41–The Evolution of Venture Capital–1 of 2 - a podcast by Bertrand Schmitt & Nuno G. Pedro

In this episode, we will go in-depth into the evolution of Venture Capital, including its History, the business model, process and operating model, and what its future holds.

Navigation:Intro (01:34)
Section 1: History of Venture Capital (01:59)Section 2: The Business of VC (15:27)
Conclusion (19:54)Our co-hosts:

Bertrand Schmitt, Entrepreneur in Residence at Red River West, co-founder of App Annie / Data.ai, business angel, advisor to startups and VC funds, @bschmittNuno Goncalves Pedro, Investor, Managing Partner, Founder at Chamaeleon, @ngpedro

Our show: Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture newsSubscribe To Our Podcast



Intro (01:34)Nuno Goncalves Pedro

Welcome to Episode 41 of Tech DECIPHERED. In this episode, we will talk about the evolution of venture capital. We will start it with its history. We will discuss the business of venture capital, what is it all about, and we will go into the process of venture capital. How do venture capital firms and funds actually operate? Finally, we will talk about the future of venture capital, the immediate future and the more long term one. How will it change?Section 1 - History of Venture Capital  (01:59)

Nuno Goncalves PedroMaybe starting with history. Venture capital actually goes back a long way. Obviously, we always like to go back to Second World War, the military complex in the US going full throttle, a lot of IP being generated, a lot of really useful things for defense that could be applied to the mainstream markets. In some ways, that's the beginning of the history of Silicon Valley and the beginning of the history of venture capital at scale with public-private partnerships, grants and money from government, technology transfer into areas that were ultimately areas that went fully outside of defence and into normal markets, so to speak.

Nuno Goncalves PedroBut actually, venture capital goes back even further. Venture capital and high risk projects go back to, for example, the time of discoveries, the time of trading by boat. Actually, that is where the term carried interest comes from. It is carried interest. What happened was the boat owners were going to take merchandise from one place to the other. Because a lot of these missions and projects had a lot of risk to them, not only they got paid to do it, but they also got paid in kind to do it with carried interest. They would keep some of their carried interest. That's how the term carried interest really comes into these high risk profile projects.

Nuno Goncalves PedroVenture Capital is a very high-risk endeavor, or a higher risk endeavor than normal. Its history starts around World War II with private-public partnerships.

Bertrand SchmittI feel that between the age of discovery and World War II, there might have been the age of whaling in the US, from what I understand. Nuno, you want to say a few words on this?

Nuno Goncalves PedroYeah. It goes back to whaling. It goes back to all these endeavors and projects and shipping. The military complex really expands it into private markets, so public-private partnerships, getting money into it. We started having, in venture capital, actually, early days, there was a lot of East Coast players in the market, which were more coming from the banking angle to it, just pushing into it.

Nuno Goncalves PedroThen we started having, because of a lot of aerospace defense projects happening around California and in California, there was a migration to players that were more, I would say, businessy, less banking. Some of the early VCs in this market, people like Pitch Johnson, Bill Draper, the granddaddies of us all. Bill was involved in a firm with Pitch. I think that was one of the original firms, if I recall correctly.

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