SOMERS, N.Y. – In this era of startups and new businesses popping up almost daily, there’s never been a better time to learn the language of venture capital.
But for those would-be business owners who don’t know an angel investor from an angel food cake, Kenneth M. Freeman has got you covered.
Working with veteran venture capitalist Leonard A. Batterson, Freeman – who co-owns Halston Media, the parent company of this newspaper – has co-authored “Building Wealth Through Venture Capital,” a how-to guide that is designed to help both investors and entrepreneurs navigate the landscape of investing in new business ventures and point out what pitfalls to avoid.
“The book was actually [Len’s] idea,” Freeman explained. “It’s a way of educating prospective investors and entrepreneurs about what venture capital is about and how they might be able to participate successfully.”
The book draws on the two men’s 35-year career experience, Batterson working in venture capital, where he worked as a founder or early investor in several billion-dollar-plus companies such as AOL and Cybersource, and Freeman in marketing, where he served as the vice president of corporate marketing development for Nabisco, as well as the North American president and CEO of Taylor Nelson Sofres Plc, which was the world’s second-largest marketing research company at the time.
“Len had written a book about 30 years earlier that was somewhat groundbreaking at the time,” Freeman said. “It was more written for entrepreneurs in terms of how they would go about finding venture capital money, the process and how it works, et cetera. He thought about it and said, ‘Gee, wouldn’t it be great to write something now that provides counsel for both sides of the relationship, both investors and entrepreneurs?’”
Originally, Batterson and Freeman had thought about hiring a professional writer to take their ideas and translate them to the page. However, the more they got into the process, they found that having a third party involved was somewhat diluting the message and getting in the way of the story they were trying to tell. The solution was simple: write it themselves. This proved to be a fortuitous decision, as both men brought something different to the table that gave the book both a wider perspective and deeper insight.
“Len’s perspective in writing the book was as a career venture capitalist, and he’s an attorney as well, who has had tons of success and experience in the industry,” Freeman said. “And my perspective was of someone really fairly new to the industry. I’ve been working together with him for about three years now and I really came to it initially as an investor. Our first contact since we graduated business school in the early 1970s was when he was soliciting my interest as an investor. That was the perspective I brought.”
Freeman noted that the writing process was a smooth one, enhanced by the different personalities and temperaments of its two writers.
“Despite being an MBA and an attorney, he is extremely intuitive and creative,” Freeman said. “He has ideas about and understands technologies and technological advances as they’re emerging in a range of fields. He can wax eloquent on what he thinks will be coming in the next 10 or 20 years. And I tend to be pretty left-brained, logical and linear, and that really helped to take the story and lay it out in a way that the reader can understand.”
The book aims to guide people through the somewhat daunting world of venture capital by outlining how, despite the inherent risks, the potential for success is too great to ignore.
“When you look at startups and early stage venture capital, 80 to 85 percent of ventures will fail and, for most of those, investors will lose their total investment,” Freeman said. “It’s a risky asset class, but on average, the returns are outstanding because you do have 15 to 20 percent that succeed, and some of them succeed dramatically and pay back to investors 10, 20, 30, 40, 50 times their investment. So what that says is that, on the one hand, while the risk and the uncertainty is greater when investing in the early stages, the opportunity for gain is also greater because you’re buying in while the venture is valued at a lower price.”
One of the things the book cautions is to be on the lookout for the so-called “unicorns,” which are companies that are, at least on paper, worth more than $1 billion. A good example, he notes, is Uber, which is valued at around $68 billion based on the latest round of funding.
“People who invested in Uber early will come out making plenty of money,” he said. “The issue is that, over time, as their valuations, what investors are valuing the company at, go up over time, you can get exuberance in momentum that pushes those prices too high. In the case of a company like Uber, the price is almost assumed that everything will work out OK, but in real life, everything doesn’t work out OK! In the past year, Uber has had to retreat from China, they just indicated in The Wall Street Journal that they had to join forces and take a minority share in a joint venture with a similar Russian company that was actually leading the market in Russia. So you can see all these places where, yeah, they might have a viable business, but it won’t be as robust as what people thought in the very last rounds of fundraising.”
Now that the book is out, Freeman says that the purpose for writing was somewhat twofold.
“A part of the motivation for the book was altruism, educating people and educating entrepreneurs as well,” Freeman said. “Showing them they can get access to money and how they can manage it. And a part of it is also meant to help us to make people aware of the firm that we’re working to build now, called VCapital.”
An online venture capital firm, VCapital leverages not only Freeman and Batterson’s vast experience, but the combined experience of an entire team of professionals designed to make the most of anyone’s early-stage venture investment opportunities. “We really got the firm off the ground this year,” he said. “And it would be great if people reading the book recognized what we’re up to and understand what we’re saying and perhaps turn to us.”
“Building Wealth Through Venture Capital,” by Leonard A. Batterson and Kenneth M. Freeman, is currently available on Amazon and other book stores. For more information on VCapital, visit vcapital.com. For more information on the book itself, visit http://book.vcapital.com.