What happens when you turn $1m into $750m as a Junior VC

The answer will not surprise you + Last week in VC (9/16/2019)

As a VC if you end up leading an investment into a company that ~750x’s and returns the fund, you might expect a piece of the carry or some kind of thank you, but if you were a junior VC when you led that investment, you’ll likely never see anything other than the GP’s new mansions in the Hamptons on Instagram.

It’s a side effect of how junior VC roles are usually structured (a nice salary package with no carry and limited prospect at promotion). You get none of the financial upside (carry) and marginally lower downside.

If an investment works out, it’s because the partners approved it (or a partner will try to share/take the credit). If it doesn’t work out, the partners get to diffuse the blame: “it’s the associates fault — they are still learning after all”. To be fair, not all firms/roles are like this, some firms let associates invest their own money into a sidecar vehicle.

Disclaimer: I haven’t verified what @arrington is hearing, but it shows a completely plausible scenario

Last Week in VC

Last Week on VC Twitter - 9/9/19

If you give a mouse a cookie, soon the mouse becomes an activist investor in your company

Quote of the week

Brex is using some their VC money to open a restaurant in South Park, but the most beautiful part might have been this quote.

“how could we … make something that was awesome, awesome again without the worries of it being like a super profitable business”

(Source: BI)

Last week on VC Twitter

💰 CultureAmp raises from Sequoia China

If you’re wondering why this is in Sequoia China’s wheelhouse, it is because CultureAmp is based in Melbourne.

✂️ WeWork is looking at a substantial valuation haircut

Don’t worry about Softbank, they’ll be fine. Only $2B was invested in equity at the $47B valuation and as they say, “Name your price, I’ll set the terms”

🦄 Assurance IQ (a Seattle based self-funded insurance seller) was acquired by Prudential for $2.35 billion

A low profile bootstrapped startup, founded by a former a16z partner and an experienced insurance “operator”, quietly built a profitable business that was recently acquired by Prudential.

📦 Activist investor Starboard announces a 7.5% stake in Box

If you give a mouse a cookie (get rid of the dual-class share structure), soon the mouse becomes an activist investor in your company….

Good Reads

Last Week on VC Twitter — Week of August 26th 2019

VCs continue to yell "price matters" into the void to maintain their sanity

It’s Burning Man week. On the playa, no money is exchanged, instead favoring a gifting economy. This is part of what makes it so compelling for VCs, it’s a break from their usual job of selling money.

Surfacing Interesting Threads

Here are some posts/threads that were interesting but didn’t get a lot of attention on VC twitter. Let me know if you prefer this kind of content over a recap of the week’s news (which is at the bottom of this newsletter)

How I Invest by Brad Gillespie

A README file for entrepreneurs and LPs about how Brad Gillespie (at IA Ventures) operates

https://medium.com/@bradgillespie/how-i-invest-9b9971992871

Seed Stage Squeeze

In what has been the busiest summer on record in SV early stage venture, Semil Shah (Haystack) posits some thoughts about why the seed stage market has gotten so competitive.

http://haystack.vc/2019/08/18/the-summer-solstice-and-seed-stage-squeeze/

Marc Andreessen: Software is going to eat healthcare

Marc Andreessen & Jorge Conda talk about how software will eat healthcare.

https://www.breaker.audio/a16z/e/50105370

Last week on VC Twitter

💰 YC Demo Day. $20M post is officially the new $10M post

Consensus View: The high valuations might come back to bite the companies later
Contrarian View:

🚲 @Tandem_HQ wins the "hottest" YC demo day startup award. Raises a $7.5M seed at $30 from a16z

Consensus view: “Remote working is hot right now”

Contrarian view: “They should have accepted our term sheet over a16z”

📊 DataDog releases their S-1

Consensus view: It’s a solid SaaS business.

Contrarian view: Better rush out before the IPO window closes

🌱 @jvrionis tries to rebrand pre-seed as "Soil Investing"

Consensus view:

Contrarian View: We’re going all in on Soil Investing. Let’s have the venture firm commision comics to get likes on twitter.

Last Week on VC Twitter — Week of August 19th 2019

VCs really should have expected the higher prices for YC companies when Demo Day moved to SF

It’s every early stage VC’s favorite week of the year: Demo Day week! Personally, I can’t wait for all of the incredulous tweets about the valuations that YC companies are looking for.

At the the bottom of this edition of Last Week on VC Twitter, we find out if VCs and founders think “relationship building” matters.


📊 S-1s for WeWork and Cloudflare released

Big winners for WeWork: Softbank, Benchmark, Adam Neumann

Big winners for Cloudflare: Fidelity, NEA, Venrock, and Pelion Ventures (a Salt Lake City based firm)

😡 Toptal founder outed for blocking VCs and employees from actually getting equity

If he had not prevented employees from gaining equity, I would have admired the move. Sure his reputation among VCs is burned, but if things go well, he’ll never need them again. VCs are sophisticated counter-parties and knew what they were getting into when they signed the notes. If they don’t like it, they can ask for the principal (and interest accrued) to be paid back.

Employees on the other hand, aren’t sophisticated counter parties and often find themselves getting the short end of the stick (see this thread about an early WeWork employee and not getting equity)

💸 Softbank loans $20B to Vision Fund employees to invest in Fund II

$10B of which will be given to Masa. Say what you want but he is a man comfortable with risk. This ups Softbank’s total downside exposure in Vision Fund II to $58B.

📆 Demo Day & Burning Man prep

160+ companies in this batch. Three Days of Pitch Madness (Alumni Demo Day was today).


Thread of the week:

🤝 Do VC Relationships Matter?

Last week on VC Twitter — Week of August 11th 2019

At this point, round labels (A vs C) are only used by lawyers to figure out how much to charge

If you live in SF and read this newsletter, there’s a good chance you went to Outside Lands this past weekend, but the real question is if you were able to watch the music festival from the comforts of a VC firm sponsored cabana.

Here’s what happened last week on VC Twitter. Check out the bottom of this post for a chart of the number of seed rounds by market from Tomasz Tunguz.

Last Week on VC Twitter

🆕 New firm: $200M fund for “01 Advisors” from @dickc and @adambain

Their Form D says they’ve raised ~$135M of the $200M and indicates that they’ll be based in the other hip spot for VCs in SF (Jackson Square).

💰 @webflow raises a large $72M A round from @Accel (at ~360M+)

People love their product. $72M is a pretty large “Series A” and it goes to show how round labels are basically useless these days.

🦄 @scale_ai raises a $100M C round (at $1B+) from @foundersfund

👤 @katherineykwu joins @notationcapital

@notationcapital is quietly building a stellar team in NYC.

Top VC Starter Kit Tweets / Replies


Value Add Content

Tomasz Tunguz (@Redpoint) recently posted a visualization of the number of seed rounds by market. Number of Seed Rounds might not be an amazing metric, but it’s still revealing. The standouts are the the demise of social media/ad-tech and the rise of AI/FinTech/Blockchain.

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