The Mystery of Venture Capital

Victor W. HwangT2 Venture Capital, Kauffman Fellows

Class XIIWorld Bank STI Global Forum * December 10,

2009

Money is everywhere. But money is not the same everywhere.

Thanks to Endeavor Egypt

HIGH-IMPACT ENTREPRENEURIAL

CAPITAL

Hernando de Soto focuses on legal structures, but this is only part of the picture.

The U.S. has strong laws throughout all 50 states, so why does venture capital thrive only in some parts of the U.S.? The mystery must be deeper.

Where Does Entrepreneurial Capital

Really Come From?

?

… $ ≠ entrepreneurial capital

?... failure of efficient markets

theory

?… we can do better than luck and

prayer

The Secret Art of Venture Capital

Venture capital is learned through apprenticeship.

Venture capital operates in a highly-networked community.

Venture capital is dependent on human qualities more than transactional structures.

Venture capital must compete in a global marketplace today.

Barriers to Growth

Thanks to Endeavor Egypt

Plantation Rain Forest

A different approach to economic growth…

In a rainforesttemperature, humidity, precipitation, sunlight,

soil/nutrients, other flora/fauna

In a startupcapital, entrepreneurs,

laws/norms, ideas/inventions, talent, markets

Our View of the Innovation Landscape

Innovation is complex– Serendipity happens– Regions that can quickly mobilize critical resources –

including capital – around opportunities will succeed economically

– Critical mass of diverse assets

You can’t have clusters of technological innovation without social and behavioral change

Networks that cross professional and social boundaries play a key rolePeople are the most important IPFailure can be a positive metricCommercialization is a ‘body contact’ sport

Differences Between Venture Capital and Ordinary Capital

• Trust-based, high transparency, and integrity in motivations

• Win-win, not win-lose

• Relationship first, transaction second

• Guidance, mentorship, experience in building companies (“return on involvement”)

• Personal counseling

• Access to the rest of the ecosystem: strategic relationships and critical know-how

The Mystery of Venture Capital?

One possible solution…

Kauffman Fellows

Venture Corps

– Empowers and educates a generation of venture leaders in emerging geographies

– Connects talent in emerging regions to the world’s ecosystem for talent, ideas, capital, markets

A unique venture program that activates a global ecosystem…

… While Tied to the World’s Best VCs and Entrepreneurs

The Society of Kauffman Fellows consists of 500 venture capitalists in 180 funds, managing $80 billion in 28 countries around the world

A Global Venture Ecosystem

Venture Corps Network• Build a global family of interconnected VC

funds in emerging geographies • Sponsored new talent in the Kauffman

Fellows Program• Global training/mentoring programs by

industry leaders• Hands-on work to catalyze new startups

a highly interactive “neural network” for sharing resourcesVenture Corps HQ

• Office at Kauffman Fellows, the world’s leading venture network

• Superior access to the world’s best VCs and entrepreneurs for mentoring and collaboration

• Global summits to share deals, trends, expertise, talent

ContactVictor W. Hwangvictor@t2vc.com

Thank You