The Masters of Private Equity and Venture Capital: Management Lessons from the Pioneers of Private Investing

by Robert Finkel

Ten Leading private investors share their secrets to maximum profitability

In "The Masters of Private Equity and Venture Capital," the pioneers of the industry share the investing and management wisdom they have gained by investing in and transforming their portfolio companies.

Based on original interviews conducted by the authors, this book is filled with colorful stories on the subjects that most matter to the high-level investor, such as selecting and working with management, pioneering new markets, adding value through operational improvements, applying private equity principles to non-profits, and much more.

Genres: Business, Finance, Buisness, Economics, Audiobook, Nonfiction, Entrepreneurship

321 pages, Kindle Edition

First published December 14, 2009

Reviews

[Herve · Rating 4 out of 5]

I just read the chapters related to venture capital in the book The Masters of Private Equity and Venture Capital. These are the chapters 7 to 11 built from interviews of:
- Garth Saloner, Stanford Professor
- Bill Draper, founder of Draper Richards and of Sutter Hill
- Richard Kramlich, founder of NEA
- Steven Lazarus, founder of ARCH Venture Partners
- Pitch Johnson, founder of Asset Management Company

You may not know their names but Draper, Kramlich and Johnson are famous "grandfathers" of Silicon Valley venture capital. You may remember them if you read anything on the history of venture capital.

I have to admit my favorite chapter was about Pitch Johnson. (So if you are bored with my lengthy post at some point, jump to the Johnson chapter before quitting!) I had been in contact with him in the past when he sent me a great poster about the early history of the west coast VC. I had also quoted Johnson in my book; I quite liked what he had to say about entrepreneurship: "Entrepreneurs are the revolutionaries of our time." And he had added: "Democracy works best when there is this kind of turbulence in the society, when those not well-off have a chance to climb the economic ladder by using brains, energy and skills to create new markets or serve existing markets better than their old competitors"

So is VC an art or a science? It is certainly not the only topic of this book but all contributors give their views on the question (and on a few other issues I will also mention).

Chapter 7 - Garth Saloner - The Entrepreneur and the Venture Capitalist

Saloner, a Stanford professor, gives an overview of what VC was and is about. He begins to say that VC is not what it was: "Rich and reliable returns no longer seem quite so dependable" (p. 143) so that VCs "Move toward a more conservative mix in their investment portfolios" because of "stressful market conditions".

One of the sections of his chapter is called "Tough to predict". "A VC cannot tell which of the many opportunities that cross the desk will be a 30 bagger". [A 30x multiple] ... "And it can be nearly as difficult to predict which will return zero. These uncertainties drive the typical venture investor toward a home-run model."

A third topic he studies follows another section title: "Whose side are you on anyway?" He answers by stating that the VC has a responsibility towards its LPs. "The typical VC has every incentive to play long ball while many entrepreneurs will be simply happy to see their product come to market. And therefore the VC may be more aggressive." The disparity in perspective is rooted in two aspects:
- the preferred stock structure which may induce fast exits if success does not seem to appear,
- the time and money, which gives an incentive to shut down if the time effort is too high.
"But even the success does not eliminate this tension: the entrepreneur may prefer a longer time horizon," VCs need liquidity. The author is not sure that Bill Gates, Steve Jobs, Michael Dell or Larry Ellison would have been given the opportunity with venture capitalists in control of the board room.

In conclusion the final section is called: a successful, if uneasy, marriage.

Chapter 8 - Bill Draper - Pioneer Investing

Bill Draper is indeed a pioneer of Venture Capital. You may read more about him on another post of mine, The Startup Game.

"Venture investors put their money into technologies that have not yet come to fruition, untested business ideas, undeveloped markets, and often entrepreneurs with virtually no track record. It is a pioneering from of investment."

One of the sections here is "Seeing into the future". "It is not a simple formula. Experiences become lessons, lessons become practices, and practices help us to succeed or fail." ... "It is essential to be quick footed, connected and on top of the latest technological changes in order to succeed." ... "The face of genius changes all the time." Draper clearly explains the difficulty of the VC activity which makes it (according to my understanding of his views) more an art than a science.

Draper also talks about returns and money making: "Instead of worrying about their carry - in other words, their share of the profits, and fretting about the increase in value of their portfolio, some venture capitalists were more concerned about their fees, or the amount of money that they charged based on the funds under management. The rise of the megafunds and the Wall Street transaction mentality inevitably increased the competitive pressure on everyone." ... "The last thing they want to do is share deals, that is unfortunate because cooperation brings more talent to the table." There is a nostalgia of the good old days, that have suffered from greediness.

But Draper is an optimist: "Skype was still in the idea phase, but it promised to be an amazing breakthrough. Zennstrom and Friis epitomize what it means to be a disruptive innovator." ... "Society would not be as advanced, interconnected and civilized as it is today were it not for the scores of talented venture capitalists who provided the platform for brilliant and passionate entrepreneurs to develop and nurture their world-changing ideas and innovative technologies."

Chapter 9 - Richard Kramlich - Change for the Better

Kramlich is more on the science side (again according to my understanding). Let me quote him: "Some changes can be anticipated and planned for. Others are as surprising as a satellite that becomes space junk." ... "Our ability to anticipate, manage, respond to and capitalize on change has been an essential ingredient of our ability to grow into a firm that over our 32-year life span has helped 165 companies make initial stock sales." ... "We spend a considerable time managing change." NEA has industry teams with experts such as a Nobel Laureate. "VCs are savvy risk takers, able to adapt to changing markets, they nurture creative ideas that might become huge successes. They know that sometimes they will fail completely."

He also sees different approaches: "Some people are natural agents of change" ... "Jim Clark is one of the rarest examples who operates almost exclusively on instinct." ... "A fast-change artist."

He also added about Metcalfe, founder of 3com: "I had a difficult time telling if this was genius or folly"

And he concludes with "At NEA, [we] have developed some fairly sophisticated tools to avoid the dead ends. What are the holes where the incumbents are not playing? We have applied this sort of thinking to solar power, and have invested in 15 companies. But I am not sure their investments in the solar industry have been stellar... He also discusses greed (he claims NEA only takes 1% management fee vs. 2% on average) and the megafunds (he claims he can put in action billion-dollar funds in order to invest in companies such as Tele Atlas)

Kramlich definitely insists on systematic analysis, expertise and processes even if he recognizes intuition, art and guts play a role for others.

Chapter 10 - Steven Lazarus - Beyond the Ivory Tower

The roots of ARCH Venture Partners are unusual as Lazarus funds began in a university framework, which is why the author of the book summarizes this chapter with the comment "It is possible to systematically commercialize the research from university laboratories"

Lazarus is more humble. He describes ARCH as "an experiment designed to help commercialize laboratory research." ... "Systematically rummaging through university labs." but he adds: "We made plenty of mistakes." ... "The techniques that have been so helpful to me might be helpful to anyone trying to manage an enterprise that embraces risk in order to grow companies and turn a profit." ... "The scouts also needed to be good judges of talent." ... "We launched ARCH as a technology incubator but the most successful investment turned out to be a company that had nothing to do with technology."

One of the sections is "Facing the risks". "We were identifying science literally at the site of inception. We faced three risks: technology, market and financing." (Surprisingly he does not mention the people or team risks.)

Lazarus is also on the science side of venture capital but when you read between the lines, you may see some of the artistic features.

Chapter 11 - Pitch Johnson - Fostering Innovation

As I said above, this was my favorite chapter. "The crucial decisions must be made on the basis of inadequate information." ... "Back an entrepreneur without knowing if the idea is powerful, the market big enough and the management strong enough." [About Amgen in which he invested] "The company must control variables, be able to replicate results, learn from mistakes, and incorporate new information. Beyond that, there was the human factor."

"I have learnt the tools and techniques, the importance of working with the best people, perhaps the single most vital ingredient of success, I have learnt the pitfalls to avoid. With a lot of lessons over time, one has a good chance of backing the right people with the right ideas in the right markets." ... "The art of our business is to select only the best people with the strongest ideas. The people with drive, the ones who can execute, who can work with others."

He has also a funny and critical (for him) anecdote: "As I rose in the ranks [of the company he first worked for], I was eligible for stock options. I got 42 shares. The founders each owned hundreds of thousands, I decided I needed to do something else."

He also has quite a unique model of venture capital: he decided to quit VC and run his own money, more like a business angel. The main advantages: "Not the same time horizon. The luxury of patience." He also criticizes some abuses: "VC has become a big money management business. AMC is just $60M. But since 2007, VC is back to basics: starting companies, find people, with breakthrough ideas. Whereas in the dot-com, it was quick-hitting with no intention of really innovating." As an example, he claims he was an investor in Boole and Babbage for 30 years !!

"Many styles of entrepreneurs work. What counts is matching the right CEO with the particulars of the challenges facing a company. Informal or hierarchical styles, both work." (He compared Tandem to Teradyne as examples of both styles.)

Art or Science? Clearly a lot of art, a lot of technique and know-how too. Clearly not an industry, but more a craft. And as we all known, craftsmen are just in-between artists and scientists.

[Tino · Rating 3 out of 5]

Not so much actual management lessons as just general VC stuff. I didn’t mind that but it does mean it missed its mark a bit. Relatively interesting stuff otherwise. 3 stars.

[Farhad Ahmad · Rating 4 out of 5]

It is an insightful book for those who would like to learn some management skills from the Private Equity experts from the late 20th century at the times of tech book. The book provides a handful illustration of the management style of key PE investors. My favorite Venture Capital story in this book is Patricia M. Cloherty's experience in Russia.

[Zach · Rating 4 out of 5]

Appreciate the big picture messages. Would have appreciated more discussion, from a quantitative perspective, on the intricacies of structuring deals

[Juan Flores · Rating 5 out of 5]

Excelente libro, lleno de secretos e historias de pioneros de la industria. Resulta útil tener el "mapa" de los negocios desde sus cimientos a la cima donde lleguen.

Excellent book, full of secrets and stories from industry pioneers. It is useful to have the "map" of the business from its foundation to the top where it reaches.

[Andrew · Rating 4 out of 5]

I only read the PE part but really enjoyed it. Didn't learn technical stuff but learned about some PE firms and how they thought about the process and investing in private equity.

My notes are below:
Part 1 - PE
1. Method over magic-the drivers behind pe performance - Steven Kaplen (UChi prof)


2. Operating profits - using an operating perspective to achieve success - Joseph Rice (CDR cofounder and chairman)
The lesson - “Nothing in this world can take the place of persistence”
CDR first to make operating perspective a point of focus
Pioneer of operating and financial skills to improve port companies
Recruited jack welch in 2001 once he retired from GE - then joined as special partners
Get former CEOs to take active roles of port companies
Firms need to be good at one part - turnaround, financial engineering, industry focus
Founders all had operating experience
In 2008 welch said be aggressive don’t play defense at meeting
Started by doing crisis management for firms banks don’t due to default
Helped Jerry Kohlberg
CDR operating partners are in all partners of business - source deals, analyze proposed transactions
Lexmark from IBM deal
Use cf from mature side to build developing business
Gave employees ownership interests
To improve performance they did two things
Operating review - brings all operating partners of the firm with management of portfolio companies have a detailed discussion with 7 individuals
Investment screening committee - quality control on deal making
More financial partners an operating - but operating are a huge part of success
Financial partners usually two generations younger than operating partners
Advice
Study operations as careful as the finances - go beyond the numbers
A company is not fixed in a steady state - competitive dynamics change - be prepared to turn on a dime
3. Skin in the game - investing in service businesses - Warren Hellman (Hellman & Friedman - chairman)
Style - investing in high quality business franchises
“All potential investment should be considered guilty until proven innocent”
Great grandson of IW hellman, who built the wells fargo bank
Youngest partner at Lehman brothers - 26
Hellman typically avoids heavy industry, preferring to invest in non-capital intensive people oriented services business
Sometimes markets go through a phase where old economics seem outmoded -such as instead of profits its cost per click and eyeballs or leverage frenzy
Franchises that grow don't need a lot of capital and give a service will always last
First deal of Levi strauss
Focus on companies with fewer physical assets and lower capital costs
Look for high barriers free cash flow strong management and persuasive case that investment can help grow business
Return on tangible capital - cash flow measure
Unlike a lot of Pe firms, HF has a lot of experience in minority stakes in firms and helping transform their strategies
Founder partners will all bankers - don't just rely of engineering but look at good investment
Success is to have the right CEO in place
Average company in mediocre industry with high capital costs is bad
Bankers will say we have an opportunity to do something so lets figure out how to do it - investors will say every investment guilty until proven otherwise
Have to understand dand like the business not just the trade/security
Principles to invest by
Ensure team’s interests were always closely aligned with investors and management - thing to do- also power when agree and work to same goal
Do not charge deal fees or monitoring fees - (if they do they give it back to Lps) already responsibility for investors
Presents conflict of interest
Focus on project return of tangible capital
Everyone knows cash flow is important but how you measure it is key
Want to reflect long term demands an investment will place on our firm - so look at capital requirements needed for business to operate and grow
Want to look at future costs - if not same as buying a dog without food
Average firm has return of 10% they look for 20-30%
Companies with cash flow can fund growth pay down debt and make dividend payments
Doesn't like firms with double leverage
Financial leverage is one thing but industrial leverage is another
Companies with large amounts of physical assets, PPE have industrial leverage
Hard to add financial leverage on top of firms with industrial leverage
Cash flow drops won't have cash to finance debt
Due to not liking industrial leverage but also liking high returns on capital they focus on investing in finance/service oriented business opposed to manufacturing businesses
Dying industry does not help
Like media, financial, software and advertising industries - soft assets
Y&R deal didn't ask for total control - 10% voting rights - wanted them to understand they controlled the firm - took minority position
Excess working capital is bad - such as AR - having AR not cash impairs ability to pay down debt
Invested in the NASDAQ - 19% stake
Transition periods create investment opportunities
Nothing exceeds like excess - succeed when we push ourself to excessive degree
4. The Partnership paradigm - working with management to build toward success - Carl Thoma (Thoma Bravo founder)
“Private equity is about superiorly managed and performing companies, not being an investor. It is about being proactive”
Known as “buy and build: strategy that requires patience industry specific knowledge and unrelenting focus on performance
Key to success is to focus on management (CEO)
Before he closes a deal he insists on changes and metrics to be made
Firm can get best results when management acts quickly and effectively
Run companies by anticipating things
Worrying is an effective way to do that
Also anticipation is key is it starts with worrying and then goes to preparing
Effective leaders anticipates problems and try to act before then
Mindset to adopt ownership perspective and treat each investment as an asset to work to improve over time
Most important work is to select and improve management
Since fist deal of PageNet they have specialized in buying small multi unit companies and building them through acquisition into major national players
Technique became know as platform investing or leveraged buildups
Executed platform in funeral homes, golf courses, copier dealerships
Has been a good way to use leverage
Would look at industries in need of consolidation and then look for a CEO to execute the consolidation
Costs can be cut but changing culture or improving management is not always easy
Environment back then gave room for error but not anymore
They use significant leverage so have to move quickly
5x times firms competing fro deals now then back then
Due to this they can only work with the best CEOs can’t afford
Try not to change CEOs as that takes time which they cannot afford
Some problems no management can solve
Needs to be shared understanding of objectives with management
If CEOs don’t deliver despite time cost get a new one
Don’t give second chances
Time is the enemy
Can get higher IRR in shorter time period
No room for mistakes, little room for management changes and absolute accountability
Used financial leverage to buy undervalued companies with strong CEOs and promising growth prospects
Consolidated industries had big gap between good and bad firms
PE shop would look for more firm to add while management would operate the companies
Companies available to buy were available because they were poorly managed in the first place
Page net industry had good growth and no national dominant player - plenty of local stores to roll into one - then share costs distribute best practices and have greater purchasing power - benefits of size
Finding a ceo - get a search firm
Good people at other places will bring those good practices to new firms
Got old team members too - more effective
Sometimes industries are just not that professional so your team gives you an advantage
Once you have a lot of the market you can run out the competition
They did 7 more acquisitions for PageNet stayed with them for 10 years
Invested 8 m and netted 800m - 100x
Put firm on the map
Lessons from platform investing
Key insight - there is a certain minimum scale that makes sense for investment
small firms may not be good because if the guy leaves then the shop could pretty much be closed
Important lesson - hard for a CEO to repeat his success - don’t hire ceos for a second time maybe do BOD instead
More difficult for CEO to invest himself in the business a second time and bring the same intensity - not as hungry for success
Can’t have CEO’s do different industries - don’t have the time for him to get contacts and learn the industry
With big difference in fim’s in the industries management can have a big impact
Get a great manager, give him capital and add firms for him to run strategy
Slogan - partners with management also would think 20% would be home runs 60% would be middle and 20% would not work out but times have change - prices are more competitive - adopted new strategy trying to bat 100% home runs
They used to buy 4-5x cf but now pay 8x
Old investment process does not work as effectively anymore
Execution is critical as we need to lower the effective purchase price as fast as possible by increasing earnings
Board/PE sometimes does strategy stuff as CEO does not have enough time for it as he looks at strategy and execution
Now decision on CEO is less as important
Now they look for the company first - then more complete management team and less just the CEO - want strong management and companies that are competitive and want to improve and grow
They are investors with ownership mindset they don't wanna be in the position of managing the companies they own
Key to success is effective worrying
Minimize risk by shrinking the time you are exposed to one company or industry
Make an impact quickly and then get out
Why 3 can be better than 5
Need to invest in industries you understand + want stable management + need to do upfront work before investing + find changes to be made before = fast profitable turnaround
Buy go corporate culture + benchmark firm with comps + have Ceos look at firm
Sometimes have the seller fire people before you buy so you can come in and just focus on growth
Now start with a little larger firms so they can have a better team with small was hard to get a ceo
Need to know when to say NO even if looked at something for 6 months
Old days - if person is not good you can fire them - don’t have time for that now - need to have good management
5. Beyond the balance sheet - applying pe techniques to not for profit work - Jeffery walker (JPM Partners)
6. The inside game - managing a firm through change after change - John Canning (Madison Dearborn partners)
MDP shows that management of the firm can be as important to success as investment know how and strategic vision
Canning has called for a reassessment of strategy and an adjustment to a new low leverage future
8 of founding partners are still there today - remained remarkably stable through economic change
Pe started as venture investment in 1950s, 1970s bootstrap deals (pe firms raised money for transaction by transaction basis), later banks used leveraged transactions, 1980s - term PE was used - expanded deal size and leverage - (KKR nabisco) - 1990s saw industry mature and increase in size of deals - 2000s started with dot com bubble crisis led to Pe to scale back - throughout time one constant thing - the firm.
Partnership and management of firm is at the heart of the way we do business
Managing the firm is essential for success = when firm is well run professionals can focus on other things like deploying capital
Fewer distractions the better
MDP is one of the larger longest lived pe firms - not well know that 8 key people in the firm have been there for an average of 25 years
Started in 1970s with venture capital arm of first national bank of chicago which then turned into PE approach
He was the lawyer of the group - found changes in the law create expansive new opportunities
Raised 85M at time which was second largest next to KKR (100M) - Bravo was also raising money then
Eventually left First Chicago with team to start MDP in 1992
Learned solidly run companies even in bad economic conditions can still be profitable
First commitment came from williams college (pe friend joe Rice was on the board)
Kkr also gave them a list of people to call
Set up shop at corner of Madison and Dearborn in chicago
First investment was a no leverage deal - structure was 60^ would be growth equity and 40% would be buyouts
Is a fair guy - they have a flat compensation setup - no one person has over 10% - can’t government a partnership without a flat setup because there will be too much infighting - sooner or later partners will storm the castle
Making it equal gets rid of people flooding to the hot sectors
Don't want people to do bad deals
Telecom burst in 2000 they closed 25 firms
Don't overreact when markets turn against you
They considered doing their own telecom fund also changing hiring so associates can interview with escort groups without having them interview the whole firm - they also received hefty bonuses
Never launched the fund and returned to old hiring cycle
Want the loyalty to be to the firm and not the group - firmwide perspective
Important to have ever leadership meet the people they hire
Have three years they pick a specialty
In 2000 stopped taking and cut management fees - felt it was the right thing to do
Vintage risk - all deals ending at same time exposed to industry risk
Value in extreme stress testing
Need to justify why to stick with the company every year
They don’t put new money into a company running into trouble
Limit themselves to no more than 10% of the fund in a transaction
In one year they just did one deal
Uncertainty creates opportunity
Find opportunity where other see only trouble and make the most of it
Part 2 - VC

[Vovka · Rating 1 out of 5]

Garbage -- mostly unedited reprints of corporate storytelling ghostwritten by PR teams about the venture and PE firms featured in the book. There are very, very few "management lessons from the pioneers of private investing" to be found in this book. That said, it's quite uneven -- some of the PR teams that contributed to the book did a better job than other teams and might have accidentally said something worth noting.

[Vasco · Rating 4 out of 5]

The bad: Well, not necessarily a bad thing, but the first PE part is much more technical and interesting than the actual VC part. The VC part has lots of stories with some of the legends in the game. Respectable and with authority, sure. But it's a lot less practical than the first half. I'm not sure if the guys in the first half are as "famous" in the PE arena as the ones in the second half are in the VC space, but I find the first half a lot more practical and actionable. The VC part is mostly stories and remembrance. However, the title of the book clearly states it's a series of interviews, not necessarily teaching material, so I don't really think this can be considered a "bad" thing. tl;dr: I just wish there was more actionable info on the second half, the VC section.

The good: The book has interviews with reputable experts, and many useful lessons in sourcing companies, vetting them, the due diligence of the process and the post-investment support. It's very comprehensive and definitely deals with a lot of situations, levels of maturity, and even different geos. Solid book and very comprehensive.

[Wes J · Rating 5 out of 5]

As someone who's more interested in the execution aspects of private equity, I thought chapters on Rice, Hellman and Thoma were really good.

[InvestingByTheBooks.com · Rating 3 out of 5]

In this book some of the real veterans of Private Equity and Venture Capital get to tell their own story – How did their career develop? Why did they make the choices they made and how did this form the sectors today? What lessons can they share (professional and in life)? The author Robert Finkel is the president and founder of a USD 190 million, Chicago based, PE-firm called Prism Capital. He got the inspiration for the book while arranging a number of panel discussions with seasoned VC-managers. With the book Finkel is “seeking to expand my own interest in their accomplishments and channel it, in written form, into a kind of virtual classroom, one open to public viewing.” Self- improvement and sharing of financial wisdom – two worthy causes to write a book.

The structure of the book is simple: first an introduction by the author, then the two major parts of the book presenting one academic and five practitioners within first PE and then VC and finally a number of appendices with material from some of the practitioners (“Managing Director Selection Criteria” etc.). The arrangement lends itself perfectly to study the similarities and the differences of the two protagonists. Let’s begin with what unites PE and VC. For a start they raise money, run funds with finite lives and then return the limited partners’ money. This gives them “the advantage of a burning platform”, i.e. a built in sense of urgency, a notion that time is money and an understanding of the alternative use of cash that is very conductive to driving change (and results). Both also view themselves as down to earth stewards of healthy business values, builders of enterprise value and champions of capitalism. That investors in public equity often are seen as politically correct hysterics is perhaps no surprise but I hadn’t appreciated the tension that at times exist when it comes to hedge funds. HF:s are much too financially complex for the taste of those managing private capital and on top of that HF:s are the main competitors for the LP’s money. In slightly different ways both VC and PE provide structure to the companies they invest in – governance is increased, strategies are sharpened and management is recruited. Another obvious similarity is the “2-and-20” fee structure.

The fee structure however illuminates one of the differences; AUM is much larger in PE than in VC and therefore while those working in the former can live happily on the management fee, the carry becomes relatively more important in VC. Even though they both, as stated above, bring structure the execution is very different. VC:s invest in the early stages and in hot new markets while PE invest in mature cash cows with potential for improvement. This means that while PE-owners at an early stage try to replace a CEO they don’t have confidence in, VC-owners often coach an entrepreneur for longer and often only replaces him for a “professional manager” when the venture is brought to sufficient scale. The structure PE brings is focused on cost and capital efficiencies, repositioning often through M&A, accountability and cash flows, VC brings R&D prioritization, hiring skills, taking a product to market by adding sales competences and in general building a company with necessary systems. The outcome of an investment is more binary in VC than in PE and hence the risk is higher. This means that it’s more common for VC’s to co- invest and spread the risks, while this is mostly done in the very largest deals in PE. The difference in risk level also means that where leverage is a large part of the return PE generates, VC is equity- based only.

The masters presented in this book have been in business for 30, 40 or even 50 years and the stories they tell are those of how VC and PE started. One privilege of age is the ability to put things in perspective. However, at times the texts become memoirs rather than teachings of the tricks of trade. This makes the book likable but you don’t learn as much as you could have.

[Roman Milioti · Rating 4 out of 5]

Divided between PE & VC, the book leverages the insights of 10 historically successful investors by providing them with a chapter to detail their own careers and investment philosophies.

I have added a few takeaways I found most valuable below:

Financing: I) Avoid the “Good Security Fallacy”: Invest in companies with strong cash flow that can grow over time. Do not invest just because the security seems to promise a good return. The health and prospectus of the underlying business count for more. II) Leverage does not make a an investment good or bad, it just magnifies the results.
Operating: I) Agree with Management on New Operational Goals/Metrics/Systems Before Deal Close; II) Franchise Investments: Investments - quartile franchises and systematize top quartile operating activities to entire portfolio
Wisdom: Adjust to economic conditions: Change in economic cycles is a clear signal that investment styles will have to change.

[Victor]

Ótimo livro.

É um mix de história das indústrias e de seus principais "personagens" com cases de investimento e compartilhamento de boas práticas. Há ainda retratos ricos de alguns nichos interessantes. O livro peca só, ao meu ver, na falta de estrutura e continuidade, às vezes com prolixidade, presente em certas seções. Apesar dos esforços bem produtivos de edição, o formato de escrever a partir de entrevistas adotado pelo autor não consegue se desvencilhar desses problemas. Não atrapalha a leitura, só restringe o potencial do livro, que consegue, ainda assim, ser muito bom.

[Scott Wozniak · Rating 4 out of 5]

The best part of this book was also the worst part. Each section came from a different author. Each of them were in the first wave of private equity & venture capital. They literally created the category. So the range of wisdom and different perspectives is what made this book good.

But they weren't all equally good writers. And their perspective didn't always agree with each other. So, some parts of the books were more useful than others.

If you're working in this space, this is a useful book. But I wouldn't start here if you are curious to learn about it.

[Joel-Oskar · Rating 2 out of 5]

You must be in the industry to enjoy this. Although frankly even then the 'lessons' are limited and all very similar at the end of the day. The most interesting bit is perhaps reading about the founding history of many of these funds such as NEA, Thoma Bravo, and Madison Dearborn. Wouldn't say it's worth the £20 paid for this.

[Tiago P · Rating 4 out of 5]

Very interesting short business biographies from business people that pioneered the private equity and venture capital investing. I preferred reading the PEq ones but they were all interesting. All of them provide some good business lessons/insights/recommendations.

[Vinayak Mahbubani · Rating 5 out of 5]

A good read for someone wanting a qualitative insight into the world of private equity and venture capital. Conversations with reputed investors reveal key considerations of an investment thesis - allowing the reader the compare and contrast different strategies for success.

[Tomas Milasauskas · Rating 5 out of 5]

Great collection of case studies on different PE/VC funds investment strategies, deal sourcing and portfolio companies management. Highly recommend for CEO or anyone looking to tie up with PE/VC fund.

[Vasanth · Rating 4 out of 5]

If you are starting a business for the first time - this book may not be for you. If you are into 2nd or 3rd venture and wants to hear some interesting insights how big investors play their game - this book is a nice read. Just short of 5 stars

[Ricardo Carriedo · Rating 3 out of 5]

Good stories and anecdotes. A lot of what’s but very little how’s. The book lacks deep insight into how the industry works or how investors think on investments.

[A · Rating 1 out of 5]

Mindless propaganda

[Silas Mahner · Rating 5 out of 5]

Good book, mostly just a bunch of cool stories from folks in the space. Could have offered greater insights with all that striking power but overall worth the read.

[Emilio Cajiga · Rating 3 out of 5]

Muy sobre la superficie, esperaba algo más técnico…

[Ulrik Carlsen · Rating 3 out of 5]

Fikk denne anbefalt. Helt grei bok, mye gjenfortelling av andres suksesshistorier innenfor PE og VC. Helt ok det, men etterhvert så går det fra å være lærerikt til litt kjedelig

[Dmytro · Rating 5 out of 5]

Great book structured as a mix of interviews/memoirs/"lessons learned" by top PE and VC patriarchs who created and shaped both industries. Each of them tells his/her story, explains what makes their firm's investment philosophy different from others etc.

I was impressed by chapters telling about private equity approach for African charity and University VC fund backing its technological research. Just shows you how you can apply PE and VC techniques with success outside the industries.

So would recommend the book to people interested in PE and VC. However it's not the "PE/VC for dummies" so there won't be much about types of investment/structure/success rates/revenues/details on figures etc. The book focuses on elite behind the industry, and should be seen accordingly.

[Candice Hughes · Rating 4 out of 5]

This book gives good insight into the way that private equity and venture capitalists assess the people, companies and technologies they invest in. It was interesting to see the individual investors personalities come across in the ways that they invested and in the types of people they chose to work with. Some wanted short-term profits while a few advised patiently nuturing investments over the longer term. It was also interesting to learn how each got started in the business.

Finally, the Appendix is quite useful for gleaning pointers in how one could go about assessing and investing in companies oneself (once that big bonus comes in or you sell off a company of your own).

[Asif · Rating 4 out of 5]

Enjoyed the book for the most part. What was different was how the people featured appears to have written the chapters themselves which gave an original feel. I could relate to the private equity part a bit more than the VC part. Yet some of the chapters on Venture Capitalists were very intriguing. Favorite chapter was about the American lady who went to Russia to do VC. She gave some very practical advice which I think applies to lots of frontier and emerging countries. In particular the use of proper research to find out why Russian people behave in a certain way instead of blaming it all on culture was very smart. A lot of the things we consider irrational actually do have logic.

[Josh Gatlin · Rating 5 out of 5]

Immediately my new favorite investment book on private investments

The most insightful and well written book I have read on private investment. The Appendices alone are more useful than most other books of a similar nature. I found it to be a much more well written, relevant, and applicable than the similar attempt by "Founders at Work" - I find it a very underutilized resource for Investment Bankers such as myself that want a better understanding of what Investors are considering. It is very beneficial knowledge to have when presenting to financial buyers.

[Jon · Rating 3 out of 5]

+: Good coverage on the history of PE/VC from a first-person perspective. Understand how the important persons in these fields got started and saw patterns and trends before others.
-: Generic insights and high-level lessons. Not repeatable information and their position was situational.

Worth reading, but won't get you into PE/VC or make you a better Principle/Associate by itself.

[Brian Zheng · Rating 5 out of 5]

Many books have been written about hedge fund legends but this is probably the only book about PE and VC pioneers so far. Moreover, each chapter is written by the legends themselves. Excellent book details the pioneers' investment/management style.

[Cristobal · Rating 4 out of 5]

A great oral history of some of the most successful names in the business. It's an enjoyable read and also manages to provide some interesting best practices, though most you would arrive at through common sense.