VC: An American History

VC: An American History by Tom Nicholas

Most books about VC are, like the great majority of business books, effectively listicles or “interviews with greats” or “notes from the frontiers of success” that purport to give over lessons of “how you, too, can do it” or “how this moment of patently superficial vulnerability from my personal history that I will pretend is a deep look into my darkest soul taught me how to be a better parent-founder-innovator-investor-coach,” or “how I humbly added value by teaching the greats to be the greatest” or “try a lot harder and be grit-ful and you will undoubtedly match the feats of the Successful” or “how I took a pithy saying used by a famous basketball coach and imported it into my asset management style with outstanding results including not only financial upside but unbounded love from my employees” or “defy conventional wisdom like everyone else who triumphs” or some other such witless nonsense.?

VC: An American History, is different.??This is an actual book ABOUT venture capital.?Tom Nicholas, a professor at Harvard Business School, has done a marvelous and, I believe, unique job of telling the broad story of how the most important asset class of the last quarter century came to be.??VC?is a history of the field through time, through its precedents and its nascency and then into its flowering.?It is an academic book, well researched and sourced, considered and even, and it contains within it a touch of clear-eyed genius.

As a good monograph, VC takes us from All the Way Back Then to Rather Recently to chart the development of venture capital from its earliest formal structures to the swashbuckling dynamism that has lately fairly dominated the world’s financial attention.??But the most excellent discovery of the book, and its most exciting claim, is that the venture capital ecosystem that we see today has its most important rooted precedents in the whaling ventures of 19th?century New England.??Nicholas makes his case well.??Those brave souls, from intrepid sailors and reserved Quakers to enterprising captains and dashing harpooneers, took to their bound ledgers and to the high seas to give real life to the phrase “nothing ventured, nothing gained.”??They were the first real risk capitalists at scale, and boy oh boy did they succeed.??(Never mind, for a minute, how we may, today, lament the awful depletion of whale populations, which is itself worthy of a book on the Object Lessons of what happens when an asset class succeeds too much!)

Not all readers will rejoice in the entire book.??Many pages are correctly devoted to the stepwise evolution, chiefly over the course of the 20th?century, of corporate structures and tax strategies that permitted alignment of incentives among investors and entrepreneurs; the ready provision of risk capital; and the prospect of stunning upside in the infrequent awesome grand slam home run financial outcomes.??On the other hand, anyone who picks up a book like this will find it very interesting indeed that nearly all so-called venture capital, as recently as the 1960s and 1970s, was intended to be what we would now called “growth capital” – funding for the expansion of going concerns – rather than seed money for the proverbial dorm room- or garage-based startup.??The book has many bonus tidbits.??For example, I did not know, till I read?VC: An American History,?that Stanford University, unlike the great East Coast universities founded in prior centuries, was always expressly intended to be a kind of practical, innovative, commercial engine, and that this spirit was manifest not only in its chartering statements but also in the ongoing work of its successive leaders, including the famous Dean Frederick Terman, who allotted, in the 1950s, part of the university’s property as an industrial park.??Finally, I found the case studies of particular VC-backed companies (e.g. Apple, Genentech) less interesting, but it must be true that such studies are essential for a book like this; that they were probably constituent elements in Nicholas’s yeoman work along the way toward this book; and that venture capital is so secretive and hard to access in any true longitudinal data-based way that there might simply be no other avenue for an academic to tell the venture story.??In any case, all these sections, too, read well, and one wishes that a book like this were made mandatory reading for policymakers.??I have a feeling we shall see future editions of this book: as it is,?VC?basically ends in the mid-2000s, as the dot-com bubble is imploding and its aftermath is beginning to take shape, so there is little here about the rise of micro-funds, super-angels, entrepreneurs-turned-VCs, formation and studio funds, the step-function higher returns seen in the past half-decade-plus, the globalization of venture capital, etc..??I hope we shall see more.

After reading?VC, this reader was left asking only one major lingering question about the author’s expertise in the field.?Nicholas clearly believes (unless he has kept his doubts very private) that excellent VCs “help” companies succeed.??If he means that only in the broadest terms in which the book tends to describe “help” – board governance, replacing leadership to help accelerate growth once the company in some way “outgrows” founders, assistance in raising more capital – then surely he is right.??But if he means it in some entrepreneurial way . . . well, suffice it to say here that this question undoubtedly deserves another look and another book: I have been both an entrepreneur and an investor, many times, and this important topic warrants more careful attention!

It is too easy, nowadays, and it is sometimes now even fashionable, to forget the many gifts our country has made to the earth.??We can call these the Gifts of the Americans.??Our nation, surely more than other in history, has made it possible for more people, from more backgrounds, more often, and more fully, to prosper.??The United States has been a bounty for the whole world.??Our American Project is, doubtless, not over, as there is much more work to do.??But it is just plain excellent to see a deeply researched book explain, yet again and in yet another field, what America can do.

Highly recommended.??You can buy the book directly here:?https://www.amazon.com/VC-American-History-Tom-Nicholas/dp/0674988000

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