This document provides an overview of venture capital investing, including: - The power law distribution of investment returns in venture capital, with the single best investment returning more than all others combined. - Moore's law driving exponential growth opportunities for exceptional startups through computing advances and network effects. - Examples of startups like YouTube and Skype that achieved massive scale despite initial skepticism. - Qualities like a balanced personality, hustle, and contrarian thinking that make for successful venture capitalists.

1. Demystifying (Ad)Venture Capital
Antoine Nivard, Associate
@antoinenivard

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In the world you and I come from…
Markowitz’ Modern Portfolio Theory

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…assumes Normal Distribution of returns

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The world of startup investing is not normal.
The Power Law in Venture Investing

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The Power Law is hidden in time
The Perceived vs Actual Power Law
Sources: Mike Maples Jr.

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The Power Law states that the single best
investment returns more than the rest of the
investments combined

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What is a VC fundable startup?
Fund size: $100M
Average term: 10 years
Expected annual return: >20%
$300M
Avg. stake / company 15%
Aggregate exit proceeds $2B!!

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VCs look for extraordinary outcomes

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In the world you and I come from…
Michael Porters’ Generic Competitive Strategies

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Moore’s Law is the biggest opportunity & threat
CPU Transistor Counts 1971-2008

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Moore’s Law states that the performance
of computing doubles every 18 months
at any given price

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…competition is for losers

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Mectcalfe’s Law states that the value
of a network is a function of the
square of its number of nodes

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Networks can have hybrid structures

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Mobile is the new scale
Sources: Ben Evans, a16z

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Start small and scale upwards

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Exceptional startups (Power Law) leverage the open
opportunities of computing (Moore’s Law) to grow
exponentially (Metcalfe’s Law)

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YouTube
They are crazy!
“ ”Mark Cuban, Entrepreneur & Investor, 2006
…about Google’s acquisition of YouTube for $1.6B

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What Skype is doing is like a toy. They
don’t realize they can’t scale it, they
don’t have a brand like the AT&T brand
nor our local footprint.
“
”
Hossein Eslambolchi, CTO, 2004

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• 1.5+ million homes
• 34,000+ cities
• 190+ countries
• 25,000,000 guests
Early 2008 Summer 2015

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Be contrarian
Sources: Adapted from Mike Maples Jr.

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What iNovia look for…

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The way we look at opportunities
Vp
Valuable
Problem
FmF
Founder-Market
Fit
PmF
Product-Market
Fit
Ua
Unfair
Advantage

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Our investment themes
Future of WorkIndustry SaaS Software-enabled Hardware

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Careers in VC

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There is no linear path

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Powerfully balanced personalities & attitude
IQ
EQHQ*
Successful VCs
Sources: 1Adapted from Alfred Lin
Personnality1 Attitude
“Lean it all” vs “Know it all”
+
Commitment
*Hustle Quotient

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A few resources
• Classic Books
• The Lean Startup – Eric Ries
• The Hard Thing about Hard Things – Ben Horowitz
• From Zero to One – Peter Thiel
• Classic Blogs
• Paul Graham
• Bill Gurley
• Fred Wilson
• Tomasz Tunguz
• Brad Feld
• …so many more out there
• Other great content
• YC – http://startupclass.samaltman.com/
• Follow VCs on Twitter

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Thank you!
antoine@inovia.vc