Dror Futter’s Post

No one has seen more in venture than David Clark. 🧠 32 years investing in funds 💰 300 fund commitments  🚀 45 companies returned $1BN+ My 7 key takeaways 👇 1. You Can Have Fund Returners on Billion Dollar Funds  Our data found 45 investments that returned a billion dollars to the fund. Most of these have happened in the last 7-8 years. The idea that you can’t get a fund returner from a billion dollar fund is simply untrue. 2. It is OK to Miss a Good Manager You don’t have to get every great manager out there. Understand your lane, be comfortable with it. Recognize it is still relevant to deliver the expected performance from the asset class. 3. Venture Power Law and Same Names in Most of Them 1% of company exits generate the bulk of returns in the industry. These companies always have the same investors. We’d rather spend our time trying to access the best names than finding the needle in the haystack. 4. Only 1 in 50 Funds Does 5x Around 1200 funds were raised between 2000-2014. - More than 50% haven’t returned 1x capital. - 6.6% generated 3x net DPI. - 2.6% generated 5x net DPI. Venture is fucking hard. 5. Why Massive Fund Sizes Today Might Actually Be Too Small I’ve had the same conversation 15 years ago about how big funds = no returns. You have to compare fund sizes today with exit sizes in 10-15 years. Tech outcomes in 15 years will be so much larger. 6. The Best Time to Invest is in a Firm's Hard Times Even great firms go through difficult times. Succession periods, financial crisis… Current lack of liquidity is a good time to invest in LPs. They need distribution coming back to make new commitments. 7. Why The Sequoia Evergreen Fund Made Sense They only got criticisms because they implemented it when markets saw significant correction. There are several companies that continue to compound at high levels after their IPO. If you’re in those top 1% companies, you should ride it all the way. (links in comments) #founder #funding #business #investing #vc #venturecapital #entrepreneur #startup #seed #funding

Preparing a venture capital term sheet is a crucial step in the process of raising funds from venture capitalists. This is a good document from Venture Capital #Venturecapital #Termsheet

Fresh founders, if you're raising #venture #capital to fuel the #growth of your #business, here's a superb guide on how to prepare your #VC term sheet. 🧑🏫

Email Subject: “David, I just got a term sheet! How much is it really worth?” *****WARNING - The deal is not done ***** Response: Receiving a term sheet can feel like a major milestone, but its true value depends on several factors: 1. Non-Binding Nature: Most term sheets are non-binding, meaning they’re more like a handshake than a contract. It’s a step forward, but it’s not a done deal until the final agreements are signed. 2. Investor Commitment: The value of a term sheet depends heavily on the investor’s reputation and commitment. A term sheet from a well-known investor who has a track record of following through is more valuable than one from a lesser-known entity. 3. Terms and Conditions: Look beyond the headline valuation. The terms—like liquidation preferences, board control, and anti-dilution clauses—can significantly impact your company’s future. A high valuation with unfavorable terms might not be worth as much as it seems and will most likely bite you on the bum later down the line. 4. Market Signal: A term sheet can signal to other investors that your company is worth backing, which can help in raising additional funds. However, it can also lock you into terms that limit flexibility. I get emails from founders saying, "oh we have a term sheet" and they expect me to jump with joy, while actually I don't really care. 5. Due Diligence: Even after a term sheet is signed, the deal is subject to due diligence. Issues uncovered during this process can lead to changes in terms or even withdrawal of the offer. 6. Negotiation Power: The term sheet is often just the starting point for negotiations. It’s important to understand which terms are flexible and where you can push back. In summary, while a term sheet is an important step in the fundraising process, its value lies in the details and the follow-through. It’s a signal of interest but not a guarantee, so treat it as one step on the path to securing investment, not the final destination. #termsheet #startups #funding www.parioventures.com

⚫ Preparing a Venture Capital Term Sheet ⚫ This report aims to provide a comprehensive analysis of venture capital term sheets, with a focus on key provisions that impact the economics, control rights, and protections for investors. ⚫ The objective is to elucidate the essential components and considerations involved in negotiating and drafting term sheets for Series A preferred stock financing. ⚫ By examining the various clauses and their implications, this report seeks to equip entrepreneurs and investors with the knowledge needed to navigate the complexities of venture capital agreements effectively. ⚫ The process of preparing a term sheet is pivotal in venture capital transactions, serving as a preliminary agreement that outlines the fundamental terms and conditions between the company seeking investment and the potential investors. ⚫ The term sheet's primary purpose is to address major business and structural issues early on, thereby saving time and resources by either facilitating agreement on key terms or highlighting irreconcilable differences that could impede the transaction. ⚫ This report is structured to cover the critical elements of term sheets, including valuation and economic terms, control and decision-making provisions, and market-standard investor protections. ⚫ Each section delves into the specifics of these components, providing insights into their significance and the typical terms negotiated in the venture capital landscape. Awesome Guide by Morgan Lewis Stamford #venturecapital #vc #startup

A useful guide to prepare for a VC term sheet

Below easy list to learn some new (review some familiar) terminology. if you don't know just ask for an explanation please add any extras thanks Great list Murli Ravi and some great additions in the comments too

Investors use funding lingo all the time. This often confuses founders. Want to sound like an expert? Study this list of 20+ terms: ❇️Cap Table: Ownership anatomy of stakes. ❇️Dilution: The decrease in ownership due to the issuance of new equity. ❇️ESOP: Reserved shares for future employee brilliance, essential for team camaraderie. ❇️Vesting Period: Usually (not always!) four years with a one-year cliff for stock options. ❇️Pre-Money Valuation: The value before the investment alchemy occurs. ❇️Post-Money Valuation: Company value after the investment alchemy. ❇️GPs (General Partners): These are the key people managing funds. LPs provide the capital. ❇️LPs (Limited Partners): Investors in VC funds; you want them on your team. ❇️Fund of Funds: Investing in VC/PE funds, not directly in startups. ❇️Capital Call: LPs contributing committed capital as per schedule. ❇️Subscription: The investor promises to a startup/fund. ❇️Follow-On: Existing investors hopping in subsequent funding rounds. ❇️Carry (Carried Interest): GP's fraction of fund profits. ❇️DPI (Distributions to Paid-In Capital): Capital repaid to LPs vs. initial investment. ❇️MOIC (Multiple on Invested Capital): Total investment vs. LPs' investment. ❇️TVPI (Total Value to Paid-In Capital): Total fund value vs. paid-in capital. ❇️IRR (Internal Rate of Return): Anticipated investment growth rate by year. ❇️SAFE (Simple Agreement for Future Equity): Right to purchase stock in future rounds. ❇️Convertible Note: Loan that transforms to shares at a pre-established valuation. ❇️Liquidation Preference: Establishing the payment order in liquidation events. ❇️Anti-Dilution/ Ratchet: Safely adjusting earlier investors' share prices to maintain fairness. ❇️Pay-to-Play: Needs proportional involvement in funding rounds. ❇️Drag-Along: Ensuring that every shareholder sells once a certain group of major shareholders have voted to sell ❇️Tag-Along: Ensuring that you don't get left behind when major shareholders decide to sell Anything more to add to the list? #venturecapital #startups

Not all Angel Investors are finance or market savvy. But they do have a good understanding of potential and growth from their own past business experience.   Similarly, not all business founders have the financial discipline or market savvy to navigate through competition, market dynamics to make their venture a success. However, they do have great ideas.   This is where the “disconnect” occurs and most angel funds are lost within the 3 year mark in many business ventures.   You can find many angel investors who have sunk in anywhere between $50,000 to a $1 million and seen the returns dwindle away within the first 3 years. They expect a 15% to 25% return over a period of about 5 years and never attain it. When you dig a little deeper you will find that the investment was mostly an emotional one rather than a pragmatic business decision. They liked the story, they loved the founders’ infectious confidence, and somewhere along a reasonable trust was established with the knowledge of risk lingering behind and the investment was placed.   No detailed financials were discussed, and critical questions about matters such as cash flow management, any litigation risks, market challenges, competitive intelligence, the people skills of the founder, future capital requirements, revenue generation strategy, market risks etc. were never discussed or analyzed.   You can also find most of such business ventures are stuck requiring more capital, abysmal cash flow (if any), poor management skills, a stubborn founder/CEO with a know it all attitude and a hand full of litigations and lawsuits regarding payments and returns to investors. The only hope at this point is to have a Venture Fund, a Private Equity or a UHNI/Family Office will come by and either invest more or buy their failing venture. But the fact is such ventures are never considered in comparison to several, well packaged and financially brilliant opportunities that lands on their desks every week.   We work with several brilliant business founders and early stage companies with strong business potential and financial discipline on a deal by deal basis that can deliver sustained returns and seek investors who can contribute to their business with strategic wisdom.   NO FAIRYTALES NO UNICORNS info@hyperstrategies.com #startupinvesting #angelinvestors #angelinvestment #earlystagestartups #earlystageinvesting #investinginsights #angelinvestor #investmentfunds #investmentfunds #capitalraising #venturefunding

Cross-Fund Investing: Potential Pitfalls and Considerations Cross-Fund Investing: What You Need to Know Some venture capital firms invest from multiple funds (e.g., VC Fund III and VC Fund IV) to support companies. This is called cross-fund investing. Potential Issues: * Later rounds may have different valuations than earlier rounds. * Different Limited Partners (investors) in the funds may end up with different returns. * In a down situation, one fund may be disadvantaged over the other, leading to conflict. One Exception: Early-stage firms sometimes create "Opportunity" or "Select" funds to invest in their successful companies at later stages. This allows early-stage investors to participate in their wins. #StartupJourney #VentureInsights #Entrepreneurship #TermSheets #TohundGuide