Short 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 […]
Read the postShort 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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As opposed to Double Down on Winners, this strategy emphasizes the vast majority of a VC funds capital being allocated for investments in the original investment in a company rather than later rounds after buying some ownership.
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If you believe that investing in startups has a power law of returns with a very few winners generating the vast majority of the returns, the strategy is to invest in more companies in order to increase the chances of having a true break-out winner in the portfolio.
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