Life of a VC

BeachI just answered the question "What is it like to be a partner at a venture capital firm?" on Quora.  I thought it may be a good idea to repost here.

The question is too generic, but i'll attempt an accretive answer.

In general, I'd say it's more stressful than it appears.

  • Return hurdles for VCs are high and many return multiples that would make angels happy do not move the needle for VCs.
  • We say ~200 NOs for every yes.  This does not feel good.
  • As portfolio companies increase, the workload begins to compound.  Sometimes, busy periods for a few companies overlap, creating time squeezes.

On the other hand, I feel I am the luckiest person in the world for doing what I do.

How to Share Metrics with a VC

Data_spreadsheet_Flickr_Jorge_Franganillo.jpg_resized_460_We see about 1000 pitches every year.  That's about 20 per week.  With the majority of these, we know that it's not for us within the first 15 minutes.  We do engage further with about 400 startups every year. The first engagement is either an in-person meeting or a call.  This is the step where we start to demand metrics and data from these startups, and frequently, it's a painful process. What we typically like to see is three sets of information: 1. Historic financials Here, I don't necessarily mean the  statutory income statment, but sometimes, they work as well, as long as they reflect the management's view of the company's operations.  What we look to see is a summary of the monthly economic activity or the business, and perhaps, the unit economics.  Typical items we looks for are:

The Game has Changed – Power to the Audience

Adblock_logo_&_wordmarkNow that Apple is openly encouraging ad blockers, publishers are up in arms.  The topic dominated the tech conversation last week, and I think it is well understood by now. If you are not up to speed on it, here are a few links to skim. This development should not be a surprise to anyone in digital media.  We have been headed in this direction for a while. When was the last time you persevered through a Youtube pre-roll's full length?  How about clicking on a display ad? Apple's move is understandable.  While spammy ads are a nuisance on the desktop experience, they are a killer when you deal with them on the small smartphone screens.  Apple wants its users happy in their browsing experience, and does not have to apologise to anyone when you decide to use blockers. Ultimately the media audience is gaining power, and it will reward Continue reading "The Game has Changed – Power to the Audience"

VC Fund Economics

Ss-moneyIf you are an entrepreneur looking to raise capital from VCs, it's important to understand VC economics.  This understanding will save you time and effort by helping you identify the right VCs to target and how to frame your conversations with them. For a successful early-stage VC, the minimum expectation seems to be that in a portfolio of 20 investments, one or two most successful investments will return the fund, the next five will return it once more, and the remainder will return it yet one more time.  This gets you a 3X on your fund.  Of course, there are large variations on the distribution, but it's a good enough example to start with. If you are a $50m+ fund, you can not assume each of your investments will return the fund (unless you are a top-tier shop in Silicon Valley).  But you do need to ensure that each one Continue reading "VC Fund Economics"

The Hockey Stick

As a VC you get pitched many hockey stick stories, but infrequently see an actual one.  This week, I came across one in the case of Airbnb (on TC). Airbnb This is the graph of summer bookings by travelers on Airbnb.  I assume there are several drivers to this growth:
  • A new market: Airbnb enables a behavior that was difficult to execute before it.  Similar to Uber, its growth benefited from the fact that it created its own market, rather than merely stealing market share from incumbents.
  • Mobile growth: As one of the earliest mobile-first companies, it was always one of the top apps in the travel category in each market it operates in.
  • Social graph: The business model requires a high-level of trust.  Airbnb used the social graph very effectively to provide this trust, and thus benefited from the  virality that social networks open up.
  • Global network effect: Continue reading "The Hockey Stick"

Migrating Digital Histories

Bigdata-1The web is aging.  I remember the day my co-founder at SelectMinds, Steve Richmond, first pointed me to the new search engine, Google, in 1999.  I also remember setting up my first Gmail account, this  blog on Typepad, my YemekSepeti account, all in 2005, my Facebook account in 2006, my Twitter account in 2007, my Runkeeper account in 2010, and my Uber account in 2012.  I have had little reason to switch from these services, and continue to use them still in 2015.  In the meanwhile, these services have learned about my preferences and patterns.  Most of these services publish APIs that would allow me, or a service I'd permit, suck meaningful data out of them.  What is important for that service is that it knows the context of these services. Think of it as a Zapier or Unroll.me, not for connecting services to each other or Continue reading "Migrating Digital Histories"

Migrating Digital Histories

Bigdata-1The web is aging.  I remember the day my co-founder at SelectMinds, Steve Richmond, first pointed me to the new search engine, Google, in 1999.  I also remember setting up my first Gmail account, this  blog on Typepad, my YemekSepeti account, all in 2005, my Facebook account in 2006, my Twitter account in 2007, my Runkeeper account in 2010, and my Uber account in 2012.  I have had little reason to switch from these services, and continue to use them still in 2015.  In the meanwhile, these services have learned about my preferences and patterns.  Most of these services publish APIs that would allow me, or a service I'd permit, suck meaningful data out of them.  What is important for that service is that it knows the context of these services. Think of it as a Zapier or Unroll.me, not for connecting services to each other or Continue reading "Migrating Digital Histories"