David Teten

MARCH 14, 2018

We particularly help companies in winning revenue from our LP network and raising capital for subsequent rounds from top-tier late-stage investors. HOF Capital provides hands-on support through our in-house team, plus a network of outside mentors who work with portfolio companies on an as-needed basis.

Private Equity 60

Private Equity Venture Capital Equity Cofounder 60

This is going to be BIG.

OCTOBER 12, 2020

I took my last LP meeting the first week of March and clearly, I didn’t close anyone that I had met with at that time. One just got a seed term sheet for twice the valuation I put in at in the pre-seed and the other is doing $200k/month in revenue. Not everyone produces LP money with the snap of a finger—not even Alan Patricof.

LP 136

LP Technical Review Software Review Valuation 136

The Equity Kicker

MARCH 19, 2012

The LP Update Meeting. I’m just back from our semi-annual update to the LPs in one of our funds, and I thought I would share the experience with you all. We have around a dozen LP update meetings a year across our four funds and they are the most important moments of contact we have with our investors.

LP 97

LP Europe Portfolio Private Equity 97

David Teten

AUGUST 21, 2019

Or should they look to one of the new wave of Revenue-Based Investors? Revenue-Based Investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. For more background, see Revenue-Based Investing: A New Option for Founders who Care About Control. But should they? Aligned incentives.

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

Both Sides of the Table

JULY 23, 2014

At the other end of the spectrum large funds have gotten even larger in the past few years which has massively increased the amount of consolidation in our industry as 66% of LP money into venture is now concentrated in late-stage or full-cycle VCs. Unprecedented revenue growth + companies staying private longer =. Why is this?

Technical Review 398

Technical Review Venture Capital Valuation Pre-Money Valuation 398

David Teten

JANUARY 21, 2021

This essay is part of a series on alternative VC: I: Revenue-Based Investing: a new option for founders who care about control. II: Who are the major Revenue-Based Investing VCs? III: Why are Revenue-Based VCs investing in so many women and underrepresented founders? IV: Should your new VC fund use Revenue-Based Investing?

Equity 78

Equity Revenue Cofounder Colorado 78

View from Seed

OCTOBER 11, 2022

I made over a dozen angel investments and a few investments in VC funds as an LP, expanding my focus to new geographies, sectors, and stages. Simply put, we can flex our check size from $400K to $4M to invest anywhere along the pre-traction to post-revenue spectrum — an abnormality and an advantage in today’s market.

North America 156

North America San Francisco Cap Table Cofounder 156

Both Sides of the Table

JUNE 29, 2014

I saved it mostly for LP discussions that I had over the past year. Time to massive revenue is the most compressed in history due to scale and Deflationary Economics. This year an associate from Upfront Ventures – Glenn Poppe – helped me pull together more information about how our industry is changing.

Venture Capital 362

Venture Capital IPO LP Jordan 362

Both Sides of the Table

SEPTEMBER 1, 2016

If a company has significant revenue you might value it based on some industry multiples but WhatsApp had very limited revenue. What’s an LP to do in deciding which funds to invest in? Because VCs tend to “mark to market” for private investments so you would often value a company based on the last financing. We can’t know.

LP 264

LP Jordan Cofounder Limited Partner 264

VC Adventure

MAY 5, 2022

Traditionally LPs have viewed this as positive. The fund is investing profits, the LP is paying fees on what effectively becomes a smaller fund (in my example above, if the fund invests 110% of the fund, LPs were actually paying a 1.8% Both were valued at greater than 50x revenue (one was, I think, 70x revenue).

IRR 116

IRR Metrics Valuation LP 116

David Teten

SEPTEMBER 23, 2017

Jaime Hildreth, Managing Director of GP and LP Strategies at Ipreo , informed us that 97% of Ipreo’s GP clients report that data requests from LP’s have increased over the past two years. Yet, according to my own surveys, a majority of private capital funds (including funds that specialize in fintech!)

Private Equity 60

Private Equity Venture Capital Equity Technical Review 60

Both Sides of the Table

MAY 23, 2012

Thomson Reuters data shows that around $10 billion of LP money went into VCs per year pre bubble. By 2000 the total LP commitments had mushroomed to more than $100 billion. LP contributions to VC firms shrunk from 2000 and by 2005-2008 had stabilized to around $30 billion per year. The Funding Problem.

Venture Capital 347

Venture Capital Technical Review LP Mobile 347

Both Sides of the Table

OCTOBER 14, 2015

I spoke at Michael Kim’s excellent annual Cendana VC/LP conference today. But like many companies over the past five years it hired aggressively and probably had some degree of straying off of a core strategy and some amount of excess jobs relative to its current revenue forecasts and opportunities. Here’s my take away.

Burn Rate 150

Burn Rate San Francisco Private Equity LP 150

YoungUpstarts

NOVEMBER 18, 2018

Your team, including a knowledgeable patent attorney, will This not only creates a revenue stream, but also ensures that there is an on-going process of adding additional intellectual property to the original patent, creating a perpetual licensing income stream. and Alarmforce LP, SkyBell Technologies, In August Home Inc.,

Intellectual Property 157

Intellectual Property Forecast LLC Acquisition 157

David Teten

DECEMBER 3, 2019

Tim Friedman, Founder, PE Stack , said, “If I could offer one piece of advice to today’s managers, it would be to take the time to understand the demands of the modern institutional LP. We are also seeing technology evaluation as an increasingly important part of LP operational due diligence. See their blog post on multiples.).

Technical Review 78

Technical Review Software Review Analytics Private Equity 78

David Teten

MARCH 2, 2013

Moreover, VC funds on average earn approximately 2/3 of their revenue from fixed fees. He surmises that LPs aren’t buying the argument that large funds don’t perform. Just think about it: if the fund size never expands, the only way for new LPs to enter is if others drop out. But why would any LP ever drop out of such a fund?

LP 114

LP Securities and Exchange Commission Silicon Valley Venture Capital 114

Both Sides of the Table

MAY 24, 2021

It has historically been the case that VCs would rather fund the promise of 100x in a company with almost no revenue than the reality of a company growing at 50% but doing $20+ million in sales. The Valley has obsessed with a quick up-and-to-right momentum story because we were thought to live in “winner take most” markets.

Venture Capital 363

Venture Capital LP Valuation Later Stage 363

Bryce Dot VC

FEBRUARY 9, 2016

4 of them have double their revenue or, in a few cases, significantly more than doubled revenue, since we kicked off the program 9 months ago. Half of each day is dedicated to getting updates on from teams on highs and lows they’ve experienced and revenue reporting for the prior quarter. We just wrapped up our 3rd Indie.vc

Los Angeles 40

Los Angeles LP Bootstrapping Revenue 40

Rob Go

JULY 9, 2012

Now, as an LP, you just have to be comfortable being a concentrated investor in a small fund to put a meaningful amount of capital to work, but a number of LP’s have been showing more comfort in doing this recently. 5% ownership is quite good in that situation! With no rules, you essentially have no strategy.

LP 53

LP Institutional Investors Early Stage Venture Capital 53

Bryce Dot VC

APRIL 28, 2016

As an aside- the discrepancy here is likely due to definitions: Andy defines a “good deal” as one that generates over $100M in revenue, Eileen defines them as companies valued at $1B or more. Given a universe of 60,000 investments, these “good deals” make up only.07% 07% of total deal.

Silicon Valley 40

Silicon Valley LP Term Sheet IPO 40

K9 Ventures

OCTOBER 10, 2017

The first time I used the words “pre-seed” (yes, the initial use was in all lower-case, but then became upper-case over time) was on June 27, 2013, at the K9 Ventures LP Meeting. Seed is the new Series A. (~$2M used get for building product, establishing product-market fit and early revenue). Where did the term Pre-Seed come from?

Seed Stage 82

Seed Stage Finance Later Stage Equity 82

Bryce Dot VC

NOVEMBER 19, 2012

That said, we’ve seen a parallel trend wherein the vast majority of LP capital is being consolidated to a handful of the top firms who’s bar for follow on financing is incredibly high. As a seed investor, we’ve always leaned towards larger rounds in favor of giving our founders at least 18 mo of runway with no revenue.

Seed Stage 61

Seed Stage LP Incubator Venture Capital 61

Both Sides of the Table

JUNE 29, 2011

The LP Community Hasn’t Yet Caught Up. As I’ve started to get to know the other side of the VC industry lately (the people who invest in VC funds or “LPs&# ) one thing has occurred to me. My best guess is that new LP funds will be set up in the future to service Micro VCs. I think some will do this.

Venture Capital 296

Venture Capital Software LP Early Stage 296

VC Cafe

APRIL 29, 2020

Many of these businesses operate in the digital realm and have seen limited impact on revenues – some have even seen their revenues explode VC Backed Startups and PPP: Do You Really Need It? Israel – 500M NIS to cash strapped startups. On the health front, there are signs of recovery.

SBA 124

SBA Technical Review Startup 124

Altgate

MARCH 8, 2009

Growth stage investors are usually the Series B or C investors who come in when the product is in the market but there is little or no revenue and the team is probably in the 20-something range with the goal to ramp it up to 40-50 employees with the new money, build out a sales team, etc. “dry powder&# ) and $1.5 Also, the $1.5

Later Stage 34

Later Stage Early Stage Venture Capital Portfolio 34

Both Sides of the Table

MARCH 3, 2013

In a discussion I had with Fred Wilson at the Invesco LP meeting Fred said the same about the influence of Clayton. ” No royalty paid until there is revenue. I have written about Deflationary Economics (one of my most read posts ever) & The Innovator’s Dilemma before. Then there is a royalty rate.

Bankruptcy 403

Bankruptcy Offshore Liquidation Preference Balance Sheet 403

Both Sides of the Table

MARCH 30, 2016

If you want to see what was on my mind – I started foreshadowing change publicly in October 2015 with a forecast of what I expected in 2016 VC funding markets at a presentation I gave at the annual Cendana VC/LP conference hosted by Michael Kim. CMRR (contracted monthly recurring revenue) grow 100% y/y. FOMO was NOMO.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

Hunter Walker

FEBRUARY 25, 2018

One consistent LP complaint I hear about new’ish fund managers is that they forget a bunch of fund construction and portfolio modeling decisions are connected. “What did you change about Homebrew III to better fit ‘seed phases’ versus seed rounds ?” a fellow VC asked me after my previous post. That’s a great question!

Product 82

Product IRR LP Seed Stage 82

conversionxl.com

FEBRUARY 4, 2014

For Brookdale – a community for senior citizens – sticking with video would have cost them $108,000 in monthly revenue. Research shows that businesses who increase their brand advocacy by 12% see an average of 2X revenue growth. So its clear that how important LP’s are. Why go through all the trouble?

Analytics 98

Analytics Software Review Conversion Video 98

Austin Startup

JUNE 26, 2019

You might notice what’s not on that list above: revenue, investors. No revenue isn’t always a problem for venture-style businesses; no investors + no revenue = challenges for most founders without tremendous self-funding. However, we also discovered key challenges we could not overcome with the capital and window of our team.

Silicon Valley 54

Silicon Valley Startup B2C Sweat Equity 54

This is going to be BIG.

SEPTEMBER 7, 2012

I know, because those people all used to pitch me as an institutional LP back in the day. In the late 90's, it wasn't surprising that companies with no revenue that were funded at 100 million dollar valuations didn't survive. Sure, when those periods hit, they hit bad, but most of the time, they hit the poorly prepared companies worse.

Later Stage 99

Later Stage Down Round Pre-Money Valuation Early Stage 99

Hunter Walker

MAY 2, 2016

I’ve written before about our LP meetings – if you want to check those out before hearing about 2016’s version, here you go: Homebrew Annual Meeting 2014. Homebrew Annual Meeting 2015. Ok, now back to present day. We Don’t Trust The Numbers (Yet) But We Trust Our Founders. So what do we know?

Advisory Board 48

Advisory Board LP Institutional Investors Portfolio 48

Hunter Walker

MAY 2, 2016

I’ve written before about our LP meetings – if you want to check those out before hearing about 2016’s version, here you go: Homebrew Annual Meeting 2014. Homebrew Annual Meeting 2015. Ok, now back to present day. We Don’t Trust The Numbers (Yet) But We Trust Our Founders. So what do we know?

Advisory Board 48

Advisory Board LP Institutional Investors Portfolio 48

abovethecrowd.com

APRIL 20, 2016

A high performing, high-growth SAAS company that may have been worth 10 or more times revenue was suddenly worth 4-7 times revenue. One response from the LP community might be to demand commitments from new funds that prohibit inside-led rounds and cross-fund investing. The same thing happened to many Internet stocks.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

K9 Ventures

NOVEMBER 30, 2008

The LP perspective. Institutional LPs typically diversify their portfolios by investing in multiple asset classes. LPs have invested in Venture Capital because as a class venture capital is both a high-risk, but high reward asset class. Venture is just one of the asset classes they invest in.

IRR 48

IRR Venture Capital LP Early Stage 48

K9 Ventures

DECEMBER 10, 2011

Take two companies doing the same thing, having similar technology and I’ll bet that the company that’s located in the Valley will be 10x the size, or 10x the revenue, or whatever other success-metric you want to apply. Likewise if you’re an LP, you have to make sure you have reasonable exposure to Valley investments.

Silicon Valley 124

Silicon Valley San Jose Portfolio Cofounder 124

K9 Ventures

DECEMBER 10, 2011

Take two companies doing the same thing, having similar technology and I’ll bet that the company that’s located in the Valley will be 10x the size, or 10x the revenue, or whatever other success-metric you want to apply. Likewise if you’re an LP, you have to make sure you have reasonable exposure to Valley investments.

Silicon Valley 112

Silicon Valley San Jose Portfolio Cofounder 112