Where Venture Capital Comes From

Venture capital’s story begins in 1957, when eight engineers at Shockley Semiconductor—later known as the “Traitorous Eight”—quit together and formed Fairchild Semiconductor. Arthur Rock and Sherman Fairchild financed the deal. That moment became the foundation of Silicon Valley and the modern startup-financing ecosystem.

The Asset Class Takes Shape

Fifty-seven years later, VC had become a defined institutional asset class.

In 2014, VCs invested about $88B in startups.

Over the next decade, that number climbed to ~$368B.

Yet VC remains a niche part of private markets.

Private markets deployed over $12T last year—venture is small, but its influence is outsized.

How Venture Actually Works: The Power Law

Venture runs on a simple truth: a tiny number of companies produce almost all the returns.

In a typical portfolio of 15 startups:

11 will fail or go to zero.

3–4 carry the entire fund, often through 10x outcomes.

To survive that math, venture capital chases markets that can sustain billion-dollar outcomes, not incremental wins.

Why VC Equity Is the Most Expensive Capital

Because of that power-law dynamic, venture investors:

Expect ~25–30% net returns

Need liquidity in 5–7 years

Take minority positions

Invest in syndicates