Jack Everett

ANNOUNCEMENT- I’m delighted to share that Asset Class has partnered with Palantir Technologies to bring AI to the Alternatives and Private Capital Markets. At Asset Class we will integrate the AIP platform and Foundry capabilities of Palantir with our Fund Operating System (Fund OS). We will work with the AIP Platform and Palantir's Foundry Ontology to support highly complex tasks / co-pilot features that will allow us to leverage the FULL dataset that comes with the Asset Class Platform. By linking EVERY step of the Investor and Fund journey on a SINGLE platform, we have a uniquely complete dataset that can inform our AI actions. Over time we will integrate this as part of our Asset Class Network. This will continue to ensure Asset Class is a far more powerful system than any other in the market. We are a platform - not just an app. In the near future, we will be an AI Enabled, Networked Platform I cannot wait to bring the power of AI to our platform to enable our clients to super-charge their investment in our platform. See the announcement here: https://lnkd.in/eCSy5Tnu

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LP Tip #20 out of #50: To re-up or not to re-up A re-up refers to an LP making an additional investment in a fund where they previously invested. Before we dive in I want to share that there are reasons an LP may not to re-up which are not in your control. Here is a short list: ➡️ The LP may have evolved their strategy and needs to scale back the #️⃣ of funds they invested in.   ➡️ The LP was never set up to re-up in the first place. ➡️ The LP could be an individual that found themselves in a cash crunch and overly exposed to venture.  I'm assuming that when you got your investment that the LP explicitly told you they do re-ups. Please do not assume they do. My expectation is also that the LP dug in to properly underwrite the fund. 🏴 Re-ups are not automatic. An LP will have to re-underwrite each fund. The speed of the re-up also depends on how much work was done in the initial investment, who led the investment, level of confidence there existed when that investment was done, and current pipeline of funds. There are 4 flags that may cause an LP to walk away. 1️⃣ Partner Breakups/Changes and Team Turnover:  The biggest risk in Partnerships are whether the Partners will stay together. One LP gave me a framework on how to think through this issue that has stuck with me. Partnership is like a marriage. If one feels there is potential for a breakup, does one believe it will be an amicable breakup? Or, does one believe the spouses will never talk again? If it is an amicable split that is manageable. The Partners can find a way to support the fund. Then the question becomes whether the LP wants to back the Partner/s that remain.  If there is high team turnover. The LP will want to investigate because team stability is used as a proxy for firm sustainability and ability to scale. 2️⃣ Fund Does not Execute on what they Sold the LP:  The LP “bought” something specific and typically it is because they were missing this strategy or wanted exposure to a strategy for the portfolio they were constructing. An institutional LP will invest and write a detailed investment memo flagging all the things you said you were going to do and then go back and compare when you come back to ask for money. If for example you pitched a generalist seed stage fund and you show up asking for money sharing that you invested in deeptech at A that will cause alarm. The same can be said for the number of companies you promised to invest in or check sizes you wrote. If there are big differences LPs will want to know why. 3️⃣ Bad Actions  The fund manager/s does something that is unethical. This is a no go for an LP.  What if the situation is not clearcut? This is different for everyone and requires discussions b/w GP and LP, but most LPs don't want headline risk. 4️⃣ Continuous Underperformance  If it's early days an LP will look at some key indicators to see how you are progressing over time.

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A definite worthwhile short read that succinctly explains the current profile of VC investing in a historical context. Nurturing innovation should matter to all of us, wherever we operate, so it is important that the investing community does so as well.

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Celebrating CEO Wyc Grousbeck: The MVP Behind the Boston Celtics' NBA Finals Success What impresses me most about the Boston Celtics is something that only a CEO can do—build an inspired, high-performing organization at every level. Grousbeck's deep-rooted passion for the Celtics is palpable in every decision and statement. "Owning this team has been more than a business venture—it’s been a passion project," he affirms, reflecting on the team's journey to NBA glory. As a lifelong Celtics fan, witnessing Wyc Grousbeck's evolution from passionate supporter to transformative owner has been moving. His leadership extends far beyond the court, setting a new standard that resonates with Fortune 500 CEOs You can see it in the way Grousbek set and reached an Impossible goal of winning the NBA finals, in part by making bold/risky moves. One of them was trading three members of the Celtics starting five that got them to the championship round in 2022. You can see it in the way Coach Brad Stevens reached out to Jeff Van Gundy when he was fired by ESPN as an announcer and offered him a job as a consultant. "We had no previous relationship," Van Gundy said. "He felt bad for me and thought I could contribute." You can see it in the way coach Joe Mazulla, handled Jayson Tatum when he was in a three-point shot slump. "What did you tell him" a reporter asked. I told him that I loved him." You can see it in the way the Celtics organization hires women as coaches in their male G league, women as TV announcers, and women as heads of their "heroes" community involvement program. This past week, as the Celtics celebrated their 2024 NBA championship, Grousbeck made headlines again with the announcement of the team's sale. His visionary leadership turned a $350 million investment into a probable $4.5 billion legacy, marking an era-defining achievement in Boston sports history. For Bostonians like myself, Grousbeck's impact is profound. His legacy, etched in the annals of Celtics lore alongside legends like Bird and Russell, inspires generations and cements his status as a visionary leader in sports and beyond. . #Leadership #BostonCeltics #WycGrousbeck #NBAChampions #Teamwork #Inspiration

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ANNOUNCEMENT- I’m delighted to share that Asset Class has partnered with Palantir Technologies to bring AI to the Alternatives and Private Capital Markets. At Asset Class we will integrate the AIP platform and Foundry capabilities of Palantir with our Fund Operating System (Fund OS). We will work with the AIP Platform and Palantir's Foundry Ontology to support highly complex tasks / co-pilot features that will allow us to leverage the FULL dataset that comes with the Asset Class Platform. By linking EVERY step of the Investor and Fund journey on a SINGLE platform, we have a uniquely complete dataset that can inform our AI actions. Over time we will integrate this as part of our Asset Class Network. This will continue to ensure Asset Class is a far more powerful system than any other in the market. We are a platform - not just an app. In the near future, we will be an AI Enabled, Networked Platform I cannot wait to bring the power of AI to our platform to enable our clients to super-charge their investment in our platform. See announcement here: https://lnkd.in/eCSy5Tnu

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Seed VCs are turning to new ‘pro rata’ funds that help them compete with the big firms Alpha Partners, SignalRank and now SaaS Ventures help seed VCs pay for shares when big VCs try to price — or push — them out Lee Edwards, partner at Root VC, has a saying at his firm that “pro rata rights are earned, not given.” That may be a bit of a stretch since pro rata refers to a term that VCs put in their term sheets that gives them the right to buy more shares in a portfolio company during consequent funding rounds to maintain an ownership percentage and avoid dilution. Still, while these rights are not exactly “earned,” they can be expensive. One of the latest trends in VC investing these days are funds dedicated to helping seed VCs exercise their pro rata rights. https://lnkd.in/dRM3RvdA By Christine Hall

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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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"Small funds may have more incentive to produce higher returns The alignment of incentives between GP and LP varies drastically based on fund size. Managers of smaller funds who have invested substantial personal capital demonstrate an unwavering commitment to lucrative returns, while managers at the helm of colossal funds, buoyed by significant management fees, may exhibit a diminishing drive. This constitutes an almost incontrovertible structural benefit of managing a small VC fund. Furthermore, fund managers of established funds may, over time, raise larger subsequent funds and grow more risk averse. This can present a sub-optimal outcome for their LPs and, by virtue, manifests a bad omen for VC investing." https://lnkd.in/gHKgea4e

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Interesting data and good work from Carta in their inaugural VC fund performance report analyzing benchmarks for more than 1800 funds across six recent vintages - https://lnkd.in/e5R_dhXp Take a look at the pace of investments. As expected, capital deployment has slowed since the 2020 peak, with 2022 funds only using 43% of their capital after 24 months, down from 60% in 2020. This trend seems broadly consistent across private company and fund investing, with GPs and their LPs being more cautious and selective with capital allocation. Raising capital is tough today. Full stop. It's easy to focus on that, but I'd encourage us all to instead consider and focus on what is less talked about - that this cautious approach has created a large amount of available capital aka "dry powder," dedicated and ready to support special founders. The best founders are aware of private market dynamics, which impact the time needed to raise rounds and the milestones they must hit to successfully do that, but their primary focus is always the mission and the customers they serve. They are committed to building products to solve their customers' problems regardless of what us investors think. Building generational companies is never easy, but many have been and will continue to be built in tough markets. I try to take a similar approach in supporting founders. That doesn't mean ignoring market conditions, which can greatly impact my investment decisions and outcomes, but like focused founders, I know it makes more sense to dedicate my limited daily energy to what I can control. That means finding and supporting founders who are transforming or creating markets and doing everything I can to help them win, no matter what the market is doing. I hope to collaborate with many doing the same. Have a great week and see you out there! Note: These thoughts and opinions are solely mine and and mine alone. They do not reflect and are not associated with any company I am part of.

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Summary: Bolt's CEO has threatened legal action against an investment bank involved in their recent fundraising efforts, claiming they signed a binding term sheet for $200 million but did not follow through. Key takeaways: Bolt's CEO believes there was miscommunication at Silverbear Capital, one of their lead investors, leading to confusion about the fundraising deal. A leaked term sheet showed Bolt trying to raise $200 million in equity and $250 million in marketing credits, with a unique pay-to-play structure. The involvement of Silverbear Capital and The London Fund in the deal remains unclear. Counter arguments: Silverbear Capital's partner insists there was no miscommunication and the deal was never discussed or approved. The London Fund has confirmed discussions with Bolt's management but denies any finalized transaction. #venturecapital

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From Crypto Ice Age to AI Inferno- Gartner Curves or Extreme Weather Conditions Precipitated by VC? A few thoughts I've been reflecting on recently on learnings from being through many crypto cycles I can apply to this moment in AI investing... https://lnkd.in/d6KSM3EN

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verifiable inference. yes, that again... Luke S. just published a new thread on that https://lnkd.in/e-9dMZrF but right now, I'd like to counter the article by Casey https://lnkd.in/eduygZzD where she argues against the need for decentralized inference (in short, his argument is that we don't need it because we will have local models and edge computing). There's a key gap in these arguments against decentralized inference. 𝗠𝘆 𝗰𝗼𝘂𝗻𝘁𝗲𝗿𝗮𝗿𝗴𝘂𝗺𝗲𝗻𝘁𝘀: While advancements in edge computing and specialized chips are promising, they won't eliminate the need to use heavier, cloud-based models & inference in the near future. Hence, verifiability of decentralized models running on decentralized cloud infrastructures remains crucial. Decentralized inference ensures that computations performed on cloud services are transparent and trustworthy. This is particularly important for sensitive applications where privacy, accuracy, and resistance to censorship are paramount (i.e. - always). By implementing verifiability mechanisms, users can trust that the models used are legitimate and that the results are not tampered with. So, the main points I'm making are: 1. 𝙀𝙙𝙜𝙚 𝙘𝙤𝙢𝙥𝙪𝙩𝙞𝙣𝙜 𝙬𝙤𝙣'𝙩 𝙛𝙪𝙡𝙡𝙮 𝙧𝙚𝙥𝙡𝙖𝙘𝙚 𝙘𝙡𝙤𝙪𝙙-𝙗𝙖𝙨𝙚𝙙 𝙞𝙣𝙛𝙚𝙧𝙚𝙣𝙘𝙚 𝙨𝙤𝙤𝙣: Despite expected advancements, the computational power required for larger models will still necessitate cloud services. 2. 𝙑𝙚𝙧𝙞𝙛𝙞𝙖𝙗𝙞𝙡𝙞𝙩𝙮 𝙞𝙨 𝙚𝙨𝙨𝙚𝙣𝙩𝙞𝙖𝙡 𝙛𝙤𝙧 𝙙𝙚𝙘𝙚𝙣𝙩𝙧𝙖𝙡𝙞𝙯𝙚𝙙 𝙘𝙡𝙤𝙪𝙙 𝙞𝙣𝙛𝙚𝙧𝙚𝙣𝙘𝙚: Ensuring trust and transparency in cloud-based computations is crucial, especially when sensitive data and complex models are involved. 3. 𝙁𝙪𝙩𝙪𝙧𝙚-𝙥𝙧𝙤𝙤𝙛𝙞𝙣𝙜 𝙩𝙝𝙧𝙤𝙪𝙜𝙝 𝙫𝙚𝙧𝙞𝙛𝙞𝙖𝙗𝙞𝙡𝙞𝙩𝙮: As we transition towards more powerful edge computing, having robust verifiability mechanisms in place will ensure a seamless and trustworthy process during this period. My view is that it's a hybrid approach, where both edge and cloud-based decentralized inference coexist with strong verifiability protocols. find full article here: as promised, links in the follow-up tweet 👇 Luke's thread: https://lnkd.in/eH_efW45 Casey's full article. recommend: https://lnkd.in/e7EJ_xcW

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Summary: The article discusses the unique relationship between Colin Anderson and John Fogelsong as investors in small VC firm "Friends & Family Capital." They have a strong familial bond and utilize their connections and expertise in the Silicon Valley startup world to invest in and support successful companies, with a focus on strengthening their finance functions. Their latest fund, at $118 million, will continue this approach of investing in B2B enterprise software and hardware companies with recurring revenue models Key takeaways: Small VC firms require deep trust and long-term commitment among partners, much like a family dynamic. Anderson and Fogelsong's background and networks in Silicon Valley have been instrumental in their success as angel investors. "Friends & Family Capital" maintains a family-and-friends round of financing approach, but with external capital. Counter arguments: Some may argue that their familial bond could lead to potential conflicts of interest. The focus on finance functions in startups may not be as appealing to all investors or entrepreneurs. #venturecapital #startups #vc #investing

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The latest on YC valuations has been making headlines, so here's what I'm seeing as an early-stage fund manager investing at the pre-seed/seed. I’ve spoken to a couple dozen YC companies in the last year, all raising at $15M-$30M valuations regardless of traction or founder background – it could be a 20-year-old with a duct-taped MVP that pivoted eight times in the cohort. Compared to Techstars or other accelerators, that is 2x-6x higher than most valuations. Even for multi-time exited founders, the high bar is generally a $15M valuation regardless of product or traction. That said, YC companies could be considered de-risked due to the network effects of YC and historical data on YC producing ~10% of unicorns. Fundamentally, it makes sense if the valuation is higher because the expectations are that it’s less risky and the future outcome is bigger. There has to be a line drawn between what is fair and excessive. As an investor, I’m willing to pay a premium for opportunities that we believe can produce outsized returns regardless of the cost. Today, single-stage funds struggle to invest in YC companies because valuations are higher and therefore, the ownership is lower. For early-stage funds, without the ability to maintain future dilution, obtaining venture returns while consistently investing in YC companies is harder. The returns start reverting closer to public equities without the risk/reward matching typical venture returns.  For multi-stage funds, typically larger multi-hundred million to billion dollar funds, you can continue buying company ownership as your portfolio companies grow. A $1M-$3M pre-seed check is a drop in the bucket, so larger funds are less sensitive to valuations and look at YC investments as an option to fund a $10M+ check in the future. Whether YC is meant to create these dynamics or not, their newest model, a larger investment that carries an MFN, naturally incentivizes all the YC companies to take on investments at a higher valuation. In turn, this method coincidentally hinders emerging funds or single-stage funds from participating. Was this structured by design to pent-up deal flow for some of the tier 1s and maybe even LPs in the Bay Area? I guess you can index YC if you have a billion-dollar fund…..

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Agree with Victor Haghani “We estimate the probability of the leveraged MicroStrategy ETFs going bust in the next year at between 20% to 50%,” said Victor Haghani This Fund Manager Raised Billions in a Bet on MicroStrategy. Can He Keep It Going? Matthew Tuttle was a bit player. Now he runs a red hot fund—but there are signs the T-Rex 2X Long MSTR Daily Target ETF isn’t ready for prime time. Both strategies typically produce their juiced returns through the use of financial contracts known as total return swaps. In exchange for a fee, a market maker will pay a swap holder the exact daily return of an asset, allowing a fund to double the daily performance of a stock or index with precision. Neither asset manager has relationships with the prime brokerages at major Wall Street banks that would have the capacity to write the swaps they need. That has left the firms to turn to the options market for leverage, both Tuttle and Defiance CEO Sylvia Jablonski said. The use of options—which wasn’t a strategy described in Tuttle’s original fund prospectus—introduces a new set of risks. Prices fluctuate, and options on a volatile stock can be costly, eating into a fund’s returns. Both MSTU and Defiance’s competing fund, MSTX, have had substantial “tracking errors” in the days since they began using options, at times leaving their investors with larger-than-expected losses on down days and smaller-than-expected gains on up days. Both “2X” MicroStrategy funds have recently posted daily losses greater than three times the underlying stock, while posting gains of less than double. Tuttle says he isn’t concerned that the leveraged fund hasn’t always been providing twice the return of MicroStrategy, despite the fund’s name and stated goal. “The prospectus says it targets twice the return, it says ‘targets’ for a reason,” he says. “We’re going to try every day to get two times, some days we won’t quite get there.” (This is actually an inept comment from him since he doesn't seem to have ANY background managing an options portfolio.) Tuttle says it is feasible for him to keep running the fund with options, despite the challenges of that strategy. “You can do it, if you know how to manage an options portfolio,” he says.

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Our Lead investor Jabroni Capital decided that our pre-seed round valuation should be $69 Million, which we believe is fair Even though the above statement is satire, Most projects I speak to say something along the lines, when asked for reasoning Average seed round valuations for infrastructure projects are nearing triple digits already And founders don't even know how they are valued, what the fish? Isn't it healthy to calculate valuations based on what you have created? If you are overvaluing your project just because it's a bull market, don't you think when the cycle tops your retail investors will be left with disappointments? and sometimes when I ask whats your plan for the next cycle, they go bonkers. like no one's literally thinking past 12-18months We are so back to 2021 For those of you who know me, yes this is my virtual background during calls It's a kind reminder to be considerate before stating absurd valuations. #web3 #vcfunding #valuations #founders

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Great episode for early stage VC's and capital allocators to check out. https://lnkd.in/ekz7JHJd #vc #fundraising #venturecapital

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We are excited to back EnFi, Inc in their first round of financing. They just came out of stealth and announced a $7.5 million raise from our good friends at Unusual Ventures, Boston Seed Capital, Argon Ventures and us at Impellent Ventures. Scott Weller spoke with me about his new idea around revolutionizing credit risk analysis through AI, begrudgingly bemoaning getting pulled back into yet another startup :) He and Josh knew there had to be a better way to get risk analyzed fast at the level of the enterprise after the great SVB failing occurred and left thousands of founders scrambling away from their multi-covenant loans. They needed to move their money but couldn't because other financial institutions still relied on a clunky, long process of assessing loan-worthiness. Enter Enfi. I asked him to invest. Scott was another one of those entrepreneurs we'd back no matter what they were doing. It took a while to get him and the indomitable Joshua Summers to make room for us. But they finally relented, because I'm annoying. Very, very annoying. Like a chihuahua with a kazoo, except worse. Ask anyone... EnFi’s platform is revolutionizing credit risk analysis, underwriting and portfolio management through advanced AI and real-time monitoring for complex credit instruments. Their innovative approach to Continual Risk Analysis provides institutional and private lenders with deeper insights and automation, enhancing decision-making and risk management. Congratulations to co-founders Joshua Summers and Scott Weller, and the entire EnFi team. We are proud to be part of your journey and look forward to your continued success! #Fintech #AI #Lending #CreditRiskManagement #Innovation

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