There's a book party in Kendall Square tonight to mark the publication of "Mastering the VC Game
," the first book from entrepreneur-turned-venture capitalist Jeffrey Bussgang.
was an early executive at Open Market, the pioneering Cambridge e-commerce company, and a co-founder of Upromise, an online-and-offline college savings program. In 2003, he joined IDG Ventures Boston (now known as Flybridge Capital Partners) as a partner, and last year he became an entrepreneur-in-residence at Harvard Business School, where he'd earned his MBA. Somehow, he also found time to become the first Boston VC to publish a blog, Seeing Both Sides
, and write this new book.
The book is full of advice from Boston-area investors and entrepreneurs, including Sirtris Pharmaceuticals founder (and former VC) Christoph Westphal; Constant Contact chief executive Gail Goodman; entrepreneur-turned-VC Eric Paley of Founder Collective; and Polaris founding partner Terry McGuire, who currently chairs the National Venture Capital Association. Bussgang also talked to founders of some of the hotter New York and Silicon Valley start-ups of the moment, including social games company Zynga, Twitter, and LinkedIn.
The book is honest, often funny, humble, and it doesn't rely on jargon or get too deep into the financial mechanics of VC deals.
Bussgang relates a great anecdote about his experience pitching Upromise as a potential investment to John Doerr of Kleiner Perkins, perhaps the world's best-known VC (Doerr has invested in companies like Amazon, Google, and Intuit.)
"I thought things were going reasonably well. Then, on slide 17, John Doerr went to work on us. 'What are the revenue drivers that would bring the break-even point forward another six months?' he asked... [Co-founder] Michael [Bronner] turned to me as if I should know the answer. With only a week under my belt, I froze and looked blankly back at him... John and the other partners around the table smelled fear. They asked a dozen more killer questions. We stumbled ahead as best we could. Finally, it was over." Doerr ended up investing in Upromise, although another of his partners said he was surprised that the pair "didn't really have their arms around the financial details."
Bussgang explains the sequence of meetings that can lead to an eventual investment — or not. He reveals the two phrases that VCs hear in almost every pitch meeting with entrepreneurs: "This is the only (or last) money we will ever need" and "These projections are very conservative." He also talks about an exercise called the "rock fetch," when VCs ask an entrepreneur to spend time finding other investors willing to join them on the investment (bringing them "rocks"), but then decline to collaborate on a deal with those investors ("bring us a different rock.")
The book offers a helpful range of perspectives from investors and entrepreneurs, and many of the entrepreneurs are plain about what a difficult time they've had raising money. Bussgang doesn't plaster over the tensions can arise between entrepreneurs and investors — especially when entrepreneurs aren't willing to share or hand over management responsibilities — but he's an optimist at his core. "Ultimately, the desire to have an impact on the world and the passion for innovation is what makes this magic formula between entrepreneur and venture capitalist such a special one," he writes.