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Patterns and Models

Browse recent posts cataloging startup patterns, venture capital patterns, and mental models.

Exit: Bought Not Sold

  Short Description:  The highest prices are paid for companies where the acquirer is motivated. Some believe that acquirers will be the most motivated when they already know a company, have been interested in the product/service, and identified an opportunity for working together themselves. Therefore, the thinking goes, the company should build value, be known […]

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Exit: Dual Track Sale Process

Short Description:  A dual-track is when a company works simultaneously on conversations about selling the company completely and preparing for a financing round (or IPO or direct listing). Benefits:  Many times the best deals happen when there are urgency and a clear and attractive alternative.  If the alternative to being purchased is a clear credible […]

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VC: Grow AUM

Short Description:  Since the common economic model for VC is ~2% annual management fee and 20% of the profits, GPs have the opportunity to make more absolute dollars with larger fund sizes. Grow AUM is a strategy where GP will raise larger funds or raise funds more often in order to grow the assets under […]

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Running the Firm: Size is Strategy – Don’t Grow

Short Description: For a given follow on strategy, and the planned number of portfolio companies, the check size of an investment is almost mathematically dictated by the total fund size. In a way, the number of portfolio companies is often closely related to check size, because stage of company and level of portfolio support expected […]

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Running the Firm: Eat What You Kill

Short Description:  A compensation model common in other professional services firms where partners “own” deals that they source and are compensated largely on the results of those deals. Benefits: Accountability may spur some to greater levels of performance Attract and retain stars: some high-performing partners may be attracted to or stay for longer with the […]

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Portfolio Management: Hire Professional Management

Short Description:  The conventional wisdom used to be a founder should make way for a professional CEO once the company has achieved product-market fit. While less in favor, when a founder does not have or build the skills, relationships, and habits to run a company, they can be replaced.  Some investors and some founders prefer […]

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