- 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 interests as to those of customers or eventual acquirers.
- Benefits:
- Can be helpful for early or mid-stage career GP to establish credibility
- If done well, may reduce the risk of complete losses in the portfolio
- Trade-offs:
- Does not do as much to develop or maintain independent judgment
- Misses out on the value creation in companies that are not popular at the time and later become big
- May take focus away from company fundamentals and when VC sentiment changes, the fundamentals of how the company performs will matter more
- Examples:
- AngelList funds or syndicates?
