BUSI 200

Accounting

BUSI 465 Tasks

BUSI 465 Tasks

Reading Assignment 1

In Progress

Jan 24, 2021

BUSI 200

⁠

Notes

1/1/2020

Topics

Topic 1

Topic 2

Notes

1/3/2020

Topics

Topic 1

Topic 2

Notes

Assignments

Reading Assignment 1

Paragraph 1 - What was the most interesting fact you learned from the reading?

Yale endowment method

As an undergraduate student, I found it super interesting to learn how Yale University strategizes its endowment to ensure they have enough liquid funds for the short and enough illiquid funds for the long term. I was surprised to learn that Yale allocates over 16% of its funds to venture capital. I have the perception that universities are risk averse entities (the opposite of what VCs offer). Considering Yale needs at least 7.25% gross returns, it makes sense why Yale has invested in riskier and higher growth VC funds. I am even more shocked that they had returned 77 percent annually over 20 years. Considering they are a non-profit and will not be taxed for their gains, these are ridiculous returns. As one can expect, tuition is a very common topic for an undergraduate student, especially when these private universities have “billion-dollar endowments.” This overview of Yale’s endowment has given me a greater appreciation for what it takes to fund and grow a university.

Paragraph 2- What was the most unexpected piece of advice?

at bats per homerun

VC isn’t for every business

Perception plays a huge role in successful startups and VC

Considering venture capital is a fairly established industry it was unexpected to learn how much public perception influences venture capital decisions and the success of startups. For example, Kupor describes how his company LoudCloud had raised at a $820 million valuation. Despite this great valuation for such a young startup, the only fact people saw was that they did not raise $1 billion like their competitor did. Even if LoudCloud only needed to raise $120 million, perhaps it would have been more beneficial to sell more equity, so that employees (current and potential ones) had enough confidence in the business. I also found it shocking that valuations are as much fact as they are emotional decisions. Kupor sites that a founder can raise at a much higher valuation (sometimes higher than they should be) if they generate enough competitive offers from various VC firms. With so much money at stake, I was not expecting so many qualitative data points to influence decisions. The lesson I have learned is that entrepreneurs must have great emotional intelligence because, at the end of the day, they are convincing people to give millions of dollars to the business.

Paragraph 3 - How do you plan to implement what you learned from the reading in your life?

understand incentives of other parties

Although I may not be creating my own startup and looking to raise funding anytime soon, I will be joining Figma, a high growth design tool startup, as a software engineer in August. As a future employee of this startup, I am eager to predict when Figma will exit, whether they want to be acquired or IPO, and how the trajectory of the company will affect the timeline of my career. While many of these questions are difficult to answer, I can employ one of Kupor’s most important teachings that I need to understand the incentives for everyone involved in the business. When I talked with the Figma recruiter, they claimed they are shooting to IPO at some point, but I took this with a grain of salt because GPs may be more incentivized to push for an acquisition and liquidate their investment as soon as possible At the same time, an IPO provides unbounded returns for both the investors and founders, so perhaps an IPO is the most likely option. In the latter case, Kupor claims that startups have been staying private between 7-10 years, so it seems that Figma will not IPO for at least another 4 years. There are obviously lots of uncertainties in any startup, but understanding how the GP, LP, and entrepreneur relationship is structured will allow me to make more informed decisions about how long I should stay at Figma.

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