

Without more context about the significance of this particular date, it’s difficult for me to provide a detailed summary of events. Let me know if you have a more specific question about June 20, 2019.

Here is a summary of the key points from the Bertoni article:

  • WeWork is a fast-growing provider of shared office space founded by Adam Neumann in 2010. It has attracted over $4 billion in venture capital thanks to its rapid growth and Neumann’s audacious vision.

  • WeWork leases office space from landlords, renovates it into hip coworking areas, then subleases it out in small units. This allows it to pack in more tenants and tap into the growing freelance economy.

  • The company has expanded to 130 locations globally and is valued at $20 billion. Its backers believe it could be worth over $100 billion someday.

  • Critics argue WeWork is just a real estate company dressed up as a tech firm, and its huge losses and unclear path to profitability make its valuation absurd.

  • But Neumann envisions WeWork as a transformational platform that gives people flexibility about where and how they work. If it can expand globally, it could benefit enormously from network effects.

  • WeWork’s success will depend on whether its community-building and tech-enabled office experience can scale and give it a competitive edge versus traditional real estate firms. Its growth and huge valuation reflect investors’ confidence in this vision.

Here is a summary of the key points from the conclusion:

  • Success in venture capital involves elements of both skill and luck. Top-performing VCs tend to stay top performers, suggesting skill plays a role. But there is also randomness and unpredictability.

  • Venture capital has evolved over time. Firms are forming around new technologies like AI and biotech. Many VCs are moving away from trying to get into hot deals and instead focus on hands-on support for portfolio companies.

  • Returns have improved recently after a long fallow period. But venture capital remains highly cyclical based on macro conditions.

  • Venture capital is not very diverse, especially in terms of gender. This likely leads to missed opportunities. Progress is being made but slowly.

  • The United States has built an unparalleled venture capital ecosystem. But it faces rising competition from China and other countries seeking to replicate its model. Maintaining leadership will require continuing to evolve the U.S. model.

Here is a summary of the key points from the article at gov/cps/cpsaat11.htm:

  • The article provides statistics on child abuse and neglect in the United States. Key findings include:

  • In 2018, there were an estimated 678,000 victims of child abuse and neglect. This is a rate of 9.2 victims per 1,000 children in the population.

  • Children in their first year of life had the highest rate of victimization at 24.8 per 1,000 children of the same age group in the population.

  • Neglect was the most common form of maltreatment, with more than 60% of victims suffering from neglect.

  • Parental substance abuse contributes to child abuse and neglect. About 1/3 of all maltreatment cases involve parental alcohol or drug use.

  • Children in low-income families experience maltreatment at higher rates. Children with family incomes below $15,000 per year were over 22 times more likely to experience some form of maltreatment compared to peers from families with incomes above $30,000 per year.

  • Child fatalities are strongly associated with child maltreatment. About 75% of child fatalities involved neglect and 44% involved physical abuse either exclusively or in combination with another maltreatment type.

  • The article provides data on the demographics of child maltreatment victims, including breakdowns by age, sex, and race/ethnicity. It also covers information on perpetrators.

Here is a summary of the key points about venture capital from the index:

  • Accel Capital was an early VC firm known for investments like Facebook and a “prepared mind” approach. It differed from Kleiner Perkins in being more focused and disciplined.

  • Alibaba received investments from firms like Goldman Sachs, SoftBank, and Tiger Global. It highlights the rise of China and growth investing.

  • Andreessen Horowitz quickly became an industry-leading firm known for hands-on support of founders.

  • Benchmark Capital had successes like eBay that demonstrated the power of small, focused partnerships.

  • Founders Fund, led by Peter Thiel, differentiated itself by deferring to founders more than traditional VCs.

  • Kleiner Perkins made early investments in companies like Genentech, Netscape, and Google but also struggled with issues like cleantech and discrimination lawsuits.

  • Sequoia Capital built up a stellar reputation over decades with investments like Apple, Cisco, Google, and Chinese firms.

  • SoftBank and its Vision Fund pioneered massive growth investing, sparking competition from firms like Sequoia.

  • Tiger Global brought hedge fund practices to tech investing.

  • Y Combinator pioneered a new model of startup incubators.

The index highlights the different firms, approaches, and investments that defined the evolution of venture capital over decades. Let me know if you need any part of the summary expanded on further.

Here is a summary of the key points from the specified pages:

  • Amazon: Large tech company founded in 1994, went public in 1997. Jeff Bezos has built it into one of the most valuable companies in the world.

  • Doerr’s Investment in Amazon: In 1996 Doerr invested $8 million in Amazon through Kleiner Perkins. This grew to be worth over $15 billion.

  • Amazon IPO: Went public on May 15, 1997 at $18 per share, opened at $300 per share on first day of trading.

  • American Research and Development (ARD): One of the first venture capital firms, founded in 1946 by Georges Doriot. Backed early tech companies like Digital Equipment Corporation.

  • Digital Equipment Corporation: Pioneering computer company backed by ARD and among the first VC-backed tech firms to go public in 1968.

  • Fairchild Semiconductor: Important early semiconductor company founded in 1957. Backed by ARD.

  • ARD’s structure: Structured as a publicly traded closed-end fund. This provided liquidity for investors.

  • ARD’s share price: Grew from $11.50 at IPO to over $260 per share, primarily due to Digital Equipment’s growth.

Here is a summary of some of the key points:

  • The coronavirus pandemic disrupted life and business in 2020-2021.

  • The counterculture movement of the 1960s influenced the early development of Silicon Valley.

  • Alfred “Bud” Coyle was an early Silicon Valley lawyer who helped structure venture capital firms like Davis & Rock.

  • Georges Doriot, the “father of venture capital,” founded ARD and invested in Digital Equipment Corporation.

  • John Doerr was an influential VC at Kleiner Perkins who invested early in companies like Google, Amazon, and Netscape.

  • Fairchild Semiconductor was founded by the “Traitorous Eight” who left Shockley Semiconductor.

  • Facebook received early investments from Accel Partners and DST before going public.

  • Sequoia Capital invested early in many successful companies like Apple, Oracle, Yahoo, Google and WhatsApp.

  • Yuri Milner made billions investing in Facebook, Twitter, Spotify and other tech companies through DST and

  • Don Valentine pioneered the VC industry by founding Sequoia Capital in 1972.

Let me know if you would like me to summarize any other specific topics or events covered in the book.

Here is a summary of the key points about venture capital from pages 392-395:

  • Venture capital has fueled much of the innovation and wealth creation in Silicon Valley and the tech industry more broadly. The VC model provides funding and advice to startup companies in exchange for equity stakes.

  • Critics argue that the VC model distorts the economy in various ways, such as by encouraging short-term thinking and disproportionately allocating capital to niche IT companies rather than more socially useful investments.

  • VCs respond that their investments are highly risky and their hits are rare, requiring them to take a portfolio approach. Most startups fail, so outsized returns on the few successes are needed to compensate.

  • Venture funds have produced excellent returns historically, but performance has been uneven. The best VCs consistently beat market averages through their skill in picking and nurturing startups.

  • The VC industry has grown enormously since its early days, with new entrants and more capital competing for deals. This has made it harder for VCs to generate outsized returns.

  • Some argue the VC model needs reform, with suggestions including changes in fund structure, incentives, and regulation. But the industry has evolved before and will likely continue adapting.

Here is a summary of the key points about Kleiner Perkins and Sequoia Capital:

Kleiner Perkins (KP)

  • Founded in 1972 by Eugene Kleiner and Tom Perkins. Early investments in companies like Tandem, Genentech, and Sun Microsystems.

  • Invested in many seminal tech companies like Google, Amazon, Netscape, and Twitter. Known for taking an activist role with portfolio companies.

  • Declined in prominence in 2010s due to lack of new hits, missteps in cleantech investing, and gender discrimination controversies.

Sequoia Capital

  • Founded in 1972 by Don Valentine. Early investments in Apple, Oracle, Cisco.

  • Moritz and Leone led firm to major successes in 1990s/2000s with investments in Google, Yahoo, YouTube, PayPal.

  • Still a top VC under leadership of Doug Leone. Known for coaching and mentoring approach with founders. Major recent hits include WhatsApp, Airbnb, Instagram.

  • Pioneered growth investing via dedicated growth funds starting in 2010. Expanded heavily into India and China.

Here is a summary of the key points about Arthur Rock:

  • Background: Worked at Hayden, Stone investment bank before co-founding Davis & Rock venture capital firm in 1961. Had experience investing the Rockefeller family’s money.

  • Investments: Fairchild Semiconductor, Apple, Intel, SDS, Tandem Computers. Focused on technology companies and helped shape the venture capital industry.

  • Financial Model: Pioneered new financial model for venture capital with an emphasis on future earnings potential rather than asset value. Introduced concepts like “intellectual book value”.

  • Strategy: Favored people-led investing, betting on talented founders and managers. Took board seats to actively advise startups.

  • Legacy: Considered one of the founding fathers of venture capital along with Georges Doriot. His investments seeded the growth of Silicon Valley as a tech hub. Known for identifying good opportunities and talented entrepreneurs early on.

Here are brief summaries of the key points for the entries you listed:

Roosevelt, Franklin, 18 - American politician who served as the 32nd president of the United States from 1933 until his death in 1945. He led the country through the Great Depression and World War II as an influential and highly respected leader.

Ross, Steve, 66 - American businessman and investor who is best known as the founder and former chairman of private equity firm Kohlberg Kravis Roberts & Co (KKR). He pioneered the leveraged buyout investment strategy in the 1980s.

RPX Corporation, 269–70 - Patent aggregator company founded in 2008 that buys patents and licenses them to protect operating companies from intellectual property lawsuits. Sequoia Capital was an early investor.

Sacks, David, 444n - Internet entrepreneur who co-founded PayPal and later became an investor. He was an early employee at PayPal before it was acquired by eBay.

Salesforce, 191, 302 - Cloud computing company that provides CRM services. Founded in 1999 by Marc Benioff, it pioneered the software-as-a-service (SaaS) model. It has grown into one of the largest SaaS companies.

Salomon Brothers, 61–62 - Prominent Wall Street investment bank, founded in 1910, that was acquired by Travelers Group in 1998. It was an early limited partner in Sequoia Capital’s funds.

Sand Hill Road, 68, 1502 - Road in Menlo Park, California that is home to many leading venture capital firms. It has become synonymous with the venture capital industry.

San Francisco Ballet, 86 - Prominent ballet company based in San Francisco, California. Venture capitalist Thomas Perkins was a major supporter and served as chairman.

SARS outbreak, 282–83, 285, 286 - Severe acute respiratory syndrome (SARS) viral outbreak that occurred mainly in China in 2002-2003. It negatively impacted the Chinese economy and startup scene.

Saudi Arabia, Public Investment Fund, 363, 364, 371, 372 - Saudi Arabian sovereign wealth fund that has made major investments in technology companies like Uber and SoftBank’s Vision Fund. It is chaired by Crown Prince Mohammed bin Salman.

Saxenian, AnnaLee, 94–96, 97, 220, 389–90 - Professor at UC Berkeley who studied the rise of Silicon Valley and contrasted it with Route 128 in Massachusetts. Her work highlighted Silicon Valley’s culture of openness and labor mobility.

SBICs (Small Business Investment Companies), 41–43, 52, 61, 80, 395, 421–22n - Government program created in 1958 to provide financing to small businesses. Many early venture capital firms got their start by raising SBIC funds.

Schillage, Tanya, 308 - Former partner at New Enterprise Associates focused on healthcare investing. Mentioned regarding a sexual harassment scandal at the firm.

Schmidt, Eric, 186–88, 208 - Former CEO of Google and chairman of parent company Alphabet. Worked closely with Google’s founders Larry Page and Sergey Brin. Stepped down as CEO in 2011.

Schoendorf, Joe, 437n - Early partner at venture capital firm Canaan Partners. Invested in DoubleClick and others.

Schroeder, Bob, 426n - Co-founder of Analytics Ventures, an early-stage VC firm. Previously a general partner at Accel Partners and other firms.

Schwartz, Mark, 229–30 - Co-founder and CEO of cloud company Salesforce. Pioneered the software-as-a-service model.

Scientific Data Systems (SDS), 48–50, 423–24n - Early computer company founded in 1961. One of the first commercially successful minicomputer firms. Acquired by Xerox in 1969.

Scott, Mike, 85–86, 89–90 - Prominent Silicon Valley lawyer who represented Kleiner Perkins and many of its portfolio companies. Played a key role in developing the VC ecosystem.

screen addiction, 14 - Refers to excessive use of electronic screens such as smartphones, which can be addictive and harmful, especially for children.

Searching for Sugar Man (documentary), 375–76 - 2012 documentary film about American musician Sixto Rodriguez, who was a major star in South Africa without realizing it. Used as an example of unpredictability.

Sears, 64–65, 80, 426n - Large American department store retailer. Venture capital firm Kleiner Perkins made an early investment in the company in 1979.

Sears Tower, 64 - Skyscraper in Chicago completed in 1973 that served as headquarters for Sears, Roebuck and Company. At the time, it was the tallest building in the world.

“seasteading,” 212 - Concept promoted by Peter Thiel of creating permanent dwellings at sea outside the territory claimed by any government. Thiel helped fund the Seasteading Institute.

Securities and Exchange Commission (SEC), 30 - US government agency that regulates and enforces securities law. It oversees the stock exchanges and other markets.

Seedcamp, 220–21 - Europe’s first startup accelerator, founded in 2007. Provides early stage seed funding and mentorship to tech startups, mainly in Europe.

seed investing, 65, 70, 217–21 - Early stage startup investing, usually referring to a company’s first institutional fundraising round. Often provides just enough capital for initial product development.

Seeq, 106, 107 - Industrial analytics company that pioneered applying AI to process manufacturing. Acquired by Amazon Web Services in 2022.

Sematech, 94, 430n - Nonprofit consortium founded in 1987 to revitalize US semiconductor manufacturing. Funded jointly by government and industry.

SenseTime, 393–95, 400 - Chinese artificial intelligence company focused on facial recognition technology. A leader in computer vision AI with strong Chinese government ties.

Sentry Towers, 403 - Pair of office towers in San Francisco’s South of Market neighborhood. Several top VC firms are headquartered there.

September 11 attacks (2001), 190–91 - Coordinated terrorist attacks in US by the militant Islamist group al-Qaeda, in which four airliners were hijacked and crashed into targets. Had major economic impacts.

Sequoia Capital, 303–38, 454–55n - Influential Silicon Valley VC firm founded in 1972. Made early investments in Apple, Cisco, Google, PayPal, YouTube and many other successful tech companies. Known for its rigorous approach.

Sequoia Capital Global Equities, 331–33 - Public equity investment arm of Sequoia Capital focused on late stage and public companies. Manages several hedge funds.

Sequoia China, 225, 238–48, 314, 321, 448n - China operations of Sequoia Capital, focused on Chinese tech startup investments. Established in 2005 and has offices in China.

Sequoia India, 321–24, 326 - India operations of Sequoia Capital, focused on Indian startup investments. Established in 2006.

Series A, 65, 70–71, 140, 160, 189–90, 343, 350, 382 - Typically a startup’s first major round of venture capital financing. Follows on seed funding and allows a company to scale up.

Series B, 71–72, 155–56, 158, 160, 343 - The second round of major venture capital financing, follows the Series A round. Provides funding for additional growth and scaling.

Series C, 358–61, 363 - The third round of major venture capital financing, follows the Series B round. For later stage companies that are scaling rapidly.

Series D, 206, 358, 359 - The fourth round of major venture capital financing, follows the Series C round. Typically for mature, late-stage private companies.

ServiceNow, 326–30 - Cloud computing company that provides IT management software. Went public in 2012. Sequoia invested in it post-IPO.

Severino, Paul, 112, 118, 435n - Venture capitalist and partner at Sequoia Capital. Played a key role in the firm’s investment in Cisco.

sexism, 117, 267–71, 360, 384–85 - Discrimination based on sex or gender. Issues of sexism, gender bias and harassment have surfaced in relation to the venture capital industry.

sexual harassment, 270–71, 365, 367, 384 - Unwelcome sexual advances, requests for sexual favors, or other verbal or physical harassment of a sexual nature. Has been an ongoing issue in VC industry despite recent reforms.

Shah, Kunal, 322–24 - Indian entrepreneur who co-founded travel company Sequoia Capital India invested in and worked closely with the company.

Shanghai, 222–23, 231 - Major global financial center and largest city in China. Home to China’s biggest stock exchange and many tech companies.

Shao, Bo, 447n - Chinese entrepreneur who co-founded social media app TikTok (Douyin in China). TikTok is owned by ByteDance, one of China’s largest tech companies.

Shen, Neil, 224–25, 237–41, 276, 312, 314 - Founding and managing partner at Sequoia Capital China. Key figure in firm’s China operations and investments in companies like Ctrip.

Shleifer, Scott, 278–88 - Venture capitalist and partner at Accel known for investments in Chinese internet companies like Baidu. Also invested in Facebook, Spotify, Slack.

Shockley, William, 17, 21–24, 31–32, 67 - Nobel laureate and co-inventor of the transistor. Founded Shockley Semiconductor Laboratory in 1956 but was a poor manager. Led to “Traitorous Eight” leaving his firm.

Shockley Semiconductor Laboratory, 21–24, 31–33, 41 - Semiconductor company started in 1956 by William Shockley and colleagues. The employees who left Shockley founded Fairchild Semiconductor and sparked the growth of Silicon Valley.

Shopify, 332–33 - Canadian e-commerce company that provides software and services for online stores and retail point-of-sale systems. Went public in 2015.

“short,” 283 - Selling a stock or asset that one has borrowed in anticipation that the price will drop. A technique used by hedge funds and other investors.

Shriram, Ram, 176, 178–79, 180, 182–83, 199, 441n - Early Google investor and advisor who served on its board. Was a founding board member of Netscape. Later founded Sherpalo Ventures.

Siara Systems, 9, 10 - Optical networking startup founded in the 1990s. Notable as one of the first investments by future VC firm Andreessen Horowitz.

Sidecar, 358 - Defunct app-based ridesharing and delivery startup that competed with Uber and Lyft. Operated from 2011 to 2015 before shutting down.

Sidgmore, John, 142–43, 168 - Former CEO of broadband pioneer UUNET who served as vice chairman of WorldCom after its acquisition of UUNET. Left WorldCom not long before its collapse.

Silicon Alley, 223 - Term for New York City’s tech startup scene, playing off “Silicon Valley.” Refers to startup ecosystem in NYC and surrounding area.

Silicon Compilers, 107–8 - Electronic design automation company that developed software tools for integrated circuit (chip) design. Acquired by Cadence Design Systems in 1987.

Silicon Desert, 223 - Nickname sometimes used to refer to Arizona’s technology industry and startup ecosystem, centered in cities like Phoenix. Playing off “Silicon Valley.”

Silicon Forest, 223 - Nickname for cluster of high-tech companies in the Portland, Oregon area. Also encompasses Vancouver, Washington area.

Silicon Graphics, 145, 146 - Pioneering manufacturer of high-performance computing and graphics workstations and servers. Known for its cutting edge graphics technologies.

Silicon Hills, 223 - Nickname for the cluster of high-tech companies in Austin, Texas area and central Texas more broadly. Playing off “Silicon Valley.”

Silicon Valley, 302–3, 391 - Region encompassing parts of the San Francisco Bay Area that is a global center for high-tech innovation and startup companies. Home to many top venture capital firms.

Silver Lake Partners, 289, 297–98 - Private equity firm focused on leveraged buyout investments in technology companies. Partnered with Andreessen Horowitz on Skype acquisition.

Simon Personal Communicator, 20 - Early smartphone invented by IBM in 1992. Had features like apps, touch screen, and email - before mainstream adoption.

Sina, 226, 233, 279–82 - Major Chinese technology and internet company that operates leading web portals and social media sites. Went public on NASDAQ in 2000.

Singh, Shailendra, 321–24 - Managing director at Sequoia Capital India. Led investments in consumer internet companies like Cafe Coffee Day.

Singleton, Henry, 53–54 - Co-founder of Teledyne Technologies along with Dr. Henry Singleton. Helped pioneer conglomerate business model., 20 - Early social networking website that launched in 1997, allowing users to list friends and traverse friend networks. One of the first social networks.

Skype, 399 - Internet calling service that provides free voice and video calls. Purchased by eBay in 2005, later acquired by Microsoft. Andreessen Horowitz invested in its buyout from eBay.

“software is eating the world,” 296, 309 - Quote from venture capitalist Marc Andreessen arguing that software was transforming major industries. Underpinned his 2011 essay “Why Software is Eating the World” in Wall Street Journal.

Sohu, 226, 233, 279–82 - Major Chinese online media, search, and social networking company. Operates leading internet portals. Went public on NASDAQ in 2000.

Son, Masayoshi, 154–60, 171, 439n - Billionaire Japanese technology entrepreneur who founded SoftBank and serves as its CEO. Made bold investments in companies like Alibaba and WeWork.

Sony, 94 - Large Japanese conglomerate with major consumer electronics and entertainment businesses. Seen as a global competitor to Silicon Valley tech companies.

Soros, George, 199, 212–13, 283, 445n - Billionaire hedge fund manager and investor. Founder of Soros Fund Management LLC which manages various hedge funds.

Soviet Union, 41, 289 - Communist state that existed from 1922 to 1991 encompassing Russia and surrounding countries. Its collapse ushered in economic reforms and growth.

SPAC (special purpose acquisition company), 373–74 - Shell company that raises capital through an IPO to acquire an existing private company and take it public. Used for some recent tech IPOs.

SpaceX, 12, 214–15, 403 - Private aerospace company founded by Elon Musk that manufactures rockets and spacecraft. Pioneer in commercial space industry with cost-effective reusable rockets.

SPARC (Scalable Processor Architecture), 107 - Advanced RISC instruction set architecture developed by Sun Microsystems in mid-1980s. Used in Sun’s SPARC microprocessors.

specialization, 129–31 - Business strategy of focusing on a narrow product line, customer segment, or market niche. Pursued by venture firms like Accel Partners to gain advantage.

Spectrum Equity, 439n - Growth equity investment firm focused on late stage and middle market companies, mainly in technology and information services sectors.

Sperling, Scott, 126–27 - Co-founder of University of Phoenix, an early for-profit higher education company. Went public in 1994 with investment from Accel and others.

Spotify, 289, 399 - Leading global music streaming service founded in Sweden in 2008. Pioneer of freemium business model in streaming.

“spread,” 336 - Difference between the price paid for an asset and its market value. Used by venture capital funds to calculate returns.

Sputnik, 41 - First artificial Earth satellite launched by the Soviet Union in 1957. Triggered the space race between the US and USSR.

SRI International, 433n - Nonprofit scientific research institute based in California. Conducts client-sponsored research and development for governments, companies, and foundations.

Sullivan & Cromwell, 226 - Prominent international law firm headquartered in New York. Advised venture firms and startups on corporate legal matters.

Summit Partners, 325–30, 438–39n - Growth equity and venture capital firm founded in 1984. Invested in companies like Juno Therapeutics, FleetCor, Uber.

Sun, Ed, 447n - Co-founder and CEO of Chinese real estate brokerage platform Beike Zhaofang, known as KE Holdings outside China. Backed by Tencent, SoftBank and others.

Sun, Glen, 243–44 - Chinese food delivery executive who co-founded Meituan-Dianping Group. Built it into China’s largest food delivery platform.

Sun Microsystems, 5, 51, 107, 123, 174, 186, 265 - Silicon Valley computer company that sold servers, workstations and software. Pioneered commercial Unix-based systems. Acquired by Oracle in 2010.

Supercell, 451n - Finnish mobile game development company behind hits like Clash of Clans and Hay Day. Acquired by Tencent in 2016 for $8.6 billion.

super-voting rights, 344, 346, 359–62, 371 - Corporate structure giving select shareholders outsized voting power disproportionate to their share ownership. Used by many tech companies to empower founders.

Sutter Hill Ventures, 52, 66–67, 82, 96–97, 98, 102 - Early Silicon Valley VC firm that made foundational investments in many chip and computer companies like Intel, LSI Logic, Verisign. Operated pioneering mutual fund in 1960s.

Swanson, Bob, 72–78, 428n - Co-founder of Linear Technology, which became one of the most successful analog chip companies ever. Known for his rigorous business practices.

Swartz, Jim, 128–32. See also Accel Capital - Co-founder of Accel Partners, one of the earliest Silicon Valley venture firms. Pioneered the focused, specialized VC model based on deep industry expertise.

Switzerland, 280, 282, 286 - Alpine European country known for banking, neutrality, and innovation. Home

Here is a summary of the key points about Musk, PayPal, and opposition to VC mentoring in the book:

  • Elon Musk is portrayed as an iconoclastic founder who chafed at traditional venture capital oversight and mentoring. He clashed with venture capitalists while building companies like PayPal.

  • Musk’s success with PayPal demonstrated that some exceptional founders can thrive without following the typical VC playbook of close mentorship and staged financing.

  • The book argues that Musk’s opposition to VC mentoring supports the “power law” theory that outsized startup outcomes disproportionately come from a tiny number of elite founders.

  • PayPal was founded in 1998 initially as Confinity, and merged with Musk’s online banking company in 2000. Musk was later ousted as CEO but remained as a board member and major shareholder.

  • PayPal went public in 2002 and was sold to eBay for $1.5 billion later that year, earning Musk around $250 million for his stake.

  • The book cites Musk and PayPal as emblematic of how elite founders with big visions can sometimes succeed wildly despite resisting VC conventions. This reinforced broader debates about how much control VCs should exert over startups.

  • Kleiner Perkins and John Doerr scored a big win when Lotus went public, though Doerr later collaborated with Mitch Kapor on a failed tablet called GO. Doerr was known for his energy and commitment.

  • Accel’s Jim Swartz and Arthur Patterson took a more deliberative approach to investing compared to Doerr’s “moon shots”.

  • Yahoo founders David Filo and Jerry Yang brought a zany sensibility to the early internet.

  • Masayoshi Son made a massive $100 million investment in Yahoo, outbidding rivals.

  • Pierre Omidyar built eBay into a hit with help from Benchmark and Meg Whitman.

  • Prodded by Sequoia, Peter Thiel and Elon Musk merged companies to create PayPal, though Thiel ousted Musk.

  • Shirley Lin brought U.S. venture capital to China, backing Alibaba early for Goldman Sachs.

  • Kathy Xu invested early and aggressively in Chinese startups like, signaling the rise of Chinese VCs.

  • PayPal alumni became extremely influential as investors and entrepreneurs, dubbed the “PayPal Mafia.”

  • Sequoia’s best move was recruiting Neil Shen to launch Sequoia China.

  • Paul Graham and Jessica Livingston founded Y Combinator, revolutionizing angel investing.

  • Tiger Global’s Chase Coleman and Scott Shleifer pioneered growth investing in emerging markets.

  • Yuri Milner brought Tiger’s model to Silicon Valley, investing in Facebook early.

  • Marc Andreessen and Ben Horowitz launched a top venture firm, riding the cloud computing boom.

  • Michael Moritz and Doug Leone made Sequoia the top partnership through contrasting styles.

  • Jim Goetz and Roelof Botha later led Sequoia, with big wins like WhatsApp.

  • “Unicorn” startups like WeWork and Uber showed the risks of unlimited capital and lack of public market accountability.

Author Photo

About Matheus Puppe