All Things VC - November 23' Edition

Tweets, nuggets & more

Articles & Posts

Ed Zimmerman - FOR LPs/GPs in VC: DPI Analysis of Some Seed VC Funds in Our Portfolio Now in “Carry”

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🧵 FOR LPs/GPs in VC: DPI Analysis of Some Seed VC Funds in Our Portfolio Now in “Carry” | Ed Zimmerman | 49 comments

🧵 FOR LPs/GPs in VC: DPI Analysis of Some Seed VC Funds in Our Portfolio Now in “Carry” We (Betsy Zimmerman & I) posted a 🧵 arising from discussions with VC fund managers (GPs) & the limited partners (LPs) who invest in them (we’re personally LPs in >100 VC funds + another >100 through First Close Partners) about expectation for early DPI from seed & pre-seed funds. (DPI = "Distributed to Paid In Capital" - i.e., cash $ back to LPs). Generally, it takes 7 or more years from vintage (the 1st time the VC fund calls capital) for seed/pre-seed VCs to really return any meaningful cash to LPs. This is part of why the asset class rewards "patient capital" & impatience is a mismatch for this asset class. TLDR: VC should NOT ever be thought of as a "get rich quick" strategy. VC, at its best, should be a "get rich slowly but together (with founders, execs, etc) & build big" strategy and, for sure, that requires patience for LPs and GPs alike. 🧵here: https://lnkd.in/eUBhpGk7 For our analysis, we sorted >100 VC funds in which we’ve personally invested over the last decade+. We filtered for stage (logically, growth funds should return $ to LPs sooner than seed funds). We focused on our top performing seed & early stage VC funds, which are already “in carry” (they’ve returned >1x the capital LPs gave them, so now the VCs get an extra % of the “profits”). The above Seed/Early VC funds are among our best performing from a small group in the earlier years of our LP investing (so it's a significant % of our portfolio of seed/early VC funds in that time frame). But the cash on cash wasn't meaningful until year 7 or 8 at the earliest and the inception of that period predates the phenomenon of "Private IPO Rounds" (see Tomasz Tunguz & Josh Kopelman on this topic in 2014/5, which I teach in my VC class Columbia Business School) https://lnkd.in/evPDigkq As Josh Kopelman wrote:"What stood out most was 231 companies raised >$40M in growth rounds in 2014 alone,while ~240 VC-backed IT companies IPO'd in the last 10 yrs...Astounding. I don’t think we’ll fully understand/appreciate the impact of “private IPO” phenomenon for another decade." I think he's right - but if we're not patient with the capital we expressly allocate to seed/pre-seed, we'll be pressuring VCs to sell low (into a down market) rather than allowing them to continue to grow & wait out the cycle. Sure there's risk, but VC is not risk free, nor should VC ever be thought of as a "get rich quick" strategy. We’re not opposed to selling some of a position along the way (esp. opportunistically). We've done that & some of our best performing VCs have too. That is, however, a very different strategy from LPs pressing GPs to push everything to DPI in the first 3 or 4 yrs of a seed fund. | 49 comments on LinkedIn

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Gokul Rajaram on young VC investors being disenchanted with venture

Saanya Ojha on deal velocity and tough the market environment

Samir Kaji on unwinding of the peak times in VC will take time to sort through

Reflections on Completing Five Years in Venture Capital

How Family Offices Are Taking the Reins and Skipping the VC with Dave Sachse

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CHARLES HUDSON

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- The Big Reset in Seed to Series A Graduation Rates is Real and Permanent

Letters to a Young Investor: Reid Hoffman

Nihal Mehta - Top 10 tips on how GPs can fundraise effectively in this market

Pushkar Singh - Power Law in Venture Capital

Saanya Ojha on deal velocity

Sisi Song - Founders are putting off pitching VCs

SiftedEU - ‘EU’s AI act could kill our company’

Akash Bajwa - risk curve asymmetry at seed is profoundly different to that of growth investors

Nathan Beckord - Should Founders Receive a Monthly Salary?

Akhil Paul writes on

Verdis Investment Management

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TechCrunch - For VCs and founders, building in public is about filling the top of the funnel

Michael Jackson - Europe needs an overhaul. Root and branch.

Chris Harvey on disclaimers & legal review

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Is 'Unicorn' Sounding More Like 'Dinosaur'?

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Tough VC choices

Samir Kaji - The ZIRP period skewed people’s expectations on venture

What graduate majors have a higher likelihood of “producing” a unicorn?

The venture capital industry is bleeding out from excess and misappropriation. ​

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What percent of startups make it from Priced Seed to Series A?

Investing in small VC funds vs. large VC funds. ​

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A GP’s View on VC Fund Performance (When It’s “Early”)

Do established managers outperform emerging managers?

Driving High Performance Corporate Venture Investment Committees

Brace yourself for a surge in acquisitions.

Evaluating the Risks in Secondary Investments

What does it take to IPO in 2023?

Finding from crunching through 20,000+ founders and pitch decks.

Is there’s a ‘reasonable case to make’ that the job of VC ‘doesn’t exist’ in a world of AI-powered two-person startups

Founder splits

The VC industry needs to rip up the playbook and start again

News & Reports

State of European Angels 2023

State of Private Markets: Q3 2023

PitchBook - US VC Valuations Report

PitchBook Analyst Note: The Seed Blip

PitchBook - Germany Market Snapshot

PitchBook - PitchBook Private Capital Indexes

PitchBook - Europe VC funds jump ahead of US counterparts over 12 months

European VC Valuations Report

PitchBook - US investors favor UK for overseas VC deals

Ilya Strebulaev on Alumni Networks in Venture Capital Financing

Sapphire Ventures - Outperformance: The Power of Power Laws – Which Investments Generate the Greatest Venture Returns: Enterprise or Consumer?

finpeers - Filling the gap between Venture Capital and Private Equity

A Data Driven Guide to Fundraising as an Open Source Founder

UK VC Investment

Venture Capital is an asset class that follows the power law in almost every sense.

Going Your Own Way — Defying Pattern Recognition of Venture Capital Managers

What's the difference between Rule 506(b) and the Marketing Rule?

Compensation trends report - The European tech industry in 2024

Report on non-allocation to VCs

Will AI support startup valuations

2024 is going to be far worse for startup shutdowns

Melinda French Gates: ‘It’s time to change the face of power in venture capital’

Unicorns - fewer than 1% of them are generating $1 billion in both revenue and cash ​

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Drop in median secondary price from last priced round

Failure Museum

Podcasts & Videos

Ed Sim talks on 20VC podcast

David Weisburd’s discussion with

Tracy Fong

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of

Albourne

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on role LP consultants play in the ecosystem, and how endowments access emerging managers

Jamie Rhode on how to drive the most meaningful returns in early-stage venture as a LP

How Benchmark Thinks About Venture in 2023

Special LP roundtable: What LPs are thinking about in Venture with Beezer Clarkson, Chris Douvos, and Guy Perelmuter

Raja Doddala, Head of VC at Churchill ($47 Billion AUM) on How LP’s Should Diligence GP’s

How 2023 Has Reshaped the Landscape for VC Firms with Winter Mead of Coolwater Capital

EUVC - Key Insights on The State of the Secondaries Market & How To Win

EUVC #248: Ben Topor on Growth & Secondaries Investing & The Beauty of Flexible Mandates

Why You Should Be Wrong and Alone | Chris Douvos | Superclusters

Reverse Engineering Venture Capital - Marcos Fernandez, Founding Partner, Fiat Ventures