#89 VC Deep Dive: Brad Gurley (Benchmark) + David Sacks (Craft)

Hi Everyone! 👋 Welcome to the new members of @TheFundCFO crew! We recently launched a paid tier and released our VC Fund Playbook + Models @ Streamlined.Fund! Re-linking some 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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Picture of the Day: Big Timber, MT

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“When I let go of what I am, I become what I might be.” -Lao Tzu

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VC Deep Dives & Building Generational Firms - Reflections

Last week, we dove deep on some notable VCs & unpacked some insights around building generational firms from said VCs (#87 VC Deep Dives & Building Generational Firms). We wrote that “now more than ever, venture capital firms need to think strategically about their business model.”

There’s a lot of great content from notable VCs, LPs, and CFOs/finance pros on the internet if you look hard enough. The challenge this newsletter tries to overcome is pulling out the insights out that really matter, as well as finding the most current content that overlays historical lessons with current market dynamics, which are changing faster than ever.

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Combine Bill Gurley, David Sacks, Brad Gerstner → Unique Insights

It was therefore very timely that notable VC investor Bill Gurley joined the All-In Podcast last week, where he went deep on a number of VC topics w/ David Sacks and Brad Gerstner. I’ve listened to thousands of hours of VC podcasts over the past decade and can say that this one was in the top ten. What made it so great?

Here is the list of key topics discussed, as well more detailed takeaways below (keep scrolling down!). Key topics covered in the pod include the state of series a's, dry powder misconceptions, vc market update, ipo window opens, incentives to go public soon, macro picture, and more.

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Repost (Relevant to this Conversation): Why Bill Gurley & Josh Wolfe Think VCs Won't Deploy All Their Dry Powder Anytime Soon

First and foremost, undrawn VC dollars are not on the IRR clock. There is no urgency to draw them down. The money isn't actually at the VC firm, they are still sitting in the coffers at the LPs. No VC firm I have ever been exposed to feels "pressure" to "get dollars to work."

On the back of a market reset, & w/ portfolio valuations being slashed, GPs are mostly sharing bad news w/ LPs. No GP wants to look aggressive/carefree. Imagine being a teenager with two speeding tickets & a fender-bender insisting on taking the new family car out Saturday night.

Additionally, LPs are in a tough spot from a liquidity perspective. New tax laws & mandates insist they pay out ~5% each year to their constituency. Meanwhile, outbound liquidity from VCs (IPOs/M&A) are at a 15 year low (all but stopped). GPs know this.

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Top Takeaways from Bill Gurley, David Sacks, Brad Gerstner on All-In

1. VCs have moved up to bigger deals to make more (and easier) money (Gurley). A lot of people realized you can get 2.5% mgmt. fee investing $200m+ per deal. That’s a much easier lifestyle than taking board seats and doing work. Example math: $1b x 2.5% is $25m of revenue. $100m x 2.5% = $2.5m. Obvious yet powerful when you see the numbers

2. The VC market has stabilized (Sacks). The VC market peaked in Q4’21 in terms of valuations and amount of money being deployed. It kept going down all of 2022, bottomed out in Q1’23. Today, the pace of deployment has stabilized at pre-pandemic, 2019 level