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.

Michael Arrington@arrington

I heard that a woman, then a junior employee at a big VC, led investment in @Cloudflare that turned $1m into something crazy like $750m in the IPO. She eventually left that firm, had no carry, and never got a thank you. This is the kind of story I would have dug into @TechCrunch

September 17th 2019

20 Retweets321 Likes

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

let me know how i can be helpful@vcstarterkit

Last week on VC Twitter 💳 @stripe gives VCs more reasons to fawn over “their amazing product” 📱 VCs debate which color of the $1450 iPhone 11 Pro Max to get 🆕 @WorkLifeVC a $5M fund for the “future of work” from @briannekimmel 🔄 WeWork considers an even lower valuation

September 16th 2019

9 Retweets163 Likes

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

• A Bicycle for the Heart: Improving Social Media

• Blurred Lines: “What’s different [about tech] this time around”

• How to Major in Unicorn

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:

Paul Graham@paulg

Valuations after Demo Day are 10x what they used to be, and the investors who try to squeeze founders on terms are still at it. So clearly there is not, as they claim, a correct price for the startup. Clearly they start from market price, whatever it is, and push for a discount.

August 24th 2019

44 Retweets409 Likes

🚲 @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.

Unusual VC@Unusual_VC

"Soil investing" is all the rage these days 😉😜 (cc: @KateClarkTweetsafd

Kate Clark@KateClarkTweets

Just learned that some founders refer to pre-seed investing as "soil investing." You guys are clever.

August 23rd 2019

18 Retweets92 Likes

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)

Ellen Huet@ellenhuet

another tidbit I found amusing: In January, WeWork announced it was rebranding as The We Company. It bought trademarks for "we." From whom? We Holdings LLC, an entity controlled by WeWork CEO Adam Neumann "we" cost $5.9 million bloomberg.com/news/articles/…

August 14th 2019

169 Retweets407 Likes

😡 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.

Anand Sanwal@asanwal

From the "it ain't talking shit if you can back it up" school of living is this 2016 letter from TopTal CEO to potential investors

August 18th 2019

181 Retweets790 Likes

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)

Trista Kempa@tristajaye

For those of you asking me if I bought my wework equity—I did not. But, not because I didn’t choose to buy it. Despite joining the company very early on, I was not offered options. Here’s a thread about what happened and my feelings about it now. /1

August 16th 2019

1,445 Retweets6,748 Likes

💸 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.

let me know how i can be helpful@vcstarterkit

The way Masa is solving this is by having Softbank issue $20B of loans to Vision Fund employees at a 5% interest rate (including $10B for Masa’s commit) Softbank now $98B of exposure to the two Vision Funds combined (which is almost as much as Softbank’s total market cap)

let me know how i can be helpful@vcstarterkit

Can you imagine personally being a GP of Vision Fund II? Fund Admin: "So your GP commit comes out to $1.08B. Will you be wiring or writing a check?"

August 17th 2019

1 Retweet47 Likes

Charles Hudson@chudson

GP commits are real for all of us, regardless of fund size. https://t.co/ndgsgT65NN

Techmeme@Techmeme

Sources: SoftBank plans to lend up to $20B to its employees to buy stakes in its second VC fund, with Masayoshi Son accounting for more than half of the amount (Wall Street Journal) https://t.co/GAIqeqUmUh https://t.co/SSQcjcHb8B

August 17th 2019

8 Retweets79 Likes

📆 Demo Day & Burning Man prep

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

let me know how i can be helpful@vcstarterkit

What next week looks like for many VCs: * Monday: Demo Day * Tuesday: Demo Day * Wednesday: "Diligence" meetings * Thursday: Coffee Meetings * Friday: Burning Man Prep & Travel

August 16th 2019

16 Retweets280 Likes

Thread of the week:

🤝 Do VC Relationships Matter?

Semil@semil

TIL many more founders than I would've expected vocalized a feeling (most borne out of experience) that they don't want to burn too many calories to build a relationship w/ a VC ahead of raising rounds. No judgment here, but that was surprising to hear in such force.

August 19th 2019

3 Retweets105 Likes

Ryan Petersen@typesfast

@semil It’s highly counterproductive in my experience. None of the people I built relationships ever funded us. In fact, building a “relationship” was a counter indicator for whether they would invest.

August 19th 2019

2 Retweets112 Likes

Del O. Johnson@DelJohnsonVC

@semil It is absolutely jarring the extent to which VCs don't understand how founders think and to which VCs' overrate their own importance. The industry has erected systems that only serve to waste founder time in service of making investors feel "helpful" blog.usejournal.com/ban-warm-intro…

August 19th 2019

1 Retweet15 Likes

Lili Balfour 🙏🐕🚴📈 👩‍🍳@lilibalfour

@semil Strongly disagree. If you don't build relationships (investors, customers, hires) you're at a disadvantage. How many people hold this belief simply because they're introverted? Best to get to know investors 6m to 1y before you pitch them.

August 19th 2019

1 Like

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).

Dan Primack@danprimack

Scoop: Ex-Twitter executives @dickc and @adambain launch startup advisory firm called 01 Advisors. Ex-Twitter executives Dick Costolo and Adam Bain launch startup advisory firmDick Costolo and Adam Bain have launched a new firm called 01 Advisors.axios.com

August 6th 2019

27 Retweets150 Likes

💰 @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.

Blake Robbins@blakeir

1/ Loving the trend of raising seed, getting to profitability and raising much larger rounds. Huge congrats to the @webflow team. forbes.com/sites/alexkonr…

August 7th 2019

7 Retweets77 Likes

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

Edith Yeung@edithyeung

Congrats to @scale_AI for raising $100M led by @foundersfund, with participation from @Accel, @IndexVentures, @sparkcapital, @ThriveCapital, @kevin, @mikeyk @adamdangelo. Read more on Silicon Valley Funding News - Week of August 12 2019.  Hims (Men’s Wellness Brand) Raised $100M Series C. Read Silicon Valley Funding News for Week of January 28, 2019.Silicon.newsmailchi.mp

August 11th 2019

2 Retweets1 Like

👤 @katherineykwu joins @notationcapital

@notationcapital is quietly building a stellar team in NYC.

Katherine Wu@katherineykwu

🌟 LIFE UPDATE!! I am *so* incredibly excited to finally be able to share this: I am joining the wonderful humans at Notation Capital! I can't think of better people to learn from and work alongside — as a VC (!!)💃🏻 @notationcapital @nchirls @alexlines medium.com/notation-capit…Katherine WuIt is with *immense* excitement that we officially welcome Katherine Wu to team Notation as our first principal at the firm. She will lead…medium.com

August 8th 2019

23 Retweets941 Likes

Top VC Starter Kit Tweets / Replies

let me know how i can be helpful@vcstarterkit

In addition to having the most expensive office space in America, Sand Hill Road is also the most helpful

August 8th 2019

8 Retweets168 Likes

let me know how i can be helpful@vcstarterkit

Once you become a VC, your math skills quickly deteriorate

Andreas Klinger ✌️@andreasklinger

@CindyBiSV @imranghory I had a VC once explain to me that in his fund he expects: 1/3 huge hits including breakouts 1/3 medium-sized hits 1/3 at least returning the money and 1/3 failing i never followed up to see if this worked out 🤔

August 10th 2019

9 Retweets134 Likes

Leo Polovets@lpolovets

@vcstarterkit This must've been a top tier VC. Everyone talks about proprietary deal flow, but that's rarely an actual thing. But being able to squeeze an extra third out of your portfolio? Now that's a legit competitive advantage! Respect. /cc @andreasklinger

August 11th 2019

1 Retweet24 Likes

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.