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It turns out it actually takes time to build a high-growth business with differentiated intellectual property and roll out large, enterprise-class marketing solutions. I remember a few years ago people (LPs mostly) used to ask me why I didn’t have any realized returns to show. 5 years ago. The monkey on my back. ” Yup.
Any CEO worth his or her salt knows that her investors get an insane amount of emails and often spend 8+ hours / day in meetings (board meetings, pitches, partner meetings, LP meetings, corporate relationship meetings) so often email is done on the run on one’s iPhone or in the early morning / late evening.
At the other end of the spectrum large funds have gotten even larger in the past few years which has massively increased the amount of consolidation in our industry as 66% of LP money into venture is now concentrated in late-stage or full-cycle VCs. Why is this?
At the Upfront Summit in early February, we had a chance to have many off-the-record conversations with Limited Partners (LPs) who fund Venture Capital (VC) funds about their views of the market. LPs See The Over-Valuations and Don’t Like It. All isn’t completely rosy in the LP views of the venture industry.
The famed business strategist Michael Porter described a set of successful general strategies which firms employ to achieve a sustainable competitive advantage: differentiation strategy and cost leadership strategy for those firms with a broad market scope, and a segmentation strategy for those with a narrow market scope.
I counsel first-time VCs (as well as founders) to have mid-funnel strategies to get from first LP meeting to close and to put a disproportionate amount of time into this area (I say more about this on the podcast starting at timecode 27:41). And again, just like in enterprise sales, this is all about differentiation ?—?what
You’ll never have the staying power to commit when things get tough or to get really good and build real differentiation if you just keep jumping to the next new thing. I can tell a story looking backwards why our LP base was carefully constructed. You can’t just start chasing the shiny new thing every moment something new arises.
Question : How do generalist PE funds differentiate and get in the advisers list? Question : How do PE funds differentiate in the LOI phase? Zubin Avari, Charter Oak Equity LP Christopher A. Charter Oak Equity LP Fee at close Part of management fee Part of carry. How do they prioritize and assign responsibilities?
You’ll never have the staying power to commit when things get tough or to get really good and build real differentiation if you just keep jumping to the next new thing. I can tell a story looking backwards why our LP base was carefully constructed. You can’t just start chasing the shiny new thing every moment something new arises.
You’ll never have the staying power to commit when things get tough or to get really good and build real differentiation if you just keep jumping to the next new thing. I can tell a story looking backwards why our LP base was carefully constructed. You can’t just start chasing the shiny new thing every moment something new arises.
In 2018, the 8,000 active private equity funds globally had a 15 to 16 percent annual performance differential between top and bottom quartile funds. Thus, many LPs have outsourced their investment management processes to professional investment consultants (ICs). Two degrees of separation. .
If Acme Ventures III, LP invests in Startup X then typically Acme Ventures IV, LP would not. 1) LP Bases Change Over Time – Most healthy VC firms tend to have stable relationships with the limited partners investing with them. Or public policy changes may force GPs or LPs to end longstanding relationships.
” I hear, read, see examples every day of investors espousing differentiated theses with regards to why they exist. And why a LP should give them theirs. .” “We invest in diverse founders.” ” “We invest with social good in mind.” Why a founder should take their dollars.
I hypothesized that, “Perhaps a contrarian statement in this environment: but even though there’s been a dip in fund size due to broad economic factors and LP appetite, it wouldn’t surprise me if the truly top firms raise even larger funds over the coming decade.” Local brewers = geography matters.
For example, Ashley’s background in marketing and comms (across B2B and B2C) differentiates her from many other emerging managers.] Having a strong POV also helps with finding… LP/GP fit. You just have to find LP/GP fit, or the folks who are in the market for your particular POV. Your portfolio is your brand.
Obvious caveats to my POV here, most specifically: exposure is limited to largely the US/SiliconValley ecosystem, driven by our own portfolio, my friends and co-investors, the funds I’m a LP in, and our institutional LP relationships. Lower performing VCs will disappear faster and new entrants will differentiate themselves.
Areas of interest: crypto, climate, deep tech, India (& any truly unique/differentiated strategy) Must focus on pre-seed/seed, ideally < $20m fund size. The first is the fund that you would ideally raise if LP capital was not a constraining factor. Or an LP wants to anchor the fund, but asks for a large piece of the carry.
The secret is to find your Niche – that is, the initial customer segmentation / product differentiation combo that enables you to beat your more established, mature competition with a much crappier product. Actually, this is quite far from the truth – in fact, you can be incredibly mediocre and still be quite successful.
An addition to the portfolio typically offers some differentiation or new value proposition. We have a preference for strong local teams in certain geographic regions or those focused on underserved sectors and inefficient markets.
Cindy Revol, Joe Beard and Anurag Jain from Perot Jain, LP We received a warm welcome from Trey Bowles when we first came to Dallas and there have been many others who have opened their arms to us since. Perot Jain, LP is an early stage venture capital firm founded by Ross Perot Jr. Ross Perot, Jr., About Perot Jain, L.P.
As a result VCs who didn’t want to only compete on price began looking for ways to differentiate their money from the money of other investors and started deploying the strategies listed above. The GP-LP structure used by most funds is a brake on innovation here too. Entrepreneurship is becoming more science and less art.
Well if the “why buy anything” is testing whether you’re even compatible with a VC, the “why buy me” has got to be extreme differentiation. But if you’re looking for something differentiated in your portfolio I think we’d be a great fit. why buy me? why buy now? VCs see companies all the time.
One of the first things I did when I joined the venture asset class as a lowly institutional LP analyst in 2001 was to build the VC fund cashflow model. After factoring in price and mortality rate (risk), every stage's investor would be trying to get a return that satisfies their LPs--and I think that's the same across all early stages.
Recent growth in digital social networks has served as a reminder on what differentiates our species. Maybe it is the soft crackle of an LP record that has enabled vinyl LP sales to increase year on year for the past 19. Suburban living improved living standards, but standardised everything and everyone.
So LPs are looking for a combination of “established top tier” and “new managers with differentiation.” This is key because in a permanently low-interest-rate environment parking large pools of capital in assets that benefit from interest is not possible so LPs seek “higher yield.”
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