Understanding Venture Capital


Medium Premium Preview

Our new series takes a hard look at how venture capital works, and finds positives — and plenty of negatives.

Our latest Medium Premium series from author (and software company founder) Luke Kanies delves into the details of how venture capital firms work, from how they raise and return capital to their investors, to why the best companies tend to partner with the most successful investors, causing the gains to accumulate in the top firms. The series also focuses on venture’s lack of diversity, and argues for new approaches to fix what has become a glaring deficiency.

Kanies’ work does not pull punches. He warns founders against raising capital unless they truly understand the deal they are agreeing to: You must manage your company to grow toward a highly unlikely exit, and in doing so, you will likely run your company into the ground. Venture capital, he argues, is structured in such a way as to deliver trauma to everyone involved. After all, this is an industry built around making many bets, but expecting most to fail. The first series warns that If You Take Venture Capital, You’re Forcing Your Company To Exit, while the second piece explains how the spoils of success will keep accumulating at the top. The next installment, due early next week, examines the problem of diversity in the sector.

But all is not gloom and doom in the world of venture capital. The series will soon shift to how we might build a more open market around investment and company creation. That way, venture capital can include, enrich, and benefit all parts of the economy.

Explore the Series:

Understanding Venture Capital

Read Part I: If You Take Venture Capital, You’re Forcing Your Company To Exit

Read Part II: Why the Most Successful VC Firms Keep Winning

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