My Amazon Review of Tom Nicholas' "VC: An American History"

An Ode to Risk Taking

Harvard Business School Professor Tom Nicholas adds some new insights into the history of venture capital in general and the role of the Silicon Valley venture capitalists in particular. The story has been told many times before, but Nicholas adds some new insights. Especially interesting is his view that the 19^th Century whaling industry operated in a similar manner of venture capital today where specialized agents booked the captains and the ships and received funding from investors willing to take a chance for a big payoff. Just as today the agents were experts in their field and were very active in recruiting talent and what is most interesting the level and pattern of returns in 19^th Century whaling was very similar to that of the recent history of venture capital.

Nicholas also discusses the all-important role of government, first as a purchaser of high technology equipment and second in creating legal structure that enabled pension funds to invest in venture capital and allowing carried interest gains to have favorable tax treatment for the venture capital promoters. He also discusses the now forgotten role of government sponsored small business investment companies that both created an interest in venture capital and developed executives who would go on to bigger and better things.

He is quite good at describing the early roles of Georges Doriot’s American Research and Development who hit it out of the park with its $70,000 investment in Digital Equipment (later worth $350 million) and such Silicon Valley greats as Arthur Rock and Tom Perkins. He highlights the key mantra of the Silicon Valley venture capitalists as “people, technology and markets.”

Where he goes astray is that either some of his numerical examples of the gains achieved by the venture capitalists versus the market as whole is wither not clear or may even be wrong. He also shines on the huge investor losses taken by public investors as a result of the 1990’s bubble. The VC’s were hardly innocent in this process. Further he doesn’t really go much beyond 2000 to gives us a picture of where venture capital is today. To me it seems most VC’s are chasing asset-light software and although they talk a big game on green technology they are not really there. Why? Green technology especially carbon capture is extraordinarily capital intensive. Lastly Nicholas has to make his obligatory pitch for more gender diversity in the industry.

Simply put Nicholas has given us a good history, but it could have been better.

For the full amazon URL see: https://www.amazon.com/review/RH523PJHU6QL1/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv