Media Review: The Young VC's Handbook
A first book for people exploring the world of venture capital
Happy National Read a Book Day! To celebrate the occasion, I’m writing about The Young VC’s Handbook.
The Young VC’s Handbook came out this past March, and I was given the opportunity to purchase it through Booth’s Entrepreneurship and Venture Capital Club in May. I read it over a few weekends during my summer — which in fairness is not really the authors’ intent for how the book was designed to be read.
My initial reaction was “Wow, I wish I had had a copy of this in September when I started my internship search!”
Purpose
This book was developed specifically to address the lack of texts that provide tactical advice for junior investors. As a result, the text is optimized to present content in an easily digestible way.
Sakib’s forcing function for that, which I think is brilliant, was to ask 50 different young venture capitalists who he thought highly of to write a short chapter. Each brief chapter (the longest is 10 pages) is good enough to stand on its own as a helpful blog post about some aspect of the role; they’ve been amalgamated into an awesome 330 page anthology.
Consequently, the book is 50 short chapters about VC, organized topically into 10 parts. Each short chapter is written by a different author, and each part is meant to be read over the course of a week; the book will then be completed over the course of 10 weeks.
It’s worth mentioning that all proceeds from sales of this book go to the JAAGO foundation, an NGO that operates a network of schools throughout Bangladesh that educate children for free.
Structure
VC as an industry has an interesting structure. Success, as with startups (but not most other sectors in finance) is concentrated in the top performers. Like startups, success follows a power law.
First and foremost, success requires being precisely somewhat non-consensus. If an investor is too mainstream, they’re not going to identify those massive exit opportunities that make venture worthwhile for Limited Partners. If an investor is too far off the beaten path, it’s going to be difficult to find follow-on investors for their portfolio companies.
Second, VC is largely an apprenticeship industry. So not only is it necessary to show precisely the right amount of individualism, but much of the learning happens on the job, when partners or senior investors teach junior investors. As a result, professional growth is inextricably linked to what the more senior people at a fund think of the junior person and the work they do.
Sakib’s decision to curate an anthology elegantly speaks to both of these issues. By crowd-sourcing ideas for the text, Sakib validates that the content is sufficiently normative to be good advice.
Furthermore, providing advice from so many investors exposes readers to a wide variety of perspectives, and provides an incredible amount of breadth in this respect. I can’t stress enough how useful I found this in particular.
I liked the 10 week outline of the text, but when I get into a book, I don’t like to stop reading. As a result, I sort of knew from the start that I wasn’t likely to buy into the “read a chapter a day” concept. And I thought the book was so helpful, I wouldn’t encourage anybody else to either.
For a junior investor about to start their first role, I thought this was helpful enough that I’d suggest setting aside time to read the whole thing before the first day of work.
It’s probably even more helpful to read as somebody considering a career in VC, to determine whether the day-to-day tasks of the next several years sound interesting or not.
Content
Week 1 focuses on networking.
Week 2 is all about sourcing.
Week 3 goes into detail on the first call.
Week 4 is a deep dive into due diligence.
Week 5 looks at memos and getting internal buy-in.
Week 6 talks about the term sheet.
Week 7 discusses winning deals and building a reputation.
Week 8 provides insights into portfolio support.
Week 9 gets into follow-on and growth stage investing.
Week 10 covers miscellaneous topics, from Limited Partners to angel investing to the tech stack.
I imagine neither any of these chapter groupings, nor their order, will come as a particular surprise to anybody who’s actually worked VC before, because as I understand it (from the book, Dorm Room Fund, coursework, and a summer internship at an early-stage fund) they’re…exactly what the job entails. The book delivers on its promise to explain what exactly it is that VCs do all day, and how to do it well at a junior level.
Moreover, the explanations of things in the book mapped quite well to my experiences, and the content was quite helpful in explaining how to do some things. Each VC firm is unique, so I wouldn’t expect that everything the book has to say is relevant to any particular experience I’ve had or heard about. But enough of it was directly applicable that I think it was well worth the time to read it.
But what about “Venture Deals”?
The first book that pretty much everybody in VC has told me to read, from Dorm Room Fund, to the PE/VC Lab course I took last spring, to investors who took coffee chats with me over the past year, has been Venture Deals by Feld and Mendelson. This book has been rightly seen as the essential first text in the industry for a fairly long time because of how thoroughly it deconstructs and explains the venture capital term sheet. Nothing else even comes close, and since the term sheet is such a critical part of the work of a venture capitalist, the book has become really critical to educating new investors about what the role entails.
Venture Deals explains the mechanics of term sheets better than anything else I’ve read.
And The Young VC’s Handbook provides a better description of every other part of the role.
Who needs this?
I view both books as essential reading for any aspiring venture investors.
Since reading this book, I’ve recommended it strongly to peers who ask what I’ve read recently, to students at every level who want to chat about venture capital, and to prospective Dorm Room Fund applicants.
If you’re a university student exploring venture capital or a pre-ideation founder, the Dorm Room Fund investing team might be a great fit for you.
Applications close on 29 September for those on the West Coast and in Texas, and on 15 September for everybody else.
But the people who I think need this text the most aren’t actually new or aspiring VCs. The people who need this book the most are first-time founders.
First-time founders often, through no fault of their own, do not understand what junior investors are trained to look for at different stages of the pipeline. This book makes it clear what the associate’s job is, and how they’re likely to interact with founders. It’s far easier to negotiate for win-win outcomes when you understand not only your desired end state, but also your counterparty’s.
Perhaps most importantly for founders, this book explains what incentivizes junior venture capitalists. The late, great Charlie Munger was absolutely right when he said:
“Show me the incentives, and I’ll show you the outcome.”
By better understanding how young VCs are incentivized, first-time founders will be better able to anticipate them — and act accordingly.
The Young VC’s Handbook is a great introduction to the world of early-stage investing for early-career people who are either investing or founding.