The Basics of Venture Capitalism

By Nathan Moorman

UCLA Anderson’s Entrepreneur Association kicked off their Venture Capital Speaker Series with a talk by UCLA Anderson Lecturer Jon Funk, founder of Ocean Road.

Funk, a professional venture capitalist who’s worked in Southern California since the 1980s, has invested in dozens of companies and openly admits to being a “paid member of the Dark Side,” as he puts it.

While students snacked on pizza, Funk dove into the origins of venture capital and its growth on the back of innovation in electronics, along with a broad overview of what venture capital is. He went into the effects of the dot-com boom and its huge, negative effect on venture capitalism — from which it’s only just now recovering.

Funk talked about what it’s like to work in the industry, emphasizing how important it is to look for good people when picking companies to invest in. He firmly believes that “venture capital is about investing in people” and that if the company has a strong team, it will come up with a good business hypothesis. He also said that there’s a choice that CEOs must frequently make when dealing with investors: control versus profits. According to Funk, company leaders have to decide whether they want to keep control of their business and potentially limit profits or court investors who take away some of that control in order to make money.

Although venture capitalism can be lucrative, Funk also explained that opportunities are very limited and the industry is highly relationship-dependent. According to him, the two primary paths to being a venture capitalist are through academia or professional experience in startups but, in the end, it’s about knowing the right people.

To cap off his talk, Funk shared a couple of his personal experiences in the industry. He recounted the stories of his company’s most successful investment and its biggest failure while walking the audience through the reasons behind each outcome.