How to Understand and Choose a Venture Investor

Incentives matter. So understanding the incentives of venture capitalists will help you decide if raising money from a venture investor makes sense for your business.

In this first of a 3-part series, a16z Managing Partner Scott Kupor talks with Frank Chen about how venture capital works: how the money flows, what Limited Partners (the organizations that invest in venture capitalists) are looking for, what differentiates the top investors, and what all of this means for an entrepreneur raising money.

In this episode, Scott and Frank discuss:

- Why the world needs venture (risk) capital

- Where venture investors get the money to invest

- Why venture investors only fund companies with large market sizes

- When fund raising, does it matter how old a fund is (how far along in its so-called J curve)?

- Should you care how much money a specific General Partner has invested in a fund? Or whether they have governance rights as well as an economic interest in the fund?

- How do corporate venture investors have similar and different incentives from pure financial investors?

- Can't entrepreneurs just crowdsource both funds (for example, with an Initial Coin Offering), advice and connections? What useful really is a venture investor in the era of crowdsourcing?

- What are 3 ways venture investing and entrepreneurship evolve over the next 10 years?

Want to learn more? Read Scott's book "Secrets of Sand Hill RoadVenture Capital and How to Get It" ().

This video is part 1.

Part 2 of the series, "How to Raise Money from a Venture Investor":

Part 3 of the series, "How to Get the Most From Your Board":

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