Shannon (Brady) Paolucci

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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During our Annual Investor Day, we discussed a trend we’ve been observing in the VC market: Funds increasingly using “extra downside protection” to compensate for slow growth & inflated valuations of companies. We’re now starting to see some skeletons come out of the closet (and, ironically, they might be the driving force that will re-open the IPO window). First one out: ServiceTitan https://lnkd.in/eNMuPAe6 ps: despite the compounding IPO ratchet structure, I believe ServiceTitan is a solid company and, at the right price (factoring in all adjustments), it's a great deal!

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Markets talk. We listen. We've from heard from capital allocators (#VC, #PrivateEquity, #FamilyOffices....even #VentureStudios, #Incubators and #Accelerators) that due diligence is a bottleneck to deal flow. It's time-consuming, expensive and often, subjective. We've launched #VentureIQ by the 9point8 Collective to directly address this problem. VentureIQ is an AI-enabled diligence solution that provides rapid scale diligence reports with exceptional fidelity and demonstrable cost efficiency - all within a single business day. We're in our soft launch, now. So, if you want to gain back valuable time and expose the long tail of deal flow diligence, shoot me a DM or visit VentureIQ.ai.

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Kettleborough VC has been active for ~6 years, invested in ~30 companies, gone through ~80 funding rounds, witnessed ~12 exits including ~4 instances of partial principal erosion, seen ~4 seed to $100M journeys, tracking ~29% XIRR across the portfolio. A couple of IPOs from the portfolio surely seem very much in line ahead.

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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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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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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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Earlier this year, we surveyed our fellow Los Angeles-based GPs to get a pulse check on the LA venture ecosystem. Here’s what we found: 💗 Deal flow is healthy, and most LA venture investors (68%) are seeing the same or more deal flow YoY. ✈ LA investors are spending time in a variety of markets, with NYC, Austin, and SF following closely on LA’s heels. 🔍 Innovation is concentrated in AI and machine learning, space, and commerce. 💸 Funding is happening, but it’s barbell-shaped, with deals concentrated at the early and late stages. Funding post-Series A has been challenging. 🚩 LA is differentiated, but not without its challenges. Key difficulties include not attracting enough AI talent (despite having the largest number of engineers graduating from our region over any other in the United States); talent relocated to more tax-friendly or less expensive locations; and the great SoCal / NoCal divide 🙏 Thank you to all our many respondents! I’m so glad to be part of a venture ecosystem that includes great minds like Anna Barber, Brent Murri, W. Christine Choi, Sarah Tomolonius, Rob Smith, Win Chevapravatdumrong, John Tabis, Jill Royster, Jesse Draper, Ashley Balla, Britt Danneman, Tram Lai, Carmen Palafox, Elaine Russell, Deborah Benton Amanda Schutzbank, Brian Lee, Petra Griffith, Minnie Ingersoll, Shamin Walsh, Gabe Greenbaum...wow, this list could go on forever...plus too many other exceptional humans to name. You know who you are! Explore our findings more deeply with our survey dashboard: https://bit.ly/3JsaLaB

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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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A new era of deep tech has emerged. First time funds will raise “unheard of” amounts of capital to fuel next gen deep tech startups - producing outsized, superior returns for LP’s compared to the rest. Prudent investors will act on this data and shift investment strategy as LP’s or risk being left behind savvy wealth managers and CIO’s / FO’s who saw this trend begin 4 years ago.

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Good Summary that really highlights the VC model. Interesting additional facts about Technology Start-ups - According to CBInsights: 29% of startups fail due to running out of funding and personal money. 42% of startup failure after misreading market demand 82% of businesses that went under did so because of cash flow problems. 10% of startups fail within the first year. I am a big fan of the fail fast philosophy when it comes to 'fast tech' Technologies Companies. What happens to all the deep tech and hard tech companies that are building substantial market moving technologies? I see Rex Capital LLC. very much aligning with their interests.

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Insightful breakdown from my great Partner Omri Amirav-Drory on the simple factors that really separate the top 1% of investors from the rest, and how more operators should become investors! https://lnkd.in/gEiZdT2h

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Fin Capital’s Fintech CEO Pulse Report is out! We surveyed over 50 CEOs and C-suite leaders of private companies from our portfolio and the broader fintech industry during June and July 2024 to get a quick pulse on what’s top of mind for fintech’s leaders. Here are some key takeaways: Optimism in the Air: More than 60% of CEOs reported being bullish or highly bullish on the fintech industry for the second half of 2024. Regulatory Changes on the Horizon: CEOs identified Cryptocurrency, Open Banking, and Buy Now Pay Later as the top three sectors likely to see increased regulation by the end of 2024. CEOs Want Business Development Support: Beyond capital and fundraising, business development support emerged as the top area where CEOs seek investor assistance.For more insights, including comments from my colleagues Ren Riley, Logan Allin, Matthew D. Mann, CFA, and Stephanie Perez, check out the full report here: https://lnkd.in/euHK8-9B

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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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All VCs are founder friendly – we all collectively understand that without founders, we don’t have a reason to exist. However, being founder friendly means a lot of different things. We at Touring Capital take pride in being the first call when founders need a second pair of eyes as they view us as non-judgmental board members who can problem solve together. We also look out for founders by preserving founder dilution and raising the right amount of capital needed for the business. We don’t force founders to take a specific amount of capital because of our fund size. In fact, capital efficient founders self-select us as we work with them to minimize dilution and preserve optionality. If they want to go all the way and build a massive business with a view to a public market exit, then more power to them. We have backed founders like Eric S. Yuan at Zoom and Johan Brand, FRSA at Kahoot! which were able to go public with significant founder ownership. However, if our founders decide to team up with a larger company earlier in their journey, they still own a large chunk of the company and are rewarded with a lifechanging financial outcome. Founders like Ankur Singla and Tasso Roumeliotis decided to partner with larger companies in their first forays and are now back in the game with their next acts, Exaforce and Numa respectively (and we are lucky to back them the second time around). It’s all about providing optionality for founders, not about our check size. Here's to a true partnership with the next generation of visionary founders at Touring Capital. Samir Kumar Priya Saiprasad Evan Wijaya

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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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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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