#87 VC Deep Dives & Building Generational Firms

Hi Everyone! 👋 Welcome to the new members of @TheFundCFO crew! We recently released our VC Fund Playbook + Models @ Streamlined.Fund! Re-linking our top 2023 posts: #67 Top VC CFO Posts & References & #65: WTF is Going On in VC (+ New Fund Model Data).

Every Tuesday/Thursday, we bring you actionable tools, real-world experiences, and insider insights for #VC CFOs/Finance Pros and fund managers, #LP investors, and industry enthusiasts/people who want to learn :). As a reminder:

• Tuesday: insights + interviews. Free for everybody.

• Thursday: deeper dives on VC GPs, CFO/COO strategy, more insights from LPs/GPs, and our take on what it all means (from 15+ yrs of experience). Exclusive to Paid subscribers (most of whom expense these insights).

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“Success is the sum of small efforts, repeated day-in and day-out.” -Robert Collier

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Building Generational VC Firms - What Does It Take?

Venture capital firms are re-assessing their position, processes, and investments in 2023. This includes the generational VC firms (ones that have been around >10 years and have had a lot of success) like a16z, First Round, Founders Fund, Kleiner Perkins, Lightspeed, Sequoia, Union Square Ventures, etc.

Now more than ever, venture capital firms need to think strategically about their business model. We’ve been in a zero/low-interest rate environment since 2008 but now sit at 5%+ interest rates, which impacts VC investors, funds, and portfolio companies in a number of ways. The VC asset class has grown from single digit billions to $300 billion of dry powder in 2023.

What does it take to build a generational VC firm in 2023 in beyond? In 2021, we wrote that a #VC Fund is a Business. Use Efficiency Tools to Modernize Your Finances & Back Office.” We talked about building a modern finance function with the right fund models, playbooks, processes, and organization. Essentially, the fund model dictates a VC business model and fund strategy. You also need to supplement the right fund model with efficiency tools and the right team.

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The New World of VC - What it Looks Like in 2023 & Beyond

On a recent Venture Unlocked podcast, Tom Tunguz talked in detail about VC business models, fund models, and portfolio construction strategies relative to your fund size. “It’s time to think about business model again: what’s the return on invested capital?” Are the assumptions in your fund model, strategy realistic in the new world of VC, in 2023 and beyond? How are you building your business?

The podcast and blog archives offer a lot great insights from both generational VCs (i.e. Doug Leone of Sequoia on Invest Like the Best and 20VC) and emerging managers (i.e. Tom Tunguz at Theory and Jeff Morris Jr. at Chapter One).

After consuming thousands of hours of podcasts / blogs on this topic and spending the last 15 years investing in and working with VC funds, what are the takeaways that really matter? We share some of our top insights below:

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Picture of the Day: Austin, TX