Tag: fundraising

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The reality is VCs for the most part sort of care.

What I can tell you 100% for sure is one you have even a small team, VCs:

• Will all look at your Glassdoor ratings. This is so easy to research / see.
• Will all do due diligence at least on how CEO is perceived, internally and externally. After all, this is a big part of the bet. At a minimum, they’ll talk to prior round investors for sure. And anyone in their extended network they know that used to work there.
• Do background checks on CEOs and generally all co-founders. This is pretty standard. But sometimes, not much deeper than looking for criminal acts, fines, etc.
• Are looking for inspirational leaders, especially in SaaS/B2B.  After all, you are always selling as a CEO.  To customers.
  
  Continue reading "How Important Are Happy Employees When VCs Invest?"

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Q: What don’t they tell you about venture capital firms?

A few things that aren’t obvious when you raise venture capital:

• Your VC partner may leave. There has been much more transition in VC firms in the past 5+ years. Partners leave to found their own firms in particular all the time now. Non-partners leave to join hot firms. You are stuck with the fund as an investor forever. But will the partner you are working with stay?
• VCs are well paid, but not close to top founders. The top founders make so, so much more. So yes, many VCs live a pretty good life. And that can be grating as a founder, when they trek over to your crummy office (when we had offices) in their Teslas and such. But the very top founders make so, so much more. The math here: VCs or Founders: Who Makes More? | SaaStr
• No, Continue reading "5 Things No One Tells You About VC Firms"

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Why Do VCs Want To Own So Much When They Invest?

It’s confusing. Why do VCs need to own “so much”? Why do they often have these specific targets?  Isn’t just making your investors a good return enough?

It’s because it’s really hard for VCs to make enough money otherwise.

To meet its own financial goals, a VC firm has to return 3x the amount it invests. And to reach that goal, to simplify, for most VC funds, each investment needs to be able to “return the fund”, i.e. return 1x the entire amount of the fund. Almost all VC firms have this model, that their top winner returns 1x the entire fund.

So let’s break that down for say a $500,000,000 “exit”. That’s a big exit:

• If a $25m pre-seed fund owned 5%, a $500m exit would “return the fund”.
• If a $50m seed fund owned 10%, a $500m Continue reading "Why Do VCs Want To Own So Much When They Invest?"