@itaidamti Im just surprised how infrequently these topics come up.
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Dan Kimerling
12K posts
Dan Kimerling
@dkimerling
Founder + Managing Partner @Deciens; Lead Investor, @chippercashapp @GlacierGrid @Funding_U @treasuryprime & many other fintechs. 💍 to @jojonojojo
Albuquerque, NM Katılım Ocak 2008
999 Takip Edilen6.4K Takipçiler
@itaidamti I think its more about the norms, than any specific instance. What creates runway in one context can deplete it in another.
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A question I've been thinking about: should startup founders manage potential burnout in their team / reports?
What's your opinion?
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@dkimerling True, though real non-consensus is sadly a pretty rare breed these days
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So many LPs obsess over finding EMs that can lead. But leading usually means you won a competitive process, which also means you've lost some and gotten adversely selected on others. There's nothing wrong with writing collaborative checks and not being forced to either win the lead or walk away.
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Another one of the dumber heuristics I was trained on early in my career: be suspicious of GPs who seemed too motivated by money. Fancy cars and big houses, red flags apparently.
Turns out the managers I most want running my capital are the ones who want to get filthy rich.
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Everyday I read a lot of funding announcements.
This is my periodic reminder that raising capital is not winning. Raising capital is a tool to help companies win.
Don't confuse the cart for the horse.
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@milesgr_ Yep it’s true, sadly what LPs want and what is actually best for GP returns aren’t often the same thing. All comes back to incentives.
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People love to rag on solo GPs while simultaneously underestimating how hard partnerships are.
So many VC partnerships seem to be formed around "we can raise more money together" rather than "we invest better together."
Investing is hard enough, and doing it with a partner adds another layer of complexity entirely. The number of partnership splits in recent years is a good reminder of just how hard it can be.
For a partnership to work, 1+1 really needs to be >2.
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Career risk may be one of the most under appreciated forces in VC.
Especially on the LP side.
A surprising amount of the venture market’s behavior starts to make a lot more sense when viewed through the lens of allocator incentives.
Dan Gray@credistick
You would be forgiven for thinking that the companies which raise the most from VCs are surely the most important and promising of their generation. Unfortunately, most are failures. A portfolio of the top 10 would be at –120.5% today, relative to the S&P 500. The more capital a firm manages, the more it selects for scalability and market signals, rather than any deeper qualities or outlier potential. This is a result of the top-down incentives from their own investors; careerist allocators who only really care about reliable IRR on large pools of capital. Fundamentally, the goal is no longer to "back great founders", but to find the most dramatically scalable vessels to consume allocation. So, growth is pulled from public markets, where fees are a mere 0.05-0.7%, into private markets where they are a more lucrative 2%. This much larger fee layer essentially becomes a tax on innovation. The 5 largest VC firms extract more than 10x the management fees they used to, despite a clear weakening of the venture market over that period. None of this improves until the market realises it's clearly dumb to apply the same compensation structure to radically different scales and strategies.
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imo a lot of new founders don't understand the LP-GP dynamic well (i.e. that LPs keep GPs in business, and GPs are expected to pursue strategies they sold to LPs when fundraising). This usually leads to the following sequence of events:
> Fund-fundraising is very hard (I may take crap for this, but fundraising is the only task I think is harder for a GP than a founder). GPs simplify their job of selling their product to LPs by pitching the "hot" thing (e.g. AI), and inventing some narrative about how they are uniquely positioned to acquire the best positions in the "hot" thing (there is already pre-existing allocation interest in the "hot" thing)
> If you sold your LPs "access" to the hot thing, and the market becomes wholly irrational (like it is currently), you're basically stuck having to choose either: 1) overpaying for a "hot" company (questionable long-term DPI strategy) or 2) keeping discipline and passing (but with the risk that your LPs give you short-term crap — read: threat to your n+1 fund — for missing out on the kind of access you sold them on)
Most GPs here will optimize to not have short-term pain (i.e. overpay) and kick the can on returns down the road with (imo, unsubstantiated) platitudes like "what if it's the next Facebook?"
(this also means there is no room for your weird, non-AI startup in their portfolio btw)
Dan Gray@credistick
To quote @skupor: “Sins of omission are worse than sins of commission. It’s okay for a VC to invest in a company that ultimately fails, that’s par for the course in this business. What’s not okay is to fail to invest in a company that becomes the next Facebook.” This becomes a real problem for small and emerging managers if their proposition to LPs is access to consensus-type opportunities. They end up with a dilemma; to face scrutiny for overpaying, or even greater scrutiny for missing out on seemingly obvious winners. There's also real systematic risk in tying a fund to a particular category where the window of opportunity may close at any moment. Deal-by-deal SPVs are one answer, but that approach amplifies venture capital's principal-agent conflicts as GPs pass most of the risk to their LPs. In truth, it's probably just not a strategy that small and emerging managers should pursue. The scaled venture platforms, on the other hand, are relatively price-insensitive, and can pay up when required. Enjoyed chatting to @arian_ghashghai of @EarthlingVC about this, and many other topics, in the recent episode of Going Solo. Links below.
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i've accepted for a while now that ballooning AUMs in VC structurally require the constant need for a bubble (or framed more diplomatically, high-growth industries that require endless capital)
however, I underestimated that AUMs have gotten so large that we need to create 3 bubbles simultaneously to satisfy deployment cycles (LLMs, robotics, space). I did assume all of these 3 would go through some bubble event before 2030 (one narrative leads to the next) but the timeline compression is mind-boggling
once again, unsure how this experiment plays out but doesn't feel like a good idea
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Being right about a technology ≠ making money from it.
People who bought Amazon at the peak of the Dotcom Bubble waited 10 years to break even. Cisco buyers waited 24.
Timing is the variable most investors underweight and most founders under-plan for.
deciens.com/press-and-insi…
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@Firmcap @kevinhartz @ncsh @pitdesi @mattturck @semil @ileri @cyantist @chrija its BTV... and @iamjakestream is the legit one ;)
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Proven GPs and future legends in the making
A* @kevinhartz
Adjacent @ncsh
BTC @pitdesi
Firstmark @mattturck
Haystack @semil
Hummingbird @ileri
Long Journey @cyantist
Point Nine @chrija
Colin Gardiner@ColinGardiner
Who are Tier 1 VC funds? (updated) Sequoia Benchmark a16z Founders Fund Khosla Accel Lightspeed General Catalyst NEA Kleiner Perkins Index Thrive GV USV Bessemer Greylock First Round Insight Contenders / rising stars / sector-dependent: Menlo Craft 8VC Sutter Hill Conviction Elad Gil Neo Eclipse HF0 Ribbit Lux Redpoint Forerunner Coatue Still not ranking them, and sector/stage matters a lot. This reflects comments from my last post. Who is still obviously missing or in the wrong spot?
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@patrick_oshag Have you read the Dungeon Crawler Carl series?
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Anyone read anything really great lately (any format)?
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This will end poorly
Jeff Weinstein 🇺🇸@Jeffreyw5000
As I was saying about venture's Nifty Fifty moment...
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@dkimerling @iPaulLee Loyalty isn’t an option, it’s the whole point
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Hearing more stories of GPs dropping early LPs after success to “upgrade” their LP base in later funds.
If you do this, you suck.
Those early LPs took real risk on you and your success was only possible because of them.
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@wolfejosh Have you read his unpublished bio of Don Valentine?
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Legendary @sequoia VC Mike Moritz published maybe his most important book ever.
A life and family story.
This opening hit me hard.
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@kwharrison13 In our second fund, we have 4 positions over 10%
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Pop quiz. Who can guess the most concentrated venture fund I’ve seen in a long time?
One fund has three 10% positions. Another has 60% invested in just two companies.
Kyle Harrison@kwharrison13
Heat Seekers vs. Truth Seekers in Venture Capital
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I’ve made this point so many times, yet people seem to be surprised and/or don’t believe me
Dan Gray@credistick
It’s insane that this still needs explaining. Venture capital is not efficient. There is virtually no correlation between funding and outcome even up to Series A. Heat is mostly just bidding away returns.
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