Book · How the machine works
The Power Law
Sebastian Mallaby · 2022
A financial historian on how venture capital became what it is, and why the distribution of outcomes makes it behave unlike any other asset class.
Why it is here
Mallaby is a historian of finance rather than a participant, which produces a considerably more sceptical account than the industry writes about itself. The book traces the emergence of the model and, crucially, takes the mathematics of the return distribution seriously.
The relevance to an angel is direct: everything in our portfolio maths section — why one investment decides the result, why portfolio size matters more than selection, why the failures are not a sign of poor judgement — is the practical consequence of what this book describes.
It is also good on the industry's self-mythology, which is a useful inoculation before you read any of the first-person accounts on the other shelves here.
Read it if
You want to understand why the asset class works the way it does before deciding how much of your money belongs in it.
Skip it if
You want tactics. This is history and structure, not a manual.
What it explains