Robert B.

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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The Information broke news that Insight Partners has just secured $10B in funding for their latest flagship fund. This is perfectly timed given their multiple $1B+ companies sold over the past week. This is a clear sight that #limitedpartners still have in their #privateallocations even during the current slow markets for #IPOs and #M&A. This would also appear to be good news for #AIfinancing and #SaaSFinancing. What do you think? #Management #VentureCapital #PrivateEquity #CapitalMarkets https://lnkd.in/gXu_s8Qj

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Q3 is out and Q4 is in!  This is a great read about Base10's strategic switch showcasing how Carta is simplifying fund administration for emerging managers, which is especially important now rolling into the year-end busy season. 

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In the season finale of Brex's Controllers Classified podcast, BCV partner Sarah Hinkfuss spoke with Erik Zhou to discuss the VC investment landscape and how BCV approaches due diligence for growth-stage companies. For founders, there are three things that are important to share with investors: 1. Your unit economics, or how you think about your business drivers. It’s by far the most important thing today and those inputs (e.g. customer cohort data, gross margin, sales and marketing costs) give you a complete picture of the business. 2. Your business model, or how you think about your future. It doesn’t have to be a huge, complicated spreadsheet. Rather, it’s an important instrument to show people how you think about the business. What is your view of the future and what do you believe are the most important drivers of the business? 3. Your memo, or your narrative. A popular format today is to tell your story in a memo, not a deck, and it’s great because the writing process forces more complete thoughts to give investors a full view of your business and vision.

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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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As the IPO window remains shut and other paths to liquidity (buyout and M&A) remain compressed, the Cerebras Systems S-1 filing is a cautious welcome sign for the venture capital asset class. As the first "pure play" generative AI company to go public since ChatGPT's release, this marks what could the beginning of a new technology IPO wave. The company is making the bold attempt to take NVIDIA head on: ✅ Cerebras has developed a novel wafer-scale AI chip that is 57x larger than a GPU with 7,000x the on-chip memory  📈 Revenue grew a an incredible 1,122% YoY to $70M in latest quarter 💰 Blue-chip technology investors including Benchmark, Coatue, and Altimeter But the S-1 filing also reveals some notable challenges and risks: 🚩 83% of revenue came from a single customer in 2023 🗳️ Possible CFIUS scrutiny over their relationship with an Emirati company 🧑‍💼 CEO named in prior SEC enforcement action in early 2000s We will continue to keep an eye out for more details in the coming months around IPO pricing and the company’s regulatory squabbles, but in the meantime, please enjoy the full essay below.

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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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Late-stage VC funds are earning dismal returns relative to the S&P 500 and take little risk. So why are LPs continuing to fund them? What the heck is happening in VC and can we fix it? In his three-part series on why VC is dead, Joe Merrill condenses conversations he's had from leading money managers all over the world into what's happening in VC today. Read the first part here and stay tuned for part 2: https://lnkd.in/gmCMx6wR #vc #article #latestage #earlystage #learning

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The Silver Tsunami is upon us, and it's reshaping the mergers and acquisitions landscape like never before. With an estimated $10 trillion in assets set to change hands over the next decade, driven by baby boomers retiring, the opportunity for savvy investors and entrepreneurs is immense. Currently, around 30,000 businesses sell annually, but with more than 8 million baby boomer-owned businesses expected to transition, the volume of transactions could increase tenfold. This is a monumental shift that smart buyers are already preparing for. You don't need to be a Wall Street titan to benefit from this trend; many of these businesses will transition to local entrepreneurs and small business owners. Are you ready to seize a piece of this $10 trillion wealth transfer? Position yourself strategically to take advantage of this unprecedented wave of opportunities. Engage with fellow professionals and explore how you can be part of this transformation. Not sure how? Let's talk about it! #SilverTsunami #MergersAndAcquisitions #BusinessOpportunities

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Dan Primack of Axios has some choice words for VCs in this post. If you are an investor, LP or a founder raising money from VCs - worth the read. I tend to agree with Dan here and have some thoughts... 1) Private Equity is an ecosystem that relies on flow not a one-way transfer of assets. VC is semi-broken right now because no one wants to sell off a portfolio below performance targets. Could mean game over for the GPs. Seems like public, private and venture are all trying to remain optimistic while waiting for a drop in interest rates and an uptick in IPOs or PE buyouts to start the liquidity flow again but Fed and inflation data keep frustrating this kicking off. 2) VC have one core job as far as LPs are concerned....Create a magic black box that is a cash multiplier. Not a black hole! When and how early investments become liquid need to change also. 3) We have an 80 year old VC fund model that requires wild, best-case scenario power-law returns to generate the performance numbers the asset class promises to investors. This handcuffs GPs to staying in deals for a very long time as the early exits or lower deal multiples can drag funds performance and then their job security, fee structure, etc as I alluded to above. This also drives companies to "go big or go home" and operate with inherently more risk than stability. 4) Dan talks about the need for liquidity and to get back to the money flow. This is easier said than done as a minority investor. Incrementally easier if you and your co-investors are able to steer the company at the board level but its still "not your company" and the "market is the market" re comps/multiples and demand. 5) So - what can we, as an industry, do about this? We have to evolve. We have to have some hard conversations around the table and not let staid endowment funds and Goldman Sachs dictate how our industry looks at the future...feel like this becomes a new post or a series so I'll leave it here for now. #venture #VC #startups #privatequity

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I used to think LPs only invested in emerging VC / PE firms for better returns. That’s true…sort of They obviously first and foremost want high returns, but in building our firm and studying the industry I’ve learned that LP motivations are more nuanced than that To understand why an LP really might invest in us, I start with the assumption that they could invest that $ in Blackstone (or a similar large PE firm with top quartile track record) What could we offer that is incremental, and how should we position ourselves in that way? 1. Smaller funds can be higher upside — LPs may be looking for higher risk / higher return opportunities, so we have to emphasize the path to outlier returns. This means discussing not only their expected value but also the distribution of outcomes, and how that might differ from the rest of their portfolio 2. Harder to partner with successful firms later — LPs are often looking to build long-term partnerships with firms that will be around for many fund cycles, and that is about more than just returns. It’s important to emphasize not just the strategy of this fund but also the vision of the firm we’re building 3. Co-invest opportunities — Some LPs don’t care about co-invest, others only invest in funds for co-invest. When speaking with the latter, we emphasize that we have a disciplined and repeatable process to generate and share co-invest opportunities (easy to say, harder to execute) 4. Learning and thought partnership — We have LPs that invested in us because they have conviction in or personal passion for health & wellness and want to learn more about the ecosystem. For these folks we might talk through investment opportunities they see that are in our industry, or invite them to industry events. We also spend a ton of time writing quarterly letters to help them track the industry and learn from our companies It takes years to know where our returns will ultimately shake out, and we’ll have no reason or permission to exist if they aren’t good In the meantime it’s crucial to recognize and deliver on these other needs of our LPs, to provide the experience that they signed up for

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🧱BRICS+ ACCELERATE 'THE UNIT' CHALLENGER TO KING 💵 🅰️ ARCADIA ECONOMICS (C. Marcus) interviews Eagle Forge (EF) Matt Riley about "BRICS-buck" aka "THE UNIT", long awaited (+ overdue!) challenger. 🇷🇺 🇨🇳SEEK TO REVALUE GOLD, create a parallel SWIFT-like system. "UNIT" a payments settlement ccy with a 40% gold backing. Not 100% (many BRICS members lack required Au reserves.) 6️⃣ 0️⃣ % REMAINDER TO BE backed by a pairing of strongest world trade fiats within the group. Smaller nations (e.g. Ethiopia) do fear being "drowned" by the majors, simply giving up one problematic system for another. 🌀STRATEGY TAKING SHAPE; anchored by resources (30-40% world oil supply), sheer number of BRICS humans (1.4 billion); three pillars: 1) DECOUPLE USD-PRICED Au and Ag from the new parallel system 2) RENDER "WESTERN" FIATS irrelevant by imposing "DIPLOMATIC, INFO, MILITARY and ECONOMIC" ("DIME") power-playbook 3) LEAVE ROOM FOR credit expansion, hence < 100% Au backing 🌎 POLITICS DRIVES FX vals, the "will" to transform the system. 🇮🇳🇨🇳🇷🇺 , front-running is the "everyone for themselves" factor; could scupper a unified "UNIT" front. Requires herculean geopolitical coordination to pull it off. 🇺🇸 COULD PRE-EMPT and revalue Au reserves first. Then, weaponize their "Strategic BTC Reserve". Matt thinks the latter is mere pandering (hodler votes). 📣 BOTTOM LINE, BRICS lack asymmetric warfare (comms force) to shift the narrative. Comms majors are all G7-based (FT, X, Reuters, NewsCorp etc) ‼️INTERESTINGLY, MATT RAISES the prospect of big bullion dealers being bought out by one or more BRICS/ proxies. Miles Franklin cited as one option. Informative Miles Franklin review from LinkedIn here: https://lnkd.in/gw5pKdsN #ArcadiaEconomics #BRICS+ #MattRiley #EFBullion #USD #TheUnit #monetary #commodities #gold #silver #MilesFranklin

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Series A or B wondering when to bring in a VP of Finance or CFO? It’s a crucial decision that can shape the future of your company. At this stage, financial leadership is not just about managing numbers but also scaling processes, securing funding, and driving strategic growth. My colleague Paul breaks down key signs that it’s time to hire and indicators for choosing between VP of Finance and a CFO #FinanceLeadership #CFO #StartupGrowth #SeriesA #SeriesB #NextGenLeadership

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It has been a crazy news week for M&A and IPO announcements. We haven't seen activity like this since 2021. Hopefully a strong sign of things to come in 2025 with a lot of pent up demand. The FirstPartyCapital team is joined on The FPC Podcast this week by Andrew Buckman, VP Marketing & Investor Relations, Azerion, to discuss latest announcements. Omnicom is buying Interpublic Group (IPG) Interpublic Group (IPG) is buying Intelligence Node Experian is buying Audigent Interpublic Group (IPG), Omnicom and WPP announce a strategic investment into Mediaocean Channel Factory has appointed Canaccord Genuity - Global Capital Markets to explore strategic options Vivendi is spinning out key media assets like Havas and CANAL+ Group which will IPO as standalone companies. We also discussed Azerion's M&A strategy and recent purchase of Goldbach Group AG Tune in and get up to speed! Links below 👇 #adtech #media #martech #data #mergersandacquisitions #IPO

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VC world can be cruel and unforgiving. With LPs more and more pushing for distribution and liquidity, fund managers in the mid-tenure of their fund with zero DPI and TVPI around 1.0 would have much more difficulty to raise new fund. The ability to fundraise is one of the crucial indications and validation of the job for VCs. Key highlights from the article below: Thirteen percent of venture General Partners (GPs) no longer plan to raise another fund due to LP pullback. This rate has doubled since H1 2023 when only 6% of GPs had no plans for another fund. Nearly 44% of venture firms surveyed in mid-2023 had previously postponed their fundraising plans due to concerns about overexposure to the asset class. Many emerging managers entered venture capital in 2019 or 2020 when the LP market supported more funds. However, slow exits in the first half of 2024 have led to challenges in raising second funds without significant cash distributions to LPs. Some venture GPs are now actively participating in the secondaries market to demonstrate returns. Despite the challenges, GPs who secured fresh capital remain optimistic. They expect the 2023 and 2024 vintages to be the strongest return years since 2019. 🚀📈 #VC #VentureCapital #Fundraising #LPs #EmergingManagers #TechInvestment #MarketTrends #CountdownCapital #IndustryInsights #JetVentures #JetInvestment‍‍‍‍‍‍

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Interesting data points here. Especially if you want to understand what’s up in VC.

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This is quite interesting advice and also quite a non-consensus view in the B2B software world. Cross-border founders who are considering the US vs International incorporation question should consider this as valuable input.

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Great Sponsor-led secondary case study written in collaboration between my partner, Mike Blume and Derek Minno of Point Capital. Derek, a veteran in the VC/PE world, has been chronicling (on SecondaryLink) the GP-led VC and now PE sector. The case study provides a detailed perspective into a sponsor-led secondary and Tail End Capital Partners' approach to these investments. The case study documents Tail End's first investment, made in August, 2021 and also Tail End's first full exit in early 2024. Tail End has actually returned 97% of capital across our first three (of eight) investments proving out the velocity of capital in the Sponsor-led secondary market. Shout out to Sebastien Burdel for the introduction to Namakor Holdings the GP in Gelpac (the investment)! And, of course, thanks to Namakor for being great partners in this transaction! Article Link: https://lnkd.in/dUftFXdz Point Capital: https://lnkd.in/dAx_j8wP #sponsorledsecondary #gpledsecondary #secondary #secondarymarket #secondaries #independentsponsor #cv #continuationvehicle #liquidity #pe #privateequity #lmm #lowermiddlemarket #gp #generalpartner

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