View from Seed

AUGUST 17, 2021

I can tell a story looking backwards why our LP base was carefully constructed. But in a lot of ways, the things that made magic happen between ourselves and our LPs was driven by timing, luck, chemistry, and other factors that were hard to predict at the time.

IRR 136

IRR Dilution Founder Portfolio 136

This is going to be BIG.

MARCH 14, 2019

It started out with initial investment size, pricing, and outcome behavior for each deal and then it made a prediction around the distribution of outcomes. If you’re not actually modeling this out with a spreadsheet, I don’t know how you can look an LP in the face and say this. How will you provide it across 30 investments?

LP 97

LP Due Diligence Portfolio Distribution 97

Both Sides of the Table

FEBRUARY 6, 2017

WINTER For starters when we conducted our annual VC & LP survey in December of 2016 to prepare our annual Upfront State of the VC Industry report we found that twice as many VCs cut their investments in 2016 relative to 2015 with > 30% of VCs having cut investments. Unless of course something Trump’s our good weather.

Venture Capital 150

Venture Capital Saudi Arabia Kuwait Burn Rate 150

Both Sides of the Table

FEBRUARY 6, 2019

Yes, distributions to LPs have been pushed out a few years but the value capture in privates by the best VC firms (and best LPs) has been enormous. If you fast forward one generation of tech companies it’s a completely different story.

Venture Capital 292

Venture Capital IPO Mezzanine Early Stage 292

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% management fee). Some of those companies will be successful. Many will not. But not now.

IRR 116

IRR Metrics Valuation LP 116

Both Sides of the Table

MAY 25, 2013

As you can see from the chart their data suggests there are about $25 billion of VC distributions per year in the US. But as an LP you can’t count on that any more than VCs can. The goal of an LP is to get into the top decile. In 2000 our industry had more than $100 billion in LP money. Take for example Accel.

LP 374

LP Later Stage IRR Term Sheet 374

David Teten

JANUARY 19, 2021

Flexible VC creates early liquidity which can be either reinvested or distributed to LPs. Marco Cesare Solinas , VC Analyst with Blue Future Partners , said, “ From the LP perspective, another disadvantage is the lack of track record given the early stage of the concept. Early liquidity. Equity VC is a “get rich slow” business.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Feld Thoughts

MAY 28, 2014

When a fund has an exit, it can either distribute the money to its investors (the LPs) or it can “recycle it” and invest it in new and existing companies in the fund. The advantage, for all the investors (the VCs and their LPs), is that $100m gets put to work as invested capital, rather than just $85m.

Management 150

Management .Net LP Venture Capital 150

Feld Thoughts

JULY 28, 2014

On paper, only one is in positive return territory as a fund, but the SBIC leverage is a substantial negative factor for the LP investors in that particular fund. As a partner in one of the most visible VC firms in Colorado and an LP in many of the Colorado VC firms, I’ve never heard from Matthew or anyone from the SBIC.

SBIC 142

SBIC Venture Capital Colorado SBA 142

Both Sides of the Table

APRIL 21, 2020

Food production and distribution, group collaboration, remote training or education, sensor technology (tracking people movement, temperatures, etc), certain biotech deals. Harry asked me whether I thought LP “defaults” (not funding the VC commitments it made) would go up.

Marketing 263

Marketing Valuation Churn Rate Balance Sheet 263

View from Seed

DECEMBER 11, 2019

Venture is a field with a power-law distribution of outcomes. However, as we’ve seen from recent salient stories , these can be ephemeral and don’t end up mattering in the end… they’re really just approximations based on the market for buying a piece of a company’s cap table, not buying the whole thing or making it public.

Venture Capital 204

Venture Capital Cap Table Partner LP 204

VC Adventure

AUGUST 13, 2014

The data I site below is from Foundry LP StepStone. This was an internal analysis by an LP so I’m not able to release the full report but the data set represented over 3,000 companies and more than $ 20Bn in invested capital and spanning years 1971 through 2012. Quick update here.

LP 99

LP Portfolio Distribution Finance 99

ithacaVC

DECEMBER 14, 2011

Specifically, “too much” liquidation preference (I will use “LP” for liquidation preference). As most of you probably know, LP is one of the fundamental economic attributes of preferred stock that preferred shareholders enjoy. Series B round = $5mm and the Series B preferred stock is participating with a 2x LP.

Liquidation Preference 49

Liquidation Preference LP Preferred Stock Liquidity Event 49

VC Adventure

AUGUST 13, 2014

The data I site below is from Foundry LP StepStone. This was an internal analysis by an LP so I’m not able to release the full report but the data set represented over 3,000 companies and more than $20Bn in invested capital and spanning years 1971 through 2012. Quick update here.

LP 60

LP Portfolio Distribution Finance 60

Hunter Walker

MAY 18, 2015

They provide assistance to Californians in building a vibrant, successful and inclusive society, distributing more than $1.5b The James Irvine Foundation joined us in Fund I and has been a great partner since. in nonprofit grants to that extent. How could we not get up each morning excited to help that cause!?!

LP 48

LP Portfolio Early Stage Institutional Investors 48

David Teten

SEPTEMBER 2, 2017

So I would start by sharing with the fund an institutional LP due diligence checklist , and ask them to share their data room with you. If you are one of six in the LP relationship area, you will have less leverage than if you are a new hire with the only European LP relationships. – Tax distributions.

Private Equity 60

Private Equity Venture Capital Equity Partner 60

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. 11) Exit .

Technical Review 78

Technical Review Software Review Analytics Private Equity 78

This is going to be BIG.

JULY 30, 2015

One of the first things I did when I joined the venture asset class as a lowly institutional LP analyst in 2001 was to build the VC fund cashflow model. Distributions can actually be drawn out over an extended period of time, but for the purposes of this exercise, I just kept the fund to 11 years. It's what you'd expect.

Venture Capital 60

Venture Capital Pre-Money Valuation IRR Valuation 60

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

David Teten

DECEMBER 12, 2017

As a globally focused LP in early stage VC funds, we at Blue Future Partners have observed a growing trend of firms investing substantially in software tools, whether developing proprietary solutions or adopting off the shelf tools. But what tools are they using themselves to automate their own processes?

Early Stage 60

Early Stage Technical Review Software Review Venture Capital 60

VC Cafe

APRIL 29, 2020

The $349 billion aid package issued by the US Government and distributed in the form of SBA loans was quickly gobbled up by a large number of applications, many of which were from venture-backed or PE-backed startups. Source: NVCA , “Startup Ecosystem Faces Capital Crunch over Coming Months” USA – SBA Loans and PPP.

SBA 124

SBA Technical Review Startup 124

Haystack

JULY 20, 2018

While I don’t have portfolio level stats for them, their new endeavor Foundry Next (to invest in smaller funds and then follow-on into key investments) has built up an LP basket of 23 positions in a variety of new VC funds. Much of this would fly in the face of conventional Silicon Valley lore, but today are usually considered basic norms.

San Francisco 116

San Francisco Silicon Valley Seattle Venture Capital 116

Agile VC

JULY 24, 2013

I was having breakfast this morning from someone I know from the LP world. We were talking about what’s “working” in the broader VC ecosystem and this person expressed their enthusiasm that today there are a range of different models that are producing attractive returns for LPs. payday lending).

Valuation 200

Valuation Early Stage Distribution LP 200

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. Obviously that barrier has been brought down with low-cost ability to capture, stream and distribute content over the Internet. “Online education is truly going to kill us.”

Bankruptcy 403

Bankruptcy Offshore Liquidation Preference Balance Sheet 403

This is going to be BIG.

MARCH 3, 2019

This is the data of what your investment dollar distribution looks like if you’re doing the pro-rata of each of these rounds. If you’re a larger LP, you don’t have much choice to put the money to work either. They hold their cash back until they have more data, and lean in as a company is outperforming. How much do they hold back?

Portfolio 110

Portfolio Burn Rate LP Distribution 110

Austin Startup

JUNE 26, 2019

By the by, women donors, I recommend diversifying some of your capital distributions to reap that ROI to keep doing good… (+ this is a whole ‘nother blog post…) Undeterred. Do you want someone already making $12–17/hour watching your kid to make less (so a LP can make their returns…)? We boot-strapped some more. We side-hustled.

Silicon Valley 54

Silicon Valley Startup B2C Sweat Equity 54

Professor VC

DECEMBER 8, 2015

Luckily, Google was one of the 150 and did ultimately return the fund assuming the LP was smart enough to hold the stock after distribution. I was a Limited Partner in Angel Investors II (Ron Conway's angel fund) that was an investor in Confinity. At the IPO, Musk held a 14.2% stake vs Thiel's 5.6% (Sequoia Capital had 10.7%).

Merger 28

Merger LP IPO Redemption 28

K9 Ventures

DECEMBER 10, 2011

No distributed teams, no overseas teams, and definitely no companies that rely on “outsourcing” to build their core technology. Likewise if you’re an LP, you have to make sure you have reasonable exposure to Valley investments. One of the investment criteria that I set for K9 Ventures is based on geography.

Silicon Valley 124

Silicon Valley San Jose Portfolio Cofounder 124

K9 Ventures

DECEMBER 10, 2011

No distributed teams, no overseas teams, and definitely no companies that rely on “outsourcing” to build their core technology. Likewise if you’re an LP, you have to make sure you have reasonable exposure to Valley investments. One of the investment criteria that I set for K9 Ventures is based on geography.

Silicon Valley 112

Silicon Valley San Jose Portfolio Cofounder 112

abovethecrowd.com

APRIL 20, 2016

Cash distributions are what matter at the end of the day, bug big paper gains still make for good fundraising pitches. One response from the LP community might be to demand commitments from new funds that prohibit inside-led rounds and cross-fund investing. If you over-fund the industry, aggregate returns fall.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

David Teten

MARCH 18, 2021

Foundry Group, investing primarily in “ Software and Internet ”, follows six major themes, e.g., Human Computer Interaction (HCI) or Distribution. As such, there are 3 stakeholders when building a thesis: the investing Partners, the LPs and the founders. . It incorporates influences from the LP and, more and more, from the founders.

Technical Review 78

Technical Review Cofounder Venture Capital Deal Flow 78

Start Up Blog

APRIL 29, 2013

An era defined and dominated by the few who could afford the factories, the media and the distribution systems. Maybe it is the soft crackle of an LP record that has enabled vinyl LP sales to increase year on year for the past 19. But it’s here to stay and is about to replace the 200 year anomaly of the industrial era.

Uruguay 123

Uruguay Technical Review Vertical Las Vegas 123

Startup Lessons Learned

MAY 4, 2021

Can institutions be totally distributed or should they be rooted and loyal to a certain community or geography? And in this crypto algorithm, they said, well, since we're all making this distributed ledger, we now have provably unique digital items that I can send to you, Eric. Do we need more regulation in this area or less?

IPO 113

IPO Cofounder Technical Review Government 113

Hunter Walker

SEPTEMBER 2, 2022

I read them knowing the vast majority are biased narratives with a self-serving purpose — a politician promoting their city, a founder trying to attract exec talent, a VC test driving their new geo-concentrated LP pitch… Honestly, I get annoyed momentarily then just move on. Others can waste cycles debating it. Thanks Logan!

Chicago 78

Chicago Venture Capital Miami Employee 78