Short Description: Since at least the medium-term success criteria for a GP will be mark-ups from future rounds of financings lead by other firms in portfolio companies, one can choose to optimize for investing in companies that will likely be fundable. This involves paying as much or more attention to other minority investors’ sentiment and […]
Read the postShort Description: An investment strategy, where you pursue lower-risk/lower reward investments. In baseball, the analogy is not to “swing for the fences” with a lower probability chance of making a lot of money, rather have a high probability of making money on each investment. It can impact the investment sectors, business plans, financing strategy, valuations, […]
Read the postShort Description: Mindset is similar to a majority ownership PE-style investor. In this approach, the CEO/founder works for the investor and should fully report on a regular basis. Details of the CEO/founder’s execution should be subject to review at any time by board members/investors and they should not move forward with projects, capital allocation decisions, […]
Read the postShort Description: In the Cofounder pattern, a venture firm identifies a market need or a technology and recruits, key members of management, to make it happen. This approach is more common in life science investing or with research coming out of a university. It also happens in Venture Studios with technology businesses. Benefits: Being willing […]
Read the postShort Description: A mental model of the company side of a GP position. First is sourcing or seeing the companies as it is not a given in a private market that the set of investments will be available to all. Second is choosing which investment you want to make. Third is being able to make […]
Read the postShort 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 […]
Read the postShort 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 […]
Read the postShort 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 […]
Read the postShort 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 […]
Read the postShort 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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