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Draper responded by creating a short class in business. He expanded it when his next daughter reached the third grade, then began teaching it in his local elementary school, and finally created a non-profit organization that would formalize the curriculum and speed the dissemination of knowledge about management practices and capital formation throughout the nation's elementary schools. Volunteers now teach the BizWorld classes in about 100 California schools, and the list is growing.

The BizWorld class runs four days (would-be instructors run through a much-accelerated version in training) and is centered on the efforts of the students to make and market friendship bracelets -- the friendship bracelets that the adult volunteers in my own group had so little luck manufacturing. The kids spend four days learning about things like the differences in industrial processes (yes, the kids get to choose between setting up an "assembly line" or a "job shop," bless their tired little hands), and the fine distinctions between the jobs of the vice president of marketing and the vice president of sales. It is likely that unless their parents are themselves bankers, venture capitalists or perhaps factory foremen, they will be at least as stymied by the curriculum as the children. (In fact, Draper says that while kids tend to pick up most of the course, adults often have a lot of trouble.)

There's nothing unique about teaching elementary school kids about business in a rudimentary way. But there is a twist here: the venture capitalist.

In the real world today, there is one overriding reason venture capitalists have garnered an ever increasing amount of attention: they make a lot of money. That's what gives venture capitalists sex appeal -- or at least the kind of business-world sex appeal that leads Jonathan and thousands of bright eyed young bankers like him to thumb through their Rolodexes in the hope of finagling an introduction or two.

Every year over a million businesses are started in the United States. The vast majority are funded with personal savings. Others are funded with bank loans, with loans from friends, or as often as not with second mortgages or maxed-out credit cards. A much smaller number -- 854 so far this year, according to the research firm Venture Economics -- however, are started in a different way, the Silicon Valley way. In the Silicon Valley way, an entrepreneur with an invention, a strong resume, a brilliant new marketing plan or sometimes with just a lot of chutzpah goes to a venture capital firm and effectively sells the venture capitalist -- the first investor -- a share in the as-yet nonexistent company.

The Silicon Valley way of starting a business is of fairly recent vintage. The first professional venture capitalists started out in San Francisco in the 1950s. The biggest and best known firm, Kleiner Perkins Caufield and Byers, started in 1972. It was KPCB that first settled on Sand Hill Road, the characterless strip near Palo Alto, Calif., that -- thanks to its proximity to Stanford University and the availability of big blocks of office space many years ago (it has since become some of the most expensive office space in the U.S.) -- became the informal headquarter of Silicon Valley's "VCs."

If you were to develop a class that was intended to teach your daughter what it is that you do at work, it is likely that you, too, would feel a temptation to make yourself the hero of the enterprise. After all, it wouldn't really do for Draper, himself a professional VC, to develop a class in business that mirrors how most businesses are really started and does not include venture capitalists. So just as in the Silicon Valley game plan, right after the students in a BizWorld class have "incorporated" (paying one "KidBuck" for the privilege), the venture capitalist enters the scene.

Next page | Determining the valuation of a friendship-bracelet firm -- is it time to cash out?