Jason Calacanis’ Post

Transcript

Transparency bonus points. There's certain levels of just giving a portfolio review, just thinking about what the LP's really need to understand when you're managing a portfolio, it's what's at risk and where's my potential upside. And if you're communicating that on an annual basis, I guarantee you will be getting major transparency points from your investors. So that's really around client service and investor relations, but it's really about fundraising as well because if you ask about any LP. What's the number one way that they source new funds? They'll say word of mouth or other LP's. It's not unfrequent. It's not in the press, it's not in the Midas list. It's who are the other investors out there that are actually saying good things about your fund? And So what does that mean? The best way to fundraise is making your existing LP's happy and that leads to good investor relations. Or that comes from good investor relations. You know, people come to me a lot and ask for advice about fundraising or they're, and it's too typically when they're stuck and they'll say, Megan, I just don't understand. Our track record is really exceptional and we're having a real time raising capital. And I say one, don't worry, this is the hardest time to raise capital in 25 years that I've been doing this. It is the hardest time for everyone, full stop. And there's a lot of reasons that we can just discuss of why that's happens and why that's happening. But it's a lot around this formula. I didn't make U this formula. Someone showed it to me once and I thought it was absolutely brilliant and spot on. Because your track record matters, you gotta layer in your differentiation on top of that. But a lot of it is reduced by this underestimated factor called complexity. And what is complexity? It's are you a first time fund? Do you have paper returns but not DPI? Have you had team changes? Is your performance? Concentrated around one deal, have you had changes in strategy, strategy drift? Are you over marking your portfolio where all of the LP's know this is like this is an overestimated track record? And then there's something called the bucket issue. A lot of investors have buckets. That's the way they allocate capital. They have a bucket for early stage, they have a bucket for buyouts, they have a bucket for real estate. Are you outside of a bucket? We face that sometimes at Altimeter because we are multi strategy. And people sometimes they like early and they do late. So we are, we have a bucket issue for some of some LP's. And so I just think you really have to rationalize what you can accomplish when you're raising capital by really taking a firm look at what your complexity factor is and then layer that into your pitch. So face it head on. Don't bury it because it's going to come out and the reference calls or as they dig through and you could set, you know, really take it on. And I know this is something, you know, Jason and I talked about this when we evaluate the presentation together, it's like, let's talk about how your strategy is evolved. Address that head on in your pitch. And I think it's it's probably that piece of it is probably the biggest mistake that I see GP's making as they put together presentations and as they get frustrated that capital isn't coming. And like I said earlier, everything is achievable. You can get there if you have a rational fun size and we can talk about that a little bit. I think the one thing the market will give you what you need, you can't over raise because LP's truly understand and they'll evaluate your deals, your deal size, the markets, they're highly intelligent and it will rationalize. You gotta be rational about your fun size. VC is pretty simple as far as I'm concerned and how you have to pitch your fund, it doesn't need to be in this order. That how you explain your differentiation. It's not just about track record, but there's five basic components in venture capital. It's sourcing, picking, winning and I put the picking in portfolio construction, how you add value and exit. I mean it's basically those five components. You have to define your differentiation at every turn, otherwise you'll be leaving part of your strategy off the table. And this is really what investors seek to understand. Unfortunately, there's about 2000 VC funds that will raise. Capital or try to raise capital over the course of the next 24 months. That's an insane amount of product. There's going to be a lot of really disappointed hands out there. And so you have to show that you're really differentiated. You can access basically any VC fund today. You can access Sequoia, You can buy a secondary and get on the list. And I hate to say it, but everybody's open. Even the funds that are oversubscribed, I would argue they're open because there's ways to get in. And so you really have to be sharp. About why you deserve to be at the table, and that comes from these five components. As a founder, there are some crucial questions you got to ask yourself. Do you know how you're hiring plan impacts your burn rate? Do you know how much cash your startup has right now? Are you living in spreadsheet chaos? Well, if you want to have the answer to every investor question before they ask it, you need to check out Runway. This product is extraordinary. They've completely changed the way startups handle their finances. By the way, what an incredible amount of Runway. Government talking to founders about the runway all the time. Are you kidding me? Good job runway O what do they do? It's elegantly simple. Runway connects your accounting hour and all your data sources so that you map growth accurately. Financial modeling that you can set up in plain English and ask questions to and create reports for investors and your executives that auto update in real time. 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