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Steve Jurvetson Explains How to Spot and Secure the Next Big Thing…
Author: Decile Group
The Decile Group develops industry-leading offerings to transform venture capital into an ethical force for good in the world, including VC Lab, Decile Hub, Decile Partners and Decile Capital.
Watch the interview with Andy Zain, Managing Partner of Kejora Capital, a VC firm focusing on South East Asian tech companies.
Here, Andy dives deeper into his early insights and shares his strategy that took Kejora Capital from $5m to $600m AUM in 8 years.
He discusses the process of venture building in a developing market and explains why Kejora’s thesis has proven to be so successful.
Read more to get actionable insights from South East Asia’s top performing VC.
Table of ContentsVideo HighlightsOn Early InsightsOn Start-Up FundraisingOn the South-East Asia MarketOn ThesisVideo Transcript SummaryInitial Challenges and Growth: Investment Focus and Strategy: Market Dynamics and Opportunities in Asia: Future Outlook and Expansion: Conclusion
Video Highlights
On Early Insights
In emerging markets, you cannot be too niche You must focus on the infrastructure level of the digital economy
When we came into the South East Asian market 8 years ago, it was still an emerging market.…
Watch our interview with Steve Jurvetson, who has been supporting transformative businesses for over 25 years as an early investor with the likes of SpaceX, Tesla, Planet, and UPSIDE Foods; and as a Presidential Ambassador for Global Entrepreneurship (appointed by President Barack Obama).
Read our summary and distillation of video highlights below.
Table of ContentsVideo SummarySpotting Disruption: Long-term Investment Philosophy: Importance of Timing: Belief in Potential: Actionable Advice for VCs: Synthesizing Jurvetson’s Insights: Video HighlightsOn Fund SizeOn Team SizeOn the Importance of DebatingOn Fund and Partnership Dynamics On Thesis and StrategyOn Fund FormationOn Advice and Strategies for New Managers
Video Summary
Steve Jurvetson, managing director and founder of Future Ventures, is renowned for his ability to identify and support groundbreaking innovations, making him a pivotal figure in the venture capital world.…
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Decile Capital Welcomes Top Partner
Meet Marko Hara
Decile Capital has brought on Marko Hara as a Partner at Decile Capital. Marko brings over two decades of experience in venture capital and private equity, including investing in over 230 emerging managers as an institutional LP. In addition, Marko has been an entrepreneur and a general partner, as well, bringing experience from all sides of the table.
Marko has also played a significant role in internal deal flow coordination and business unit collaboration Marko led a team overseeing a portfolio of over 50 private equity and venture capital funds, as well as 20+ investments in unlisted companies. Notably, he was involved in the 2014 merger between the €8bn Mutual Insurance Company Pension Fennia and the €10.3bn Tapiola Mutual Pension Insurance Company.…
Decile Hub is the leading venture capital platform to grow and manage next generation firms. The platform has integrated functionality similar to DocSend, DocuSign, SquareSpace, Slack, and Affinity, as well as a venture accounting system, deal tracking, and specialized venture AI.
Unique features like Deal Memos allow for collaborative input from team members, with the added convenience of exporting in PDF format. The platform prioritizes data security, providing detailed access logs and ensuring user data remains private and retrievable. While Decile Hub integrates directly with Google for email functionalities, it maintains strict boundaries, never accessing user contacts. Access is currently exclusive to members of Decile Group’s accelerator cohorts.
Today we are introducing Decile Hub 2.0 with a slew of updates and new features to help fund managers around the world simplify fund management and operations.…
The Venture Trends Q4 2023 survey shows more than half (61%) lean towards a positive outlook on the VC landscape, which underscores a generally optimistic sentiment among emerging managers worldwide. In contrast, the neutral and negative sentiments account for a smaller portion of the votes, 25.7% and 13.3% respectively.
Top Trends + Analysis
The significant portion of neutral votes hints at a careful but receptive attitude towards market movements, emphasizing a balanced approach to investment and valuation tweaks. While the fewer negative votes show that even with obstacles like the economic downturn and reduced IPO actions, the general feeling towards venture capital movements is largely positive and robust. The survey highlights that an increase in VC ethics and ethical AI are equally anticipated for the last quarter of 2023.…
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VC Lab Cohort 13
Introducing VC Lab’s Cohort 13, an improved fund launch experience from the leading venture capital accelerator.
Key initiatives include a Venture Studio Track, matching managers with talent from the Venture Institute, improvements in our integrated venture community tools, increased social exposure, and other rewards. These innovations are a small part of VC Lab’s dedication to molding a bright future for venture capital.
VC Lab participants and graduates have seen the largest level of commitments from limited partners in history over the summer of 2023. Cohort 13 stands ready to assist managers closing on capital and launching their funds.
With structured activities, ongoing mentorship, top-tier tools, and an active community, the program equips managers to tackle challenges, finalize deals efficiently, and get active during this current investment climate.…
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Q4 2023 Venture Trends
Navigating through Q4 of 2023, the venture capital landscape is displaying a promising momentum. While prominent Limited Partners are being strategically cautious, their smaller counterparts have embraced the chance to support emerging VC managers on a global scale. Favorable entry points are being found in valuations of early-stage startups, and later-stage startups that have trimmed expenses are drawing in fresh capital through bridge rounds. AI companies, despite market volatility, have secured substantial funding and valuations, yet they persist in facing ethical scrutiny. In addition, a set of sweeping new SEC regulations are aimed at fostering enhanced transparency and fairness within the world of venture capital.
Vote on the Trends
Please select up to three crucial trends for Q4 2023 from the given choices, and press “Submit.”…
The United States Security and Exchange Commission (SEC) has updated its investment rules on Wednesday, August 23rd, 2023, targeting transparency, fairness, ethics, and accountability in private equity and venture capital. These changes aim to standardize practices within the industry, leading to varied feedback from venture capitalists, fund managers, limited partners, and other stakeholders.
VC Lab and Decile Group already comply with these new standards. Ethical organizations should always aim to exceed legal mandates, which generally set a low bar. Most VC Lab alumni funds are in alignment with these regulations, as well.
In contrast, many other firms and funds will need to make adjustments to their operations, from how they close Limited Partners to how they operate their fund governance. The full implications of the changes will take months to understand, as there is a lot of “gray area” in the new regulations. …
Venture capital firms navigate complex dynamics with several stakeholders to ensure their success. Central to this ecosystem are the team, whose expertise and vision drive the firm’s trajectory; the portfolio companies, startups or businesses that determine the return on investment; and the Limited Partners (LPs), who fuel the firm with capital. This article focuses on the nuances of fostering and maintaining relationships with these LPs, emphasizing their pivotal role in the firm’s longevity and prosperity.
LP Management Goals
The primary objective of LP management is to forge an enduring personal and financial relationship with your Limited Partners so that they continue to invest in and support the funds of the firm in a mutually beneficial manner.
Signs of Success
Responsive Communication: LPs who promptly reply to updates or inquiries show active interest and engagement.…
Securing Limited Partners is a formidable task that demands persistence, meticulous research, and strategic networking. For the average fund, this means courting nearly 250 LP prospects and pitching to a majority of them, only to culminate in a select few actual commitments. This article elucidates the exhaustive process, underscoring the challenges and providing a roadmap to effectively source and close LPs in the investment realm.
Researching LPs
Sourcing potential Limited Partners necessitates the usage of multiple research platforms. These platforms, whether digital tools or networks, provide data and insights about potential LPs, their investment behaviors, and affiliations.
LinkedIn: A hub for professionals, it can identify LPs by job titles, backgrounds, and company affiliations.
CrunchBase: This platform offers insights into businesses and their associated stakeholders, ideal for locating previous investors.…
As an emerging venture capital fund manager, identifying and engaging with the right Limited Partner (LP) archetypes is crucial for your fund’s success. This article aims to guide you through the process of identifying relevant LP archetypes, developing personas, creating target lists, and testing receptiveness to your fund’s offering and thesis.
Step 1: Identify Relevant LP Archetypes
Step 2: Develop Personas for Targeted LP Archetypes
Step 3: Create Target Lists of Actual LPs
Step 4: Test Receptiveness
Step 5: Refine Your Approach
Step 1: Identify Relevant LP Archetypes
Begin by familiarizing yourself with various LP archetypes, such as exited founders, high net worth individuals, family offices, bankers, tech executives, and small business owners, among others (see below). Evaluate each archetype based on their alignment with your fund’s investment thesis, industry focus, and stage preference.…
Limited partners, commonly referred to as LPs, are passive investors in venture capital funds. They are the main customers and ultimate backers of the venture capital model. Without LPs, venture capital would not exist. The relationship between the fund managers and the Limited Partners is complex. This article covers the history and reality of managing Limited Partners.
The History of Limited Partners
The concept of Limited Partners traces its roots back to ancient maritime trade, but its formal legal structure originated in France with the “commandite” system in the early 18th century. In this arrangement, silent partners, or “commanditaires,” would invest money in a trading or business venture without being involved in its operations. These investors had limited liability, which meant their financial loss was restricted to their investment.…
Venture capital firms often employ different investment models for portfolio construction to maximize returns and minimize risks. In this article, we will explore three of the main models – Focused, Dispersed, and Hybrid – and discuss their respective pros and cons. By understanding the characteristics of each model, managers can make more informed decisions about which model best suits their investment goals and preferences.
Focused Model
The Focused model is a high conviction investing approach where the venture capital firm makes a small number of thesis-related bets in companies the manager strongly believes in. For example, a venture capital firm might concentrate its investments in generative AI startups.
Focused Model Example
In the Focused model, a venture capital manager might concentrate investments in the generative AI space, believing that a small number of companies will have outsized returns.…
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3.3 – Venture Fund Metrics
Venture fund metrics provide quantitative measures to evaluate the performance of venture capital investments. These metrics help investors, fund managers, and stakeholders make informed decisions. Below are some of the most important metrics to understand:
Internal Rate of Return (IRR)
Definition:
IRR is the annualized rate showing the growth of an investment over time. It indicates the break-even point when considering the time value of money. It’s a relative measure, comparing the returns of different investments.
Usage:
Investors use IRR to compare the profitability of different investments. A higher IRR indicates a more desirable investment. It helps in understanding the potential return on an investment over time.
Example:
Suppose a venture capital firm invests $1 MM in a startup. After five years, they exit the investment, receiving $2 MM.…
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3.2 – Venture Fund Economics
Venture fund economics refers to the financial structure and incentives of venture capital funds. Central to fund economics is the 2/20 model, a compensation framework that has become emblematic of the venture capital industry. This article delves into the intricacies of venture fund economics, shedding light on the origins, mechanics, and enduring relevance of the 2/20 model, while also exploring its variations and the strategic implications of different profit distribution structures.
2/20 Model History
The 2/20 model is a standard compensation structure for venture capital funds. It consists of two main components: a 2% management fee and a 20% carried interest.
The roots of the 2/20 model can be traced back to the post-World War II era, a time when the venture capital industry was in its infancy.…
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3.1 – The Power Law in VC
The Power Law in venture capital (VC) is a principle where one single investment yields returns larger than all other investments combined, often by orders of magnitude. The entire global venture capital industry’s success often hinges on a few companies that rise to prominence, overshadowing their peers and redefining markets. This article delves deep into the origins, implications, and strategies surrounding the Power Law in venture capital.
The Power Law
The Power Law concept originated in the late 19th century with the work of Vilfredo Pareto, an Italian economist and sociologist. Pareto noticed that 20% of the pea pods in his garden produced 80% of the peas. He extended this observation to wealth distribution in society, noting that 80% of the land in Italy was owned by 20% of the population.…
A vintage year is the year in which a firm forms and closes a venture capital fund. There are periods of time when many great companies are born, such as 2008 when Square, Stripe, CreditKarma, NerdWallet, Uber, Airbnb, WhatsApp and Instagram were all started, among others. This made 2009 a great vintage year for venture capital, despite massive global economic challenges with the collapse of Lehman Brothers.
Vintage Year Importance
The vintage year is often the single most vital factor affecting the success rate of a venture capital fund. As an example, a favorable vintage year can yield up to a 5x return for a top performing fund, whereas an unfavorable one might deliver only a 2x return.
Several factors affect the quality of a vintage year, determining whether it is favorable or unfavorable for venture capital firms:
Economic Fluctuations: The state of the economy, including downturns and booms, can significantly influence the success of venture firms.…
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2.3 – Venture Capital Processes
Venture capital involves numerous processes. This article offers an overview of key procedures, such as creating an investment Thesis, forming a team, managing a fund, and others. Each procedure is critical in a venture fund’s lifecycle. This article serves as an introduction to these essential venture capital operations.
Writing the Thesis
A Thesis gives a fund its strategic direction. The Managing Partners, who are normally the founders of the firm, typically craft the Thesis. A clear, concise Thesis is crucial for guiding a fund’s investment choices and attracting potential investors.
Steps
Define the geographic focus of investments
Identify the sectors or market companies the fund will target
Highlight the unique strategy or “secret sauce” of the fund
Determine the stage of venture fund
Set a target for the amount of capital to be raised
Identify the fund’s name
NOTE: Completing a fund Thesis is an interactive process that can take four to six weeks.…
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2.2 – Venture Capital Entities
Venture capital firms consist of three main components: the Fund, the General Partner (GP), and the Management Company (ManCo). Each has a significant role in the operation and success of the firm. Understanding the responsibilities and interactions of these entities is fundamental to navigating the venture capital ecosystem. This article aims to provide a comprehensive understanding of these components.
The Management Company
The Management Company is the brand owner. It manages intellectual property and vendor relationships. Its operations are overseen by Managing Partners, and it employs full-time staff and vendors as needed. The ManCo receives management fees, which cover its operating costs. It usually resembles a small business.
Functions
Manages brand image
Protects intellectual property
Handles vendor contracts
Operates with full-time staff
Uses management fees for operational costs
Typically, in the first round of fundraising (Fund I), firms aim to minimize expenses by avoiding having staff and opting to distribute management fees instead of paying salaries.…