Let me caveat that there is no right answer. The purpose of me sharing the below is not to convince you one way or another. Literally, just food-for-thought. Maybe it’ll inspire new perspectives you may not have considered before.
The below is a collection of thoughts I’ve heard from LPs in the last few weeks. Some may conflict with others listed below.
- If anyone uses the word “largest” or “biggest” in their event description, the event is automatically ignored. The pursuit towards quantity maximization leads to the perception of quality minimization.
- The sourcing of every select deal in the data room / pitch deck seems to triangulate around:
- (a) I knew this founder for a long time
- (b) I used to work with this founder
- (c) The VC who’s leading this round is someone I used to work with / knew for a long time
- Yes, there are others. But the majority of featured deals seems to fall in the above 3 buckets. Relationships are king. Even for hot rounds Series A and before, founders seem to be only letting in people they know.
- Lots of discussion threads floating around with GPs asking their LP base if they should do a hot, exclusive deal that’s off-thesis (ie valuation and off-sector are the primary reasons). Of those who are doing these off-thesis deals, building a plan on when to sell seems to be a prescient conversation. Doesn’t happen all the time, but more than once.
- A surprising number of LPs I meet (mostly US based) know what MCP is + named seed deals. AI is what everyone’s talking about even for non-VC-focused LPs. Or maybe I shouldn’t be surprised ’cause my parents who’s not in tech ask me about AI deals too.
- AI sentience is a thought that is hovering around. Also large acqui-hires. LPs have started putting together a bingo card of names of who will be the next VP AI / Chief AI Officer at a Fortune 100 co.
- Past DPI doesn’t matter in underwriting EMs. Early DPI also doesn’t matter. VC is a power law business where the majority of returns are generated in years 9-15. Funds are also underwritten to be 15 years. “If you’re investing in VC and want early DPI, you’re in the wrong asset class.”
Note: Funnily enough, am in some group chats where there are some really heated debates on early DPI and DPI at fund term. No right answer. - Families who invest in EMs invest in outliers. Most decks look the same. Problem/market opportunity. Fund strategy. Track record. A few testimonials. Etc. If you want to stand out, your deck has to look different from every other one. Very different.
Note: I know many fund of funds, endowments, pensions would prefer the exact audience. All in all, know your audience. - Your job as a GP is to find a needle in a haystack. And if that’s the JD, bring a magnet. What do you do/stand for that attracts great founders to come to you? How are you spending time fishing and farming, instead of hunting?
- Don’t underestimate the value families can offer you and your portfolio. LP relationships, potential customers, G1 offering advice on how they built an enduring business, etc.
- Organic wisdom is learned through experience. Synthetic wisdom is learned through “textbooks” — reading, podcasts, books, blogposts, conversations on other people’s experience, and theoretical discussions. When shit hits the fan, the one with organic wisdom reacts faster and more acutely. Those who have only gained synthetic wisdom either are slow to react or forget to react properly in stressful situations altogether. Naturally, investors often prefer to invest in people with organic wisdom.
Photo by Samantha Fields on Unsplash
#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.
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The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.