Roberto E. Ponce Romay’s Post

#Founders, the venture capital world is complex, and sometimes, it brings out the worst in people. At Wisdom Partners, we strive to shed light on the dynamics within the industry and promote a culture of awareness and integrity. 📢 Explore this article from NFX on how VCs can sometimes lose their way: https://lnkd.in/gA2jGrwa In line with this, check out our blog post, where we explore what VCs are and aren’t, and how to get the support you need: https://lnkd.in/gr9xytsj #startupdevelopment

It’s a generational mindset virus guys. 10 to 20 X plus ROI is an impossible value proposition for most to bridge the gap years building recurring revenues. Go back to Professor Scott Galloway basics 2/3 of the traditional IPO market when your venture is ready for capital is going to be inaccessible. We need to keep grinding on restructuring how VC works with angel as with lower buy ins, have mechanisms to distribute risk, focus on product research and development excellence and rid ourselves of this toxic old school convention talking about money (and it’s classical excess) is somehow rude. Small to mid sized growing start ups in software much less specialized journalist / screenwriter / producer teams in our trade can’t allow these business models to continue. It’s at our economic peril for an incumbent management classes gain to continue controlling what they think is going to get market capture. Macro philosophy basic 30 years of tech bro conduct put us here, including the serious stuff like driving the debasement of the dollar with how the fed is operating. Your finance strategy matters as much as your product and software.

🌍 Mastering Exits in VC! Here are some reflections from today’s fireside chat with EstVCA Chair Kaari Kink and Creandum General Partner Staffan Helgesson held at EBAN - European Business Angel Network Congress in Tallinn. 🙌 How to navigate the environment of lack of exits and liquidity: ⚪ If you’re an LP, dividing your investment ticket over 2-3 funds might make sense to diversify and not depend only on one fund’s returns. ⚪ The 3rd fund is the hardest to raise so there might be pressure on the second fund to push for exits and show returns. It’s important to understand that this industry is about riding the winners and not backing out too early. ⚪ Often the best returns come several years after the initial 10+1+1 year fund term so fund managers and LPs should expect a longer holding period, even as long as 18 years, and not get stuck on numbers on the paper. ⚪ That said, selling parts of your position in later-stage rounds and recycling the capital as well as providing LPs with some liquidity is a reasonable strategy. ⚪ It helps to be transparent with LPs at the start that the fund holding period may be longer to ensure good companies can grow to exits. Equally, it helps if you don’t ask LPs to pay for the “overtime” but get approval for holding the positions. ⚪ When it comes to companies that are not obvious winners in the portfolio, it’s important to ask tough questions. Mainly, is this company a complete platform or a feature? If the latter, it might make sense to be part of someone else’s offering and merge. ⚪ The one principle Creandum always promotes is to involve a professional banker: “I have never seen an exit where not including a banker gets you a higher price”. ⚪ Times are never as bad as u think, better times come faster than you think. European landscape is still relatively early in its development but there’s much reason to stay bullish. ⚪ The biggest mistake angels and VCs can make is throwing good money after bad money. When the startup struggles to raise the next funding, it’s a strong sign from the market and you should strongly consider if committing more capital is the way to go. #exits #vc #ebancongress

Most LPs in syndicates look for 3 things when investing... but it is NOT how you gain the largest return on your investment. I lead the Red Beard Ventures syndicate which has over 4,300 LPs and has done over 215 investments to date. There are three things I have realized over the past few years that LPs look for: 1. Tier 1 Investors: a16z, Sequoia, Founders Fund, Kleiner Perkins, Index, Bessemer, etc. 2. Traction: at least $1M ARR, or some type of signal for product market fit 3. Later-stage deals: over the past year I have seen more LPs interested in later-stage companies as they are closer to a liquidation event than earlier-stage companies But, after looking through our investments there are 2 things I have realized about companies that have the largest mark-ups... - The biggest markups often come BEFORE the "signal" from top-tier firms. - Our Web3 / Blockchain-based companies currently have the highest mark-ups compared to other frontier tech deals we have done as there is an additional path to liquidity... tokens. There is something to be said about investing early, even if it means taking on more risk. As an LP and investor, you have the chance to invest at the ground floor and potentially reap outsized returns. So, my advice? Don't just follow the crowd. Develop your own investment thesis and back the companies that truly excite you, even if they're at the idea stage. The risks may be higher, but so are the potential rewards. #vc #venturecapital #investing #earlystage #angelinvestor

Smart insights from Ihar Mahaniok at Geek Ventures. Often, investors ask for a lead because of lack of conviction or a way to kick the can and buy some time. They aren't able to, or don't want to do the legwork to get to conviction on their own (it takes a lot of work!) but if they can feel confident in another firm's diligence and conviction (they have to have a really good and clear reputation) then they would be willing to co-invest. But also the runway thing Ihar details below is real. I have seen some investors overcome that by making a commitment but part of the terms of their wiring is for them to hit a certain milestone to funding in order to mitigate that risk.

General Catalyst is working on a new $1 billion continuation fund #GeneralCatalyst, one of Silicon Valley's largest #VC firms, is reportedly working on launching a continuation fund worth between $800 million and $1 billion. This fund aims to provide liquidity options to their existing limited partners while allowing the firm to continue supporting its portfolio companies like Stripe, Gusto, and Circle. Founded in 2000 by Joel Cutler, David Fialkow, and John Simon, General Catalyst has been a significant player in backing transformative startups across various sectors. With $25 billion in assets under management as of 2023, the firm continues to adapt to market dynamics. The continuation fund strategy reflects a broader industry trend, especially amid a slowdown in IPOs and M&A activities. By offering this fund, General Catalyst provides its investors the choice to cash out or remain invested, retaining future upside potential. They've enlisted Jefferies as their secondary investment advisor to facilitate this process. The article on TechCrunch in the first comment.

Initialized Capital

Has your team ever received a term sheet from a VC, only to find out there's an expiration date? Here's a great guide on how to avoid getting stressed, and find a way to make it work for you and your venture, as well as your potential investors! https://bit.ly/435E8Z2

Why do so many VCs say "come back to us when you have a lead?" Is it because they lack "guts" or "conviction" or want to piggyback on someone's work and experience? Sometimes, yes, these are the reasons. But much, much more likely the reason is the mismatch of check size and runway (or round size). E.g., let's say a company has $50k monthly burn, and they want to raise $1M to have 20 months of runway (simplification) and enough time to get to the next milestone to raise at the higher valuation. And let's say a VC really likes the company and is willing to invest. But their check is $100k (based on the fund size, they can't do more). Should they sign and wire? If they do, the company will have 2 months of runway, and if no one else invests in these two months, the company will go bankrupt and it will be a really quick write-off for that VC. So that VC has to wait until you have at least half of the round ready before they sign and wire, to make sure the company has a chance to get to the next milestone. I also was in a situation of investing early with a small check that didn't give enough runway. Thankfully, thanks to our LPs, we were able to increase the check size over time, so now we can move in first into small rounds (when a company has low burn) - $500-700k rounds. However, if a company needs to raise $2M or $3M, our check is still too small to go first. It's useful for founders to understand how VCs operate.

Out with unicorns, in with moneymakers! VCs and government ministers obsess over the number of unicorns they have, while founders boast when their startup’s price tag goes up and rant when it goes down. But a company’s valuation doesn’t really matter — until it’s sold or goes public. As Evelina Anttila managing partner at early-stage VC Wellstreet, told me a few months back, “the valuation that really matters is the one at exit — the rest are artificial milestones to get you there.” Amy Lewin Sifted You want to exit with speed and value? #transformyourbiz #designsmarterbusiness https://lnkd.in/eFCKYyAm