Alana Ackerson

Best Investors & "The Art of Execution" Book & Study by Lee Freeman-Shor: https://buff.ly/3wRjMXU A study of 1,866 investments made by 45 of the world’s top investors over 7 years - with key Insights translated for PE Execution over ideas: - In PE, the success of an investment is heavily reliant on execution, not just the quality of the initial investment thesis - it is key to focus on operational improvements and capital-efficient commercial growth to drive value Adaptability: Be prepared to adapt strategies based on the performance of portfolio companies and market conditions - flexibility can lead to better outcomes when initial assumptions do not always hold true Operational & GTM Excellence: - In PE, operational & GTM improvements and strong management practices can significantly enhance the value of portfolio companies Active Management: Take an active (& collaborative) role as a partner to your portfolio companies and support your management teams in implementing best practices, providing strategic direction (e.g. GTM), all key to driving value Leveraging Expertise Effectively: - Utilize the expertise and experience not just of the investment team but also the PE operating partners to support portfolio Long-Term Focus: Maintain a long-term perspective on value creation - while short-term monthly or quarterly performance is important, the ultimate goal is to build sustainable, long-term value (which takes patience) in portfolio companies Performance Monitoring (using the right metrics): Monitor the performance of portfolio companies against the right benchmarks (for example, some of the elusive GTM benchmarks) - this allows for the right adjustments to strategies Risk Management: - Manage risks proactively by identifying potential issues early and developing mitigation strategies. This includes both financial risks and operational & GTM risks within portfolio companies Money Management: - Effective allocation of capital and management of portfolio companies are crucial Exit Strategies: - Plan and execute exit strategies meticulously to maximize returns. This includes preparing portfolio companies for sale or public offering and timing exits to optimize value realization --------- #pe #privateequity #business

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The UBS 2024 Global Family Office Report covers the key trends emerging in alternative investments with the aligned patience around long term trends. They are making big, long-term investments in things that are getting proportionately fewer headlines - the areas they planned to invest in over the coming three years include #AI (78%), #healthtech (70%), and #robotics (67%). In other sectors ( such as #Web3), 39% responded they are likely to rely on other active managers to specialize coverage. Other themes: Material shifts in asset allocation as portfolio balance returns Climate change and debt crisis emerge as medium-term risks Geographical asset allocations set to remain tilted towards North America Confidence increases in active management With sustainability in focus, family offices seek information and advice Family offices focus on being investment specialists first and foremost

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In this week’s edition: Film/Tech: 1) WSJ on Lionsgate’s deal with Runway, an AI start up, to use their library to train AI and LLM for movie making going forward. No doubt the impact on costs, talent costs etc will be very topical going forward 2) FT on Netflix and how it won the streaming war: This subject has been exhaustively written about but still found insightful incremental thoughts on the subject Management/Corporate: 3) FT on scandals at broadcasters on the HR front (both on and behind the scenes talent) Sports: 4) FT on how the enormous success of the IPL league in India, which has been the beneficiary of broadcast rights bidding wars and subsequent corporate mergers to bid for these rights, has spawned multiple other cricket leagues: These new upstarts face not so much a saturated market, but rather challenges that IPL puts in its way 5) WSJ on F1 swearing: Key to the enormous growth for F1 has been its open window for broadcasters, notably the Drive to Survive franchise. With the drivers now having open microphones in their cars to both their teams and not the broadcast feed, some of the language has been an issue for the broadcasters while drivers note that at 300mph sometimes swearing happens

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Lexington Books managed to release my book Disagreeing despite the Data before the election. It argues the belief segregation underway in the US may be irreversible. Today's battles over climate change, disease mitigation, and election results run deep -- they're cognitive, not just strategic. Here's the gist of it. 20th-century revolutions in the philosophy of mind, meaning, and matter uncover three surprising requirements for widespread factual agreement. Critical thinking and community building have the potential to reverse two of them -- the growing refusal to test assumptions and individual isolation. Factual agreement between groups is impossible without the third one, though -- shared projects or other meaningful interaction. And a large part of American society has insulated itself from the rest. Without shared projects, communities gradually lose the ability to tell whether they agree or not regardless of the words they use. Belief segregation with similar roots has led several developing countries to the brink of failure. We'd better watch out. The attached flyer gives a discount code that makes the book -- priced in this initial run for academic libraries -- a little more affordable. Please feel free to forward it and, if you're connected to any libraries or book stores, pass it on!

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This FT article has a fancy graphic illustrating the layers of debt in private equity, but -- despite my prior post warning about the risks of debt layering in PE -- this article is inaccurate scaremongering. Here’s the key line: “Much of this lending is ultimately underpinned by the financial health of a fund’s portfolio companies. Yet every transaction ends up adding more leverage to heavily indebted businesses, which can make them more vulnerable in a downturn.” This statement is fundamentally incorrect. From the leverage used by General Partners or Limited Partners on their overall private equity portfolios to the use of subscription lines, secondary fund leverage, and leverage by funds purchasing GP stakes—none of these add leverage to the individual businesses or increase their susceptibility to economic downturns. The only mechanism that does add leverage to a business is a dividend recapitalization. However, the alternative is typically the PE firm selling the business to realize its investment, where the acquirer, especially if it’s another PE firm, would likely employ the same amount of leverage. Net Asset Value (NAV) loans may represent leverage on leverage from an LP’s perspective, but they do not increase the portfolio company’s debt or its bankruptcy risk during a downturn. Instead, they merely increase the possibility that the GP might need to sell sooner than desired to repay fund-level debt. Therefore, the only factor impacting a portfolio company’s failure probability is dividend recapitalization. The bank’s expertise is to assess the risk of its debt investment in the company. Whether a GP sells a stake in their management company, an LP sells a stake to a secondary fund, or the fund uses a subscription loan (a short-term loan backed by LP capital commitments to optimize investment IRR by delaying capital calls) to purchase the company—none of these scenarios affect the portfolio company’s ability to weather a downturn. “There should not be a pocket of the market that touches on so much of the economy in such a sizeable way, where we can say, ‘oh there’s leverage,’ and then very few of us can explain what that leverage means and why it might—or might not—be risky,” said Victoria Ivashina, a professor at Harvard Business School specializing in private capital. I can only assume Professor Victoria Ivashina was either unaware of the article’s specifics or, as a private markets expert, she is 'one of a few' (?) who could have alleviated the author’s concerns about this ‘web of debt.’ Moreover, where is the causality here? There is no indication (other than the title of the article) that PE firms are coercing banks into making these loans. The title could just as easily have been “How Banks Have Mired PE Shops in Potentially Depression-Inducing Debt.” Both parties willingly engage in these transactions, and as new debt products emerge, banks are as proactive in marketing them to PE firms as the firms are in seeking them out.

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Seems like I have been bumping into interestingly nuanced articles these days about the state of our industry and I find this piece thought-provoking. "Fiduciary Dilemma" It is indeed prevalent, one must never lose track that Beneficial Owners are, for the most part, retirees, scholarships etc... which can ill-afford losses. Given the layers of money management where does the buck truly stop? "Complexity breeds opacity" Layers upon layers of structures/fees/regulations ultimately increase total expense ratios at the expense of the aforementioned Benefical Owners "Alternatives were about creating wealth not preserving" There is indeed an inherent contradiction with many confidently (falsely) claiming their PE portfolios "yield on average 25% Net" ... "only back top quartile performers", indicating strong Alpha generation. All the while objective benchmarking data historically points to an industry heading towards a capital preservative Beta, which is perfectly acceptable at the right-sized level of expectations. The problem lies in the industry's illiquidity, cash on cash returns on unrealistic expectations/promises are only truly tested/evaluated 10 to 15 years later, if not more... By that time the parcel has long been passed along multiple times! At Collyer Capital, we thrive to be responsible stewards of capital by not forgetting our #fiduciary obligation to the ultimate Beneficial Owners and resisting the temptation of #overpromising and #undelivering by right-sizing returns we promise our investors. #CCPL #CollyerCapital #returnsexpectations #AlphaVsBeta

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Happy Thanksgiving! Love this perspective on fund diversity and deployment strategy. "For early stage investing, large portfolios (~100 investments) outperform small portfolios (~30 investments). The goal for pre-seed or seed GPs is to invest in a large enough number of companies to maximise the chance of finding outliers (about 2% for ~50x, 5% for ~15x according to data from Dave McClure). From that point, once you have built a sufficiently diversified portfolio, you can consider a strategy to deploy remaining funds into follow-on rounds for best looking companies as "call options". This only makes sense if you think these follow-ons are the best opportunity available for that capital. Evaluate them as you would any other investment. A lot of VCs (and LPs, for that matter) understand the logic of concentrating into winners, but not the first step of building an appropriately sized portfolio. Why? Probably because the former amplifies risk, while the latter reduces it — playing into the principal-agent problem in VC and the "power law" smokescreen. It also happens to be a lot easier to manage a small portfolio. I've spoken to LPs that say they prefer small portfolio strategies because concentrating into winners is more likely to produce >10x returns. In a world where only the top 5% return >3x, it makes ZERO sense to optimise for that level of risk. Especially when you are allocating other people's capital (pension funds, MFOs, sovereigns, etc). "Few investors demand diversified funds, so GPs don’t offer them. A slow and steady 'venture is a numbers game' pitch is much less emotionally compelling than 'I am a rock star who can consistently beat the odds.' And GPs need an emotionally appealing pitch to get funded." - The Pervasive, Head-Scratching, Risk-Exploding Problem With Venture Capital" This is how we built our fund's strategy -- to invest early in a diverse portfolio. Our current partially deployed fund already has 42 bets, averaging a deal every 1.8 weeks. Dave McClure taught us that investing in 50 companies on a 10x lower cost basis leads to close to the same ownership in each one as investing the same capital in just 5 companies. This approach seems advantageous for startups too as it allows us to give an easier yes to diverse and early companies. We are still finding our sweet spot around valuations and portfolio construction, and we are passionate about these core principles. Jamie Rhode, CFA has done many podcasts on this for those who want to hear more about the data. I look forward to fund 2 when we will have enough capital to both make diverse bets (60+) as well as have follow-on capacity for winners when they are, as Dan says, the best available opportunity for that capital. For investors and startups, what do you think about this strategy? https://lnkd.in/gizefUYC Benjamin Rolnik Julia C. Manu Satyavolu Aman Verjee, CFA Sophia Platt

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"Simply put, there is too much capital seeking too few opportunities, particularly at the seed stage. Multi-stage firms have eliminated pricing discipline at seed stage and the proliferation of seed firms has made the task of investing at this stage as competitive as it’s ever been, leading me to believe that indexed seed investing in today’s environment will produce poor returns. What does this mean for today’s environment? It’s never been more important to break away from median performance. While there is risk in breaking away from the pack, the risk (at least performance wise) of staying part of the herd is simply far worse. Median returns for the recent vintages are simply terrible. One could argue that funds are still in their j-curve phases, but I suspect this doesn’t explain the divergence we’re seeing between GOOD performers and GREAT performers. More than ever before, it’s clear to me that playing the same game as everyone else will not work, so fund managers should question whether they are really capable of being in the top 5% of whatever strategy they are employing. From a LP perspective, allocators should likely ask the same of their managers and consider whether allocating to indexed mega funds or indexing across too broad of a portfolio of managers is tenable in achieving their return targets." https://lnkd.in/g8GqHY-P

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The bankruptcy of Synapse, where $100 million of customer funds is missing, raises serious concerns about bank-fintech partnerships and the need for rigorous due diligence. This situation underscores the immediate need for banks to reassess their partnerships and prioritize consumer protection. Stricter regulations and enhanced oversight could become the norm, ensuring only fintechs that can withstand scrutiny will thrive in the financial ecosystem. #Fintech #AI

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🏦 Leveraging CDs for Smarter Investment Returns: A Strategic Approach for Investors 💸 Many investors overlook Certificates of Deposit (CDs) as a potential tool for low-risk, high-value investments. But here’s a strategy that could change that mindset—leveraging a CD’s value to secure a line of credit, opening up new pathways for strategic investments. Here’s how it works: 🔹 How CD-Backed Loans Offer Flexibility and Access to Capital When you invest in a CD, many banks will extend a line of credit worth up to 100% of the CD’s value. The interest rate on this line of credit is generally just 2% above the CD rate. For instance, if you have a CD earning 4%, you can access a line of credit at a 6% rate. This setup effectively gives you a “net interest cost” of just 2%—a low-cost, secure way to access capital without liquidating your CD. 🔹Turning Low-Cost Borrowing into Higher Returns With this line of credit, investors can strategically lend to peer-to-peer networks or startups at higher interest rates, often ranging from 6-8%. This allows for a potential 4-6% profit spread on interest alone, plus any additional equity gains if your funds are tied to milestone-based startup investments. 🔹Why This Matters for Investors and Startups Alike This approach provides a twofold benefit: it keeps investors’ funds secure, as they remain backed by the original CD, while startups benefit from milestone-based funding, which encourages responsible financial progress. It’s a collaborative strategy that balances risk and reward, ensuring that investors remain in control while supporting innovative ventures. At Kodial Investment Solutions, we’re committed to crafting solutions that protect and grow our clients’ capital. Leveraging CDs in this way is just one of many strategies we use to help investors achieve both security and impact. Curious how you can put your CD to work? Let’s discuss!

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The shift to a declining interest rate environment should be a very good thing for the venture ecosystem. Historical data suggests a strong negative correlation between high interest rates and venture exits, implying that lower rates could kickstart the exit environment. We think liquidity will come back in full force in 2025 as a result. Here’s to thriving through the cycles! #VentureCapital #Liquidity #InterestRates #M&A #IPO

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I am fully on board with the article from the Sorenson Impact Institute detailing the authentic combination of purpose and profession behind impact investing. It's really worth calling out from the piece that as assets under management (AUM) of sustainable and impact investing are growing faster than in any other sector, investment organizations are responding to this accelerating client demand. #ImpactInvesting

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Two hypotheses for the coming Pentagon environment: good for VC-backed and back for VC-backed… The first hypothesis is pretty straightforward, the sheer number of VC alums and VC adjacent, from the VP to the DepSecDef would logically lend to the idea that the building would naturally get more VC friendly. Not overtly mind you, I don’t see folks rolling in and outright steering funds into companies in which they have interest, more a matter of the folks holding the reins actually knowing how that world works on a deep level and implementing policy that really helps. The second hypothesis goes like this: the admin has, at best, 18 months to really get changes moving, while they have all three seats of power, before midterm pressures smack an aspirational agenda with the cold fish of reelection prerogatives. Likewise, the best I think we can hope for these private sector titans to take a break from making markets to make $200k/yr as a DC-dwelling bureaucrat, is about two years. That also happens to be the going tenure of an appointee-level official. So the White House and the E Ring have 24 months to make a difference for venture backed firms before the political gravitational pull swings the building back into a regular orbit around the budgetary sun…which is…about 1 1/2 POM cycles…the frozen middle has held there breath for longer before… I’m probably wrong in bother cases, just a casual observation.

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My early personal use of #LLMs and generative #AI have proven frustrating for the actual benefits to my business and lifestyle, similar to the conclusions of the Goldman Sachs research team (see link in comments). However, there is no question that the power of these tools is enormous; therefore, I remain totally convinced that the ongoing efforts and training that I am committing to with my team will prove to be a game changer, as both Bill Gates (see link in comments) and now Vinod Khosla have clearly outlined. See Khosla's insights from last week: "AI: Dystopia or Utopia?" "For four decades, I've devoted myself to and studied disruptive innovation. I started with the microprocessor, a seismic shift that gave rise to two key developments: the distributed computing pioneered by Sun Microsystems, of which I was a co-founder, and the personal computer. Then, in 1996, the browser emerged, marking another epochal shift. I was part of the team that invested in Netscape, the first important browser, and incubated Juniper, laying the groundwork for the fundamental TCP/IP backbone of the internet—a technology that many major telecommunications companies had cavalierly dismissed. This was the dawn of the internet revolution, during which we made strategic investments in nascent giants like Amazon and Google. The profound impact of the internet revolution speaks for itself. Then, in 2007, came the iPhone, and with it, the mobile platform era. Each new platform allowed large applications innovation and an explosion of new ideas." https://lnkd.in/e-9EiSzn

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Is SF Climate Week banter a good barometer of the macro climate tech investment mood? Key nuggets to ponder: 💰💰💰 Climate solutions (like most science/engineering and hardware based deep tech) are capital intensive. They require an "all of the above", creative financing approach to obtain the capital needed to scale (from CVCs, government, public-private partnerships, green banks, debt financing...). 🤖 AI - Everything, Everywhere (all at once). As in most sectors, AI is white hot. It can be a key component of climate solutions, but also a demand accelerant ⏩ More AI = ↗ compute and power demand ⚡= ↗ need for energy storage and grid enhancing solutions 🔋. 🏛 🤵 Political Angst. Real worry that a new administration will cut or impede climate tech catalyzing funding (e.g., DOE funding from IRA). #climatetech #climateweek

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A quick summary of considerations / thoughts for LPs investing in VC today. *Not Investment Advice* - Smaller funds provide higher return potential, but come with much more volatility (as a whole).  - Emerging Managers typically have the best alignment (smaller funds, hungry-to-succeed GPs, fees) but many have to go through a steep learning curves regarding operational governance, culture building, portfolio management, and LP relations).  -Beware of overweighting performance benchmarks as they often don’t go granular enough across fund sizes/types and sample sizes can be limited.  -Understand a manager’s valuation methodology. Careful review of marks may reveal an overally aggresive or conservative valuation policy. Know the marks of the top companies when assessing track records.  -Track records offer headlines. What you are looking for is the repeatability of outperformance, which need to factor in fund size changes, team changes, competitive shifts, and details around the "how" of past winners as it relates to potential systems the GP has for sourcing, picking, and winning.  -Median performance will not be enough. PE buyout is better if you are generating median returns.  -VC cannot be characterized as a good or bad asset class but a “Depends” asset class. It depends on the LP's ability to find and gain access to managers with the highest probability of outperformance. This isn’t easy and takes time. It's why I've spoken about the 90/10 issue in VC. While VC for many investors is often only 10% of a portfolio, it can easily take 90% of your time to appropriately build relationships, diligence managers, and make sense of evolving dynamics. -For new LPs, starting with directs is usually not the way to go; Adverse selection runs rampant, and you do not want to be the last call to invest after everyone else has passed (yes, there are times this works, but history hasn’t been kind). Most emerging LPs should probably start with funds to learn / de-risk.  -While it was gone in 2021, The J-curve is back. Expect the first 2-3 years of a fund to show negative net returns as times between rounds increase (mark-ups), deployment has slowed, and graduation rates of companies for the next round have decreased. -Technology breakthroughs like AI follow patterns where investment activity and excitement outpaces infrastructure and adoption. The top AI companies will be some of the most valuable companies of the future, but the vast majority will underperform significantly. During the Internet hype, for every Amazon/Google, there was an eToys or Webvan. -Liquidity is a real problem, but two potential outlets are coming - 1) VC GP-led secondaries are rising in prominence, and 2) Rate environment should start to unlock organic IPO / M&A activity as multiples start expanding. - The market is definitely a Tale of Two Cities. Strong funds/companies are well oversubscribed, but VERY hard for everyone else. The oversubscribed camp is<10%

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