Of the seven most valuable companies in the world, five (Apple, Google, Amazon, Tesla and Facebook), worth a collective $7.5 trillion, were founded on a small strip of California. There have been many attempts to explain Silicon Valley’s success, including the US university system and blend of hippy creativity and gold rush entrepreneurial mentality. But in this entertaining history, Sebastian Mallaby makes a convincing case that venture capital is a critical part of the jigsaw.
In the early decades of the computer revolution a new form of financing emerged, where an array of swashbuckling adventurers took substantial equity in unproven start-ups. Unlike traditional investing, they knew most would fail but banked on an occasional huge hit to make their fortunes. This unusual distribution — the “power law” of the title — requires an uncommon appetite for risk and a willingness to chase potential at the cost of personal dignity. One early pioneer won the confidence of the Atari founder, Nolan Bushnell, by stripping off and getting in his hot tub.
