202. The Business of Venture Capital feat. Mahendra Ramsinghani

Since its initial publication, “The Business of Venture Capital” has been hailed as the definitive, most comprehensive book on the subject. In its upcoming third edition, this market-leading text explains the multiple facets of the business of venture capital, from raising venture funds, to structuring investments, to generating consistent returns, to evaluating exit strategies.

Mahendra Ramsinghani is the founder of Secure Octane, a venture capital firm based in San Francisco, which invests in cybersecurity among other sectors. He is also the author of multiple books including “The Resilient Founder,” and “Startup Boards” co-authored with noted VC Brad Feld.

Greg and Mahendra dig into everything that makes VCs work in this episode, including what fund managers think about venture capital, betting on humans over ideas, characteristics of a good GP, and the mental health of founders. 

Episode Quotes:

The single biggest problem with venture capital

10:51: I think that's the single biggest problem in our businesses: Markets don't evolve or adopt technologies fast enough. Or if they adopt certain technologies, they don't adopt every technology. They’ll pick one, right? So you end up saying: Okay, in this scenario, I was the winner and in this scenario, I lost. And so this is a business where you're constantly being humbled and constantly being reminded that you cannot logically plan the outcomes.

What are the key characteristics of a successful venture capitalist?

39:06: The fundamental attributes that play out well are curiosity and openness to learning about new trends. And then the second, and the more important, is the ability to take risks within a shorter period of time and make our decisions quickly as opposed to trying to belabor over how the future might play out five years from now. 

Two metrics in measuring fund performance

27:03: What fund managers do, you know, people like me, are giving them the two metrics they want to look at before they start the conversation. So, your IRR, you know, is a time-based sort of metric of your performance. And then the second is your cash on cash, whether you're TVPI (Total Value to Paid In) or multiple of investor capital. So those two tend to have now become industry standards.

Show Links:

Recommended Resources:

• John Hagel episode 

Guest Profile:

• Contributor’s Profile at Forbes
• Contributor’s Profile at TechCrunch
• Mahendra Ramsinghani on Twitter
• Mahendra Ramsinghani on LinkedIn

His Work:

• Secure Octane Investments
• Startup Boards: A Field Guide to Building and Leading an Effective Board of Directors 
• The Resilient Founder: Lessons in Endurance from Startup Entrepreneurs
• The Business of Venture Capital: The Art of Raising a Fund, Structuring Investments, Portfolio Management, and Exits (Wiley Finance)

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