Johann 'Hansi' Hansmann’s Post

Founders rightly focus on impressing the VC in front of them. But, it's crucial to understand that these VCs themselves answer to those who fund their funds – Limited Partners (LPs). Most founders don’t get it, but LPs expectations and demands shape what VCs fund. .. I thought, it would be good to cultivate more discourse on the subject. Thus, I sat down and penned some thoughts around the common perceptions versus the often-murkier reality. .. Myth 1: "LPs Just Want Outsized Returns" While true, it's more nuanced. Time horizons, risk tolerance, and the desire for positive impact alongside financial gains vary greatly between LPs (pension funds vs. family offices vs. endowments etc). The VC fund's strategy needs to align with who's backing them. This directly impacts which startups even get serious consideration. .. Myth 2: "LPs Are Out of Touch with Startup Reality" Some are, but with the rise of institutional LPs, you often have ex-founders or sector experts calling the shots. This can be a double-edged sword – deep insights, but also potentially narrower focus on replicating their own past success vs. truly disruptive bets. .. Myth 3: "It's All About the Big Exits" Consistency matters. LPs want a portfolio approach, not just home run swings. A fund stacked with 'unicorns' but too many duds is less attractive than steady, if less headline-grabbing, returns. This impacts how aggressively VCs push for exits that may not be in the founder's best long-term interest. .. What does all of this mean for the founders? -> Research the VC's LPs. Are they aligned with your sector/stage? A mismatch means wasted effort, even with a supportive partner -> Managing Up: Strong founders build relationships with LPs, not just 'their' VC. This creates allies when tough decisions (pivots, down rounds) loom -> Tailor the Narrative: A sustainability-focused pitch won't land as well with a fund backed by an oil magnate. Highlighting the path to consistent profitability alongside the 'moonshot' potential shows you get the broader game .. This is a power dynamic rarely discussed openly. But, I really feel that understanding the VC's 'bosses' helps you strategize wisely from your first pitch onward. .. And if you need any help when fundraising, our fab investment banking team at Dexter Capital Advisors is always there to help. Reach out at devendra.agrawal@dextercapital[dot]in Likewise for Dexter Ventures, our micro VC arm that recently invested in Medulance and Atomgrid. Share with us what you are building at deals@dexter[dot]ventures Best, Devendra Tags: Anuradha, Jayant

TLDR: Vet your VCs just like they vet you! There's plenty of advice out there on how to attract VCs—what they look for, how to prepare, and the due diligence process. But not much is said about how founders should evaluate VCs in return. At the early stages, VC-founder fit is just as important as raising capital. Navigating the noise in the fundraising world can be overwhelming, but focusing on the right investors from the start saves time and energy that’s better spent on building your company. Here are a few key points I've learned from speaking with nearly 100 VCs, angels, and family offices over the past year: • 𝗜𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁 𝗙𝗼𝗰𝘂𝘀: Find investors who understand your sector. When VCs invest in your market, they already speak your language, making it easier to communicate your problem and solution. Plus, they may even help you tap into early sales pipelines—a benefit that can be more valuable than capital. • 𝗦𝘁𝗮𝗴𝗲 𝗦𝘄𝗲𝗲𝘁 𝗦𝗽𝗼𝘁: VCs often label themselves as "early-stage" or "pre-seed" investors, but each fund defines these terms differently. In today’s climate, where capital is tight, the bar is higher. One way to cut through the noise is to check their actual investments over the last 24 months. I use platforms like Metal.so for this. • 𝗙𝘂𝗻𝗱 𝗦𝘁𝗮𝘁𝘂𝘀 & 𝗗𝗿𝘆 𝗣𝗼𝘄𝗱𝗲𝗿: It’s important to know the state of the VC's fund. If they’re nearing the end of their fund or only have ~20% left, they’re less likely to invest in new companies. Some VCs may still take calls just to build a pipeline for their next fund, so always ask if they're actively deploying capital. • 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 𝗥𝗮𝗻𝗴𝗲: Early-stage investors often have a comfortable valuation range based on sector, stage, and market. Asking about their valuation sweet spot can prevent you from wasting time if you're not aligned. • 𝗠𝘂𝗹𝘁𝗶𝗽𝗹𝗲𝘀: Though not always advertised, early-stage VCs typically seek 10x-20x returns. It helps if you can show how your company can deliver those returns over time. If not, you may hear, "you're not VC-fundable." • 𝗥𝗲𝗽𝘂𝘁𝗮𝘁𝗶𝗼𝗻 & 𝗣𝗮𝘀𝘁 𝗥𝗲𝗹𝗮𝘁𝗶𝗼𝗻𝘀𝗵𝗶𝗽𝘀: Research how the VC has treated other founders. Were they supportive during tough times, or did they push for quick exits? Founder reviews can help you avoid partnerships that might create friction later on. • 𝗗𝗲𝗰𝗶𝘀𝗶𝗼𝗻 𝗧𝗶𝗺𝗲𝗹𝗶𝗻𝗲𝘀: Some VCs make decisions quickly, while others take longer to commit. Understanding their typical timeline helps you plan better and avoid frustration when time is crucial. • 𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗖𝗼𝗺𝗽𝗼𝘀𝗶𝘁𝗶𝗼𝗻: Check how crowded your space is in the VC’s portfolio. If they’ve invested in a competitor or have too many similar investments, they may not be as interested in your deal. These are just a few observations and insights I’ve gathered along my journey. I hope this helps make the fundraising process smoother for fellow founders. #EarlyStage #Startups #Fundraise

Angel investors, have you ever wondered how to boost your startup investment game? Learn the perks of forming investment groups and the potential rewards. 💹 Dive into the blog from SPV Hub - A FinTech Company for a clear breakdown! Learn more: https://lnkd.in/dtF3fuhr #AngelInvesting #Startups #InvestmentInsights #investmentopportunity #startupfunding

Over the next few weeks, First Avenue will present a series of blog posts about new and evolving dynamics in seed funding and financing by our Principal, Mike Goodrich. Today's post covers the post-covid re-evaluation of risk in seed-investing markets as well as how founders and investors can have more productive pre-investment conversations about risk. #startups #founders #funding #financing #seedinvesting #businessrisk #risk

Angel investors are individuals who provide seed capital to new businesses or startups, usually in exchange for convertible debt or ownership equity. They are often one of the first sources of funding that founders seek out when starting their companies. The requirements to qualify as an accredited investor, according to the U.S. Securities and Exchange Commission, are a net worth of over $1 million, excluding a primary residence, and an income of over $200,000 for an individual, or $300,000 for a couple, for each of the previous two years. Angel investing is an option for many individuals with personal wealth, but for those new to investing in startups, there’s a need for a roadmap to get started. The Business Record spoke with two Iowa angel investors to discuss what it can look like to start angel investing and the role angel investing has in risk capital.

About to raise institutional capital? Get a handle on the shapes that govern this exercise. 🔬 There are prime shapes and models in SaaS. ⛵️ When selecting ventures to build, partner with, invest in, or acquire, there are shapes in the team, financial models, growth rates, churn numbers, market position, risk profile that garner my attention. 📐 It’s not dissimilar to how the human eye and brain detects movement at the peripheral or a good stare and sees a predator looking back. 🐊 The term “well oiled machine” comes to mind. 🛩️ When all the components of a venture are in place or falling into place opportunities for scaling up emerge. This isn’t rhetoric, this is a very real phenomenon that takes a startup into the land of a scale up, and then a high growth venture. 🏗️ When you’re preparing to raise institutional capital, this push to shape your company becomes material. 🏭 Key Thinking 💭 1️⃣ Your team has to be on point, coachable, delivering results, and focussed on improving their own career trajectory while also delivering value to the whole company. 2️⃣ The products and services need to have conquered an ICP and significantly impacting the market. “One to watch.” Or “emerging market player.” It usually looks like soldiers taking a beach or a your friend beating you at Risk. It looks like an invasion. 3️⃣ Churn is pesky. That number has to be low. But more telling is that there is a very clear understanding of who the company’s buyer is and a working plan to keep them happy, prioritized, and engaged by delivering real value to them. 4️⃣ Risk is the driver under innovation. Risk capital fuels the capital plan. Risk is ‘managed risk’. Executives, board members, and advisors in particular sweat this all the time. Being comfortable with it and having answers on how your company will deal with it and assume more of it is important when raising capital. 5️⃣ Math matters. Your math needs to be solid. Your models need to clear in assumptions and flexible in the hands of investors who push and pull at the possibilities your company can unlock with capital. As I’m a huge fan of design and flare, if you can make it look fantastic when doing the above, it all goes down so much smoother for everyone involved. 🪩 I’m currently coordinating financings for a couple of tech ventures. They’re in great shape! But it took work to get them fit and ready. It’s a process. And we got it right. 🛠️ ♻️ Share with your friends raising or thinking about raising. 📥 DM me for help with your institutional financing. Learn more here: https://lnkd.in/gbUu2iph #saas #tech #finance #growth #startups #scaleups #funding #advisors

How life & personal finance pertains to characteristics of venture capital 'The Psychology of #Money' by Morgan Housel was a fun and illuminating read! Beyond offering straightforward yet actionable and crucial advice for wealth accumulation, Housel also touches on several topics on personal finance that operate in a very similar way to how the #venture industry is driven by the power law. As a VC analyst, I found the resemblance so interesting. 💡 Tail events drive the bulk of success. Conventional wisdom says that 80% of return in venture is driven by 20% funds and startups. Take Q1 2024 as an example. 53% of the total exit value generated during the quarter came from the IPOs of Reddit and Astera Labs. We see a similar pattern in the public market. The Magnificent Seven drove more than half of the gains in the mark cap of the entire US equity market in 2023. Professor Aswath Damodaran's blog post, 'The Seven Samurai: Big Tech to the Rescue!' takes a deep dive into how historically a small number of stocks are responsible for a significant portion of total gains in the public equity market. Housel shares how art collection and many other aspects of life - personal or professional - has pretty much the same mechanism. 💡 Optimism means the odds will be in your favor in the long run, but it will be a bumpy ride as we get there. Venture investors are inherently optimists. Otherwise, why would you be in the game for an asset class with such a long time span, where an average fund life is at least 10 years? This is particularly true for very early stage investors, such as pre-seed and seed funds, that invest in what they believe will redefine and dominate an industry a decade from now. But we know that venture is cyclical, too. Heavily inflated valuations will drop. Overheated markets will cool down. But following a healthy reset, the market will eventually come back. It's just a matter of time. The question is: will you survive long enough to capture gains when the market does bounce back? The famous saying goes, the market can stay irrational longer than you can stay liquid. 💡 Save for unexpected events because life can and will surprise you at the worst possible moment. Housel stresses the importance for people to save not for a particular cause (such as vacation planning or buying a house) but to prepare for the unexpected. This is in line with how startups operate. Companies go out of business when they run out of cash. Things can go wrong in a million different ways, and being prepared mentally and financially provides buffer that literally buys founders more time to work through those issues. Thoughts on the parallel between the financial markets and life in general?

According to Jason M. Lemkin, VC investors are not interested in funding SaaS businesses with average growth rates. A fund with a 15% ownership invested in a company needs to have a $1bn+ exit to make its Fund math work as many of its investments will be return 0-1x. However, there are other funding options available for venture stage businesses looking to scale that are not growing 100% year-over-year. For example, #VenturePE is a useful funding option for businesses that are growing slower than VC requirements and/or need to execute operational improvements. Depending on the circumstances, VenturePE can be a better fit than a debt-only option, especially for businesses that are burning cash and/or having challenges accessing debt capital markets. Often times, VenturePE sits along side or helps restructure existing liabilities, stabilizing and rationalizing the cap table and focused on a fully funded pathway to break-even and beyond. If you're looking to scale your business, it's important to consider all funding options available to you. Contact us MBM Capital if you're interested in exploring VenturePE options. We are actively backing businesses that have $5+ million in revenue and strong unit economics. Lauren Bonner Jonathan Jetmundsen

Why are VC secondaries struggling to take off? More importantly, is everyone missing out? "Objectively, GPs might be willing to sell their mediocre performers but not their “fund returners”. This mindset sits in sharp contrast to PE. VCs are betting it all on 1-2 startups to return the whole fund and more, while the rest of the portfolio is quasi-irrelevant. That changes secondary dynamics between PE and VC. Demand on the buyer side is timid, too. Marquee LP-stakes actors tend to focus on predictable, PE companies and aren’t as comfortable with unprofitable, risky tech companies. Potential buyers are also turned off by the scarcity of information on VC-backed companies. One could imagine a world where VCs intertrade some of their own stakes, but that doesn’t make much sense. VCs generally don’t want their competitors to be privy to their portfolio’s performance and if they really want to invest in a particular startup, they can just do so. That’s their job after all. This tepid environment is a shame because on-sale VC assets today are priced at tremendous discounts, especially compared to 4 years ago. Not all of them are good, but some of them could be gems. Cheap gems. But working in VC secondaries feels like preaching in the desert: potential buyers don’t comprehend the VC asset class and are enticed by the siren calls of high-interest rate lending. Adding insult to injury, what the market currently deems as “hot” (looking at you, Gen AI) is probably not on sale. Nonetheless, VCs’ liquidity issue remains. The many flavors of secondaries are all options to consider." Read Alexandre Covello's full Realistic Optimist piece on VC secondaries here: https://lnkd.in/gNrmyTDr

#DigitalAMN's cross-industry model spans #PrivateEquity, #RegCF, and the broader #startup & #angel investor marketplaces; couching $DATI‘s $168B TAM across Diversified Financial Services, & Entrepreneurial Support Organizations. https://bit.ly/3O584hT.