The Power Law: Venture Capital and the Making of the New Future

The venture capitalist mindset requires making crazy bets for outlandish returns, according to this sharp take on Silicon Valley’s bankrollers. Washington Post columnist Mallaby (The Man Who Knew) recaps the roles of venture capital firms in the recent history of tech start-ups, including Sequoia Capital’s 1987 funding of network router juggernaut Cisco, Kleiner Perkins’s investment in Google in 1999, and Accel’s early-2000s bet on Facebook. These storied deals followed a “power law” strategy, he argues: instead of seeking safe investments with reliable returns, VCs funded many risky ventures, most of which failed, in order to find a few successes that generated colossal returns. Capital firms provide services other than funding, he contends, as they dispense sound advice to novice entrepreneurs, help shape up management structures, and bring in talented executives and useful collaborators. This is no dry business treatise; Mallaby’s colorful narrative foregrounds the eternal battle between investors and the often eccentric, even abusive, tech visionaries they fund, and their squabbles over how much stock an investment will buy. (WeWork founder Adam Neumann unloaded a fire extinguisher onto one investor, who duly ponied up more cash.) The result is a lucid, thoughtful, and entertaining account of high-wire capitalism at work. Photos. Agent: Chris Parris-Lamb, the Gernert Company. (Jan.)