Short Description:
- Mindset is similar to a public market-style investor in that focus is on the selection of the right investment without emphasis or belief in post-investment portfolio company support.
Benefits:
- Avoids the trap of thinking you are the management of the companies and therefore focuses you on picking good management that can accomplish the mission without your help.
- Focuses the VC team on the deal selection which is arguably where much of the valuation creation in VC is. While some may be able to add value in other ways, those areas can at times distract the GPs from enough focus on deal selection
Trade-offs:
- Can create a hands-off relationship with founders that may appeal to some but not all of them.
- Can miss opportunities for adding value
Examples:
- Perhaps some of the actual public company investors who have come into late-stage private market?
- Perhaps some of the hedge funds that start VC arms?