Foreword

The venture capital industry went through a wild cycle in the late 1990s. Since its early beginnings in the 1950s, venture capital was really a cottage industry compared to investment banking, for example. There were only a relatively small number of firms devoted to early stage technology investments. The investment level, allowing for inflation, was stable.

The dot-com fever struck like a lightning bolt. The "new economy" revolution was on. If you didn't "get it" you would fall by the wayside. Money came pouring into venture capital and novices in the field created many new firms. Angel investors and Incubators became the rage.

To paraphrase Alan Greenspan, "irrational exuberance" prevailed. Then the bubble burst. Gone are the Angels. Gone are the Incubators. At Sequoia Capital, my partner, Michael Moritz, coined the term "B 2 N". We are all familiar with "B 2 C" or "B 2 B". "B 2 N" stands for Back to Normal. It will take some time for the excessive amounts of money raised to be invested. Unfortunately, much of it was used to shore up ventures that should not have been financed in the first place.

In 2002, many new firms (created in 1999 and 2000) are closing their doors and the trend is accelerating. We are also seeing established funds reducing their size from over 1 billion dollars to a more manageable $700 or $800 million. The same phenomena happened, on a smaller scale, in the mid-1980s.

"Back to Normal" has different meanings for venture capitalists and entrepreneurs. For venture capitalists, it means that the era of quick return is gone. Companies need to be nurtured, management teams must be assembled, and business plans and strategies must be developed. In other words, the business of venture capital is to build businesses and venture capitalists must go back to that first principle.

For entrepreneurs, it is important they understand that their interests are lined up with those of their venture investors. The goals are the same: build a successful company measured by revenue, profit, and cash flow. Eventually, the investment bankers will come knocking at the door.

This is why From Concept to Wall Street is an important book. It offers a wealth of information useful to the inexperienced as well as the experienced venture capitalist. The new entrepreneur will find it to be an indispensable tool at every stage of the company's development.

In my opinion, "venture capital", or, for that matter, "entrepreneurship" cannot be taught.

Successful venture capitalists go through an "apprenticeship." One needs experience to evaluate business plans, find the strengths and weaknesses of founding teams, build Boards of Directors, and participate in the development of the Company's strategy; in short, build an enterprise with the founders.

Entrepreneurship is not taught. One is either an entrepreneur or one is not. On the other hand, entrepreneurs need to inform themselves before and during the launching of their enterprise.

In both cases, this book will provide useful and thoughtful answers.

Pierre R. Lamond
Menlo Park, California, July 2002