Scott Walbrun

💡Benchmarks in the investment industry serve as a standard for measuring the performance of securities, mutual funds, or investment managers. They provide a reference point for analyzing allocation, risk, and return of a portfolio, enabling investors to make informed decisions. Thanks Peter Walker for keeping us all informed!! Can’t wait for this!! Follow and get on the waitlist for this one! #benchmarks #fundraising #Capitalraise #founders #womenshealth #femhealth #medtech #wellness

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Check out my recent post on why President Trump is the forcing function for us to solve the “Missing Middle” and catch the industrial Tsunami of onshoring coming to the US!

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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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Excited to announce our investment in Alta Resource Technologies alongside Leonardo Banchik (Voyager Ventures) with participation from Orion Resource Partners, Overture Ventures, and WovenEarth Ventures. Rare earths are critical in products from magnets to ceramics and it's important for the US to develop its own supply chain. While the US has some of the best rare earth resources, separating them has historically proven expensive and environmentally unfriendly. Alta through it's computationally designed and optimized proteins allows the US to bring back rare earth production with a cleaner, lower capex, and lower opex solution - and that's just the beginning. Congrats to Nathan Ratledge and the entire Alta team. Read more here: https://lnkd.in/gbGnAJn3

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🚨 California Bill AB-3129: A New Era for Health Care Transactions? 🚨 Thanks for the detailed note: Kathryn Edgerton, Deborah Daccord, Karen S. Lovitch The recently introduced California Bill (AB-3129) aims to curb the price increases and lower service quality often linked to such acquisitions. Key Highlights: 🔸 Mandatory Reviews: Private equity groups and hedge funds must notify the AG 90 days before any transaction involving a health care facility or provider group. The AG can extend this period by 45 days, potentially delaying transactions. 🔸 Conditional Approvals: The AG can grant, deny, or impose conditions on transactions if they are likely to have anticompetitive effects or significantly impact access to health care services. 🔸 Prohibitions on Management: The bill restricts physician and psychiatric practices from entering management agreements with private equity or hedge fund-controlled entities. Impact on Digital Health Adoption: The increased scrutiny could slow down the adoption of digital health solutions, as transactions involving tech investments may face delays and additional costs. However, it could also ensure that such innovations prioritize patient care over profit. Cost of Healthcare Provision: While the bill aims to control costs, the additional administrative burden and potential delays might increase operational costs for health care providers, which could be passed on to patients. Consolidation by PE Firms: The bill could deter private equity investments, slowing down the trend of consolidation in the health care sector. This might benefit smaller, independent practices but could also limit access to capital for necessary upgrades and innovations. 🤔 Should Other States Follow? While California's approach aims to protect patients from the negative impacts of unchecked acquisitions, it also introduces significant regulatory overhead. Other states should consider the balance between oversight and operational efficiency, learning from California's experience. This bill is a double-edged sword: aiming to protect patients but risking increased costs and delayed innovation. Other states should watch closely to determine the best path forward. #HealthcareReform #DigitalHealth #PrivateEquity #HealthCareInnovation #CaliforniaLegislation

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Data from the International Energy Agency (IEA) illustrates the current "readiness" of #ClimateTechs + their potential impact on carbon reduction. As shown, many techs are at an early stage of being able to have a material impact. Concerningly, some tech funds recently returned capital back to investors recently + closed their funds - citing inability to fund capital intensive techs, found in areas like ClimateTech. This in part may be contributing to the $2 trillion shortfall in ClimateTech, that Deloitte estimates. What this may mean for the future? - The migration of LPs to global, super VC funds within ClimateTech, given the large capital pools needed to fund tech development - Greater specialization from smaller funds, energizing more niche elements of the ClimateTech market - but also altering their / LP's risk profile - A greater role to be played by debt financing in funding growth entities at an earlier stage - impacting cashflow dynamics Will be an interesting space to watch moving forward. We at The Proptech Connection are constantly working with all parts of the Proptech ecosystem. From the leading LPs, funds, techs and adopters in market, providing an independent view. Reach out to us today to find out how we can help. #InvestorTrends #Strategy #Global Ivo van Breukelen Stuart Daun Kiki C. Ethan Ward

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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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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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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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Friends, Q2 was a quarter of progress and learning for us at HawkTower, where we invest in early-stage startups applying breakthrough computing technologies to maximize California's natural resource markets. Our focus is on technology-enabled interventions (e.g., AI-enabled geospatial radars for lithium-ion batteries in the waste stream) for critical, market-level imperatives (e.g., disaster prevention) that can drive rapid commercial adoption (e.g., placed on every recycling truck in the world). Our current investment priorities are: - Agricultural productivity and efficiency - Biomanufacturing - Labor and mobility automation - Waste stream optimization and decarbonization - Disaster prevention and management Here’s a snapshot of what we’ve been up to: Milestones and Investments: - In late April, we officially launched our fund, filing with the SEC. Yay. - By June, we completed our first fund close ahead of schedule, with backing from family offices, foundations, high-net-worth individuals, and organizations aligned with California's future. - Our portfolio now includes three early-stage investments (Farm-ng, Agriful Software, and Nexstera Tech). Strategic Partnerships: - We believe that startups operating closer to their customers and resources, especially in agriculture and biomanufacturing, have a strategic advantage. For instance, the Salinas Valley, a major agricultural hub, is less than an hour from Silicon Valley and serves as a center of thought leadership in the convergence of agriculture and AI (from Western Growers, Taylor Farms, and others). - Similarly, the North San Joaquin Valley is emerging as a biotech and agtech innovation hub, and we are proud to support BEAM Circular, a startup hub for the circular bioeconomy. Key Relationships: - Karen Warner, CEO of BEAM Circular, joined HawkTower as a strategic advisor. - Jackie Cruz, Ed. D. Cruz, Hartnell College’s VP of Advancement, advises on Salinas Valley and workforce development. - Ben Palone from Western Growers, with his technical background in agriculture, became a trusted advisor. - Matthew Hoffman from Driscoll's Global R&D team provides insights on global agriculture, product positioning, and investment strategy. - We collaborated with Monterey Bay DART for workforce development and automation in agtech. - Dominic Milano and the Milano Technical Group from Merced collaborated on key initiatives and advised us on investments. - HawkTower is participating in Santa Cruz Works's accelerator cohort as a mentor and advisor. Thank you Doug Erickson. - We published an overview of entrepreneurship across the UC system with input from across the University of California system. Moving into the fall, we remain deeply committed to supporting founders shaping California's future natural resource markets. Stay tuned and be in touch! : ) Db

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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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ARR abuse, while obfuscating true GAAP revenue is a real issue. In VC pitch decks, I am noticing an increasing confusion in how the founders share the Annualized Recurring Revenue (ARR), Booked Revenue, and the GAAP Revenue. This recent WSJ article on this topic, as applied to #Crowdstrike, makes this point very well. Thanks Jonathan Weil Krishna Kunapuli, Dr. Pallab Chatterjee Rajiv Roy Sumanth Channabasappa #crowdstrike #accounting #saas #ARR #GAAP #Revenues

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What is to come of the VC industry: - the overhang of investments has yet to work its way thru the system - amount of VC invested dollars is down 55% from 2021 - half as many VCs have completed a deal this year compared to 2021 - bigger amounts invested in a narrow range of companies contrary to what VC stands for - today VC rivals Wall Street with lower investment returns from more mature companies - lower startup valuations will be unavoidable Financial Times #vc #privatecapital #investment #returns #lp #investor #vcmodel #vcindustry

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Envestnet shares climb after it drops 63-page bombshell disclosure about late $70 bid from competitor's board member More details out about Yodlee, and where investors/acquirers are pinning the valuation. Compared to Plaid or MX or the others in this space, it is much lower then potential upside opportunity! D&A business, with a valuation between $250 million to $325 million," the disclosure reads. But the perception of Yodlee's value deteriorated over time – not helped by “public litigation” against the unit, the document states. "On June 12, 2024, the Company received ‘round two’ proposals from potential buyers to acquire the D&A Business, which proposals valued the D&A Business from $100 million to $220 million and requested further information on the public litigation involving the D&A Business. https://lnkd.in/gP85N26K

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Some unicorns and late-stage VC-backed companies restrict their employees from selling their stock, often at the request of their boards of directors. Not this one. Andrew Feldman and his executive team at Cerebras Systems (a high-flying AI chip startup mounting a challenge to the likes of NVIDIA and Groq) have been willing to recognize the blood, sweat and tears that employees with vested options have put into building this impressive business, by allowing them to sell their shares in the private market. This is not just great news for current and former Cerebras employees but also for the company and its investors! Why? Liquidity typically leads to higher stock pricing, making it more attractive to investors. How so? The short answer is that when a stock is more liquid, its riskiness declines. When risk goes down, so does the discount rate (the cost of capital) that investors use to price the asset. When the discount rate goes down, all else equal, the price should go up! This enhanced liquidity and pricing can help a company with fundraising valuations, consolidating the cap table before an IPO, and bridging the valuation gap between an illiquid private market and a very liquid public market. Congratulations to Andrew and the Cerebras team for delivering on your promise to your employees and investors by allowing a liquid market for your stock. And bravo to your board members (which, according to PitchBook include Eric Vishria of Benchmark , Brad Gerstner of Altimeter, Steve Vassallo of Foundation Capital, Lior Susan of Eclipse, Thomas Laffont of Coatue, and Pierre Lamond) for supporting your vision! #secondarymarket #privatemarket #marketplace #unicorns #stockoptions

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TVPI is one of the major metrics that VCs and LPs use to track the performance of active venture funds. During 2023, they probably didn't love what they saw. As of Q1 2024, median TVPI had declined over the past four quarters for each of the 2018, 2019, and 2020 fund vintages, according to Carta data. The dip was most significant for 2018 funds, where the median TVPI fell from 1.55x to 1.37x—a decline in total fund value of more than 11%. It's important to remember that, in the context of VC, these fund vintages are all still relatively early in their lifespan. A fund's TVPI after five years is an indicator, not an outcome. So, at this point in time, what exactly do these numbers mean? It was great to speak with both Stephanie Choo from Portage and Marcos Fernandez from Fiat Ventures for this new story (link in the comments below) diving into some of our data on fund performance. One of the takeaways: When it comes to calculating TVPI, how a firm marks its portfolio investments is everything. And in the current market, when valuations have shifted and companies are waiting longer than ever to raise new rounds, determining those marks can be a challenge. “If the last round that a company raised was in 2021, how do you value that company?” Stephanie told me.

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I recently saw this metric from Carta’s 1Q24 VC Fund Report, which is very concerning. DPI... is nowhere to be found in earlier vintages that probably should start showing DPI. Funding early-stage projects is great, but ultimately, these venture dollars need to exit their investments and pay back their limited partners. That’s where the metric Distributed to Paid-In Capital (DPI) comes in. While managing a fund, we get interim measures during the life of the fund (e.g. IRR, MOIC), but ultimately, “you can’t eat IRR.” If you want to build a lasting venture capital organization, you need to start showing DPI for your fund. Keep in mind that this is traditional VC data from Carta, and is not strictly crypto venture. Crypto venture tends to get liquidity earlier (tokens) and things tend to go parabolic sooner (faster, more unicorns) - but I’d wager that the data here is somewhat similar for Crypto VCs… Not as much DPI as there should be from these earlier vintages. Read the full article, as well as a recap of all the crypto fundraising rounds for August, here: https://lnkd.in/g3eVJ-iF

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After a multi-year period when it seems that venture capital funds would only get larger, CRV is moving in the opposite direction. Instead of raising a $500 million growth fund and then a $1 billion vehicle to follow it, the firm is returning just over half of its 2022-era growth fund. Why release $275 million worth of LP commits? "Market conditions have changed for the worse. And valuations for startups are too high relative to their potential payoff." Will other firms follow CRV? If exits do not recover in the next few quarters, the answer may be yes. The nuances of capital calls can play a larger role in eventual IRR than you might have thought.👇

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Here’s a question investors are often asked: When evaluating early stage companies, how much time do you spend on due diligence around future exits? It’s not surprising we hear this question a lot. Also not surprising: it’s got a wide range of answers depending on the firm. Some don’t spend much time here at all. Others make it a point to put meaningful time in as part of their process. Our current thinking: take the time to do the work on public market comps. At Alpaca VC, we spend significant time understanding how public market investors will  realistically value a business based on margin profile, product, business model & TAM. In short, we want to know: how will this company be valued at scale when we get taken out? Yes, we can acknowledge that the journey toward exit is a windy road and that there may be pivots along the way, but there are still public market companies that have a business model similar to the early stage company you're evaluating. And you can always look at gross profit multiples if you think the margin profile will change over time. So we still do the work on the comps. Quantitative metrics we look at when making the comparison to public market comps include EBITDA multiple, revenue multiple, Gross Profit multiple or all of the above. As part of this process, it’s also important to factor in the public market company’s year-over-year revenue growth as this will also significantly impact the multiple it trades at. Simple example: if you have two public market companies with similar business models and similar margin profiles, but one's growing 100% year over year, and one's growing 50% year over year, then obviously the DCF (discounted cash flow) analysis is going to spit out a very different valuation for the one that's growing faster. Why this matters: When you take all of that information into account as you evaluate an early stage business, you can begin to create a realistic picture of how this company will be valued in the public markets at exit - or how an acquirer will value the company for an acquisition. Strategic acquirers may, of course, pay a premium, but we won’t underwrite for that. This allows us, for example, to form conviction around valuation based on revenue and gross profit predictions. If we think they can do $100M of revenue five years from now, we use this diligence process to form a thesis about whether the characteristics above (product, margin, business model, etc.) will cause the company to be valued at $200M vs. $500M vs. $1B at exit. Curious how other early stage investors think about underwriting an exit and how much time they’re spending on public market comps even though these companies are in their infancy.

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