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Venture Capital Roles

There are many roles and titles within a Venture Capital firm that encompass a large set of functions and duties. Though each venture firm structures itself in a slightly different way, new fund managers should familiarize themselves with these titles.

Some venture firms have a flattened / equal partnership model while others have some sort of hierarchy. The hierarchically structured firms and the roles within them can be more opaque. 

Below is a complete list of all the investment side roles and their functions.

Partners

Before we dive into the specific partner titles we should note that Partner titles are at times interchangeable and their specific roles can differ from firm to firm. However, all partners have some sort of stake and investment in the fund and are the key decision-makers. The partners’ seniority in the firm can also dictate how much carry they get and their influence throughout the firm.

Partners also hold the most power internally in a venture firm and can sponsor / fast-track deals to the investment committee, where they have voting rights. Though LPs front most of the capital, they cannot qualify as policymakers, if they wish to keep their limited liability.

Partners sit on boards of the companies in the portfolio and most source their own deals as well as evaluate the deals coming down the investment funnel. Partners have legal liability and fiduciary responsibility for the actions of the firm. 

Below are some of the partner titles you might see in a venture firm.

Managing Partner

Managing Partners sit at the top of the firm hierarchy and usually are owners in the managing company; consequently, they control the venture firm.

They sit on the investment committee and vote on investment opportunities as well as take board seats in portfolio companies. They are the main point of contact with limited partners and make most of the strategical and executive decisions, such as mapping out the funds long term strategy

In larger funds, the Managing Partner may have risen through the ranks of the firm or may also be a founding member of the firm. These partners can choose to take backseat roles and may have other endeavours. 

In newer / smaller funds, Managing Partners are typically the partners who created the venture firm and closed the first fund and have a much more encompassing set of duties and are in charge of the operation of the fund.

Partner

This can mean any particular partner role. It can also mean that the firm has a flattened partnership and all partners have the same status and carry. 

In hierarchical funds, you will typically find adjectives such as; junior, general and senior accompanying the term partner. These terms are a way of distinguishing seniority in the partnership. Seniority has an impact on the carry a partner gets, and the junior members get less carry if the partnership is not equally distributed.

Though Junior partners also commit capital into the fund, they may not always sit on the IC, depending on the fund. They can however sponsor deals to the committee. 

Partners are in charge of the daily strategic activities within the firm or a specific fund and tend to focus on the portfolio management of the firm or the individual fund they manage. They offer operations, domain and administrative expertise both in the venture firm and the company boards they sit on. 

They will both source their own deals and evaluate inbound deals brought in by Venture Partners and the rest of the fund. They can write checks and execute deals.

Principal

They’re senior members of the investment team who source deals and work with the entrepreneurs in the portfolio.

Though they are not on the investment committee, they have their own deals and at times may get a share of the carried interest from the deals they bring in, depending on the venture firm.

As partners in training, they work closely with the partners on deals and other important functions of the firm. Principals sometimes have other designations such as Investment Managers, VPs …etc

Associate

Most established funds have associates who conduct in-depth research into industries, market trends, companies and bring in deal flow. They’re less senior members of the investment team but they do a lot of the heavy lifting in the early stages of the investment process.

They own the early due diligence process and conduct many of the vital operations tasks in the firm. Though they cannot write checks they can champion a deal and run it up the chain of command via deal memos. Most firms hold Monday meetings, where investment opportunities from the previous week are reviewed by the partners and the week’s agenda is set.

You may see differentiators in seniority in their titles such as junior and senior.

Analyst

These individuals occupy the most entry-level position in the fund. Typically they work under an Associate to help with screening inbound deal-flow and conduct early due diligence as well as to conduct research into potential investments.

Venture Partner

Venture Partners are very different from the aforementioned partner titles. They’re strategic allies of the fund who help with things such as deal-flow, fundraising and operations, typically in exchange for a commission in the form of carried interest or in rare cases a salary. Their responsibilities and compensation are outlined in a Venture Partner Agreement. 

Though they have an official title, they typically don’t reside within the firm and may not always be involved in its day companies.to day activities. For new fund managers, they can be a great asset as they are usually well networked and experienced in a particular domain.

Like other partners, they can also advise and sit on the board of directors for portfolio companies.

See below for more resources on venture capital firm titles and hierarchy.

Additional Resources:

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Insights

Interview: Andy Zain on how the top VC in South East Asia was built

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.

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. What I mean by digital infrastructure is the array of services it takes to launch a product or service.

For example in eCommerce, services such as payments and logistics are a necessity. In the US these services are in ample supply, however, in emerging economies, these areas present a great opportunity for VCs.

We also found that entrepreneurs are typically first-time founders in emerging markets. Though some have started companies in the past, most do not have experience in building and scaling tech companies.

This is why we opted for the focused venture building approach rather than the spray and pray model and why we like to bring in founders into our office. With this approach we can leverage our own experience as entrepreneurs and help the founders directly.

In developed markets, the spray and pray model can work very well, but not in emerging markets. We must contribute to developing the ecosystem. As VCs we are change agents, so we should not take this responsibility lightly.

On Start-Up Fundraising

We give Pre-Series A companies, Post-Series A investment

Fundraising in emerging markets is very inefficient for founders and can take four to five months, forcing them away from their products at a crucial stage.

If the company is raising $1m, we like to offer them $2-3m. At this stage of development in the ecosystem, we like to invest a larger amount than most (in stages with milestones), so the founders can focus on building their company.

This way we deploy our capital much quicker, typically in 1-2 years and focus on a few companies per fund. We use the remaining time to help, mentor and groom our startups.

We’ve found that this formula works very well and our success rate is close to 80%, while we only lost money on 5% of our investments. It’s a great model when the ecosystem and market are in their infancy and though our fund is much bigger now, we still follow this recipe to some degree.

On the South-East Asia Market

We are in the Golden Era in South East Asia

There are opportunities in almost every market, which makes it prime time to be here. The region is also not very saturated. Most of the unicorns have come from a handful of places such as Singapore and there is still a long way to go in places such as Indonesia, Thailand and the Philippines.

There’s a record level of investment coming into S.E Asia, and we utilize our know-how to develop and invest in many first time founders. South-East Asian GDP is at the level of China when it produced companies like Alibaba, Tencent, Baidu and the region produces its own unicorns who have started to IPO.

This region is also incredibly fast in producing unicorns. Typically it takes over twelve years to create a unicorn and IPO. Here we’ve seen them built and exited in as quick as eight years, they can even reach unicorn status in two years.

The region is ready for scaling, and things are moving much faster. We have over 600m population of which 350m has mobile and broadband access, which is larger than the US. Consumers here are able to adopt and consume tech much faster.

On Thesis

Our overarching thesis is hands-on synergy

Focusing on digital infrastructure is our strategy

We have multiple funds with unique segments and theses. We focus on spaces where we are experts and we invest in areas that can provide synergy for the ecosystem we are supporting. This way we can push long-term trends and also have short-term flexibility and agility.

When we launch or back a new business, our larger companies can immediately provide synergistic partnerships whether it’s mentorship or something else. To accomplish this we act as an intermediary between our large portfolio companies and much smaller ones.

We can do this because of our tight-knit relationships and our large stakes in these companies. This is why we choose to work very closely with a few companies. It wouldn’t be possible if our portfolio consisted of hundreds of companies with smaller stakes.

We only focus on areas we understand and where the market is ready. This is why we don’t invest in DeepTech or Crypto. All the talent for these industries is not here so it doesn’t make much sense for us to invest in such areas.

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Insights

Steve Jurvetson on Investing Smarter

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).

On Fund Size

The bigger the fund size the worse the returns

A $1bn fund cannot perform as well as a $50m fund

However, the conventional line of thought used to explain this may be wrong.

The industry has always explained the loss in performance with phenomena like ‘regression to the mean’ and the change in the stage of the fund, the ticket size and the increase in deals per partner.

I think that there is an independent reason that you can statistically discern, which is the team size.

On Team Size

It is statistically clear that when teams are bigger they make worse decisions

In Google, the average programming team is five. Beyond a team of seven, you have diminishing returns.

So I think that nine-person groups in a partnership are not a team. They usually have sub-groups / committees and it negatively affects decision making

Smaller is better in Venture Capital, but one is not great. As one, you have no one to bounce ideas off. This is why I’m loving being in a partnership of two at Future Ventures. I think I would be a worse investor if I was alone.

Even the best startups come from dynamic duos. At Apple you had Jobs and Wozniak, Yahoo had Yang and Filo, even Ellison had Miner at Oracle and obviously Page and Sergey at Google.

The mutual respect between two amazing people is a recipe for success. It sets out a similar culture as the company grows and the two characters balance each other. 

On the Importance of Debating

In 2012, I loved debating Peter Thiel on the future of electric cars and Moore’s Law

He is the only person who will argue 180 degrees on the opposite side on those topics and take a contrarian position.

When you have to defend a position you deeply care about, it really makes you think and is very fascinating.

A lot of my great investments such as SpaceX have come from internal debates and repartees I’ve had with someone else rather than a profound personal epiphany. 

On Fund and Partnership Dynamics 

You cannot have a diminutive hierarchical structure and expect junior members to fully challenge you on ideas

Open discourse allows us to arrive at the truth. Creating an atmosphere in your fund where debate is accepted is very important. When bringing in junior members, you must allow them to be contrarian.

Sometimes firms create argumentative cultures to compensate and offset groupthink which is unhealthy on so many levels. In contrast, at DFJ we had all the junior members come in with expectations and the potential of becoming a partner and not as subordinates. 

Lastly, the investment committee’s consensus policy is also very important. Having a unanimous consensus model may work with small tight-knit teams, but is very challenging in large teams. In our scoring model, a ‘passionate minority’ could outvote a majority. This allowed me to fight very hard for our investment in SpaceX and convince the IC.

On Thesis and Strategy

I can easily encourage everyone to follow and copy our core strategy

This is because our strategy is inscrutable from the outside, kind of like Tesla putting out the ‘Master Plan‘ 10 years in advance.

Unlike most firms, we didn’t pitch our specific areas of focus to LPs. Our core strategy is our ‘process learning’ and investing in things we’ve never seen before, which are adjacent to an area of expertise. 

For example, UPSIDE Foods was adjacent to synthetic and re-engineering biology, where I had previous experience. Interestingly, I had written a blog post about my interest in investing in this space and I think Uma, the founder of UPSIDE Foods, was keen to speak to us because of this.

It also sparked an interesting dialogue with Moby, the famous vegan, which really helped refine my thinking on the matter and connected me to groups focused on this topic. 

On Fund Formation

Usually, it is brutal to raise money for a first time fund

I should disclose that we came in with a great track record and a vast network so our journey might be different from most new fund managers. The process took around three months, which is incredibly fast and not typical.

It is very important to think about your successive funds early on and include your plans in your discussions with LPs. The more experienced LPs will ask about this so be ready

We found a statistical correlation that showed a partner’s personal track record was a 6X better predictor of future success than the firm the person was previously at. So we were able to leverage our past performance in our pitch. 

On Advice and Strategies for New Managers

Focus on change that matters and the money will follow

Companies that are going to change the world like SpaceX and Tesla are what really excite me

Looking back at my life, I’ve had enterprise software investments that went from $700,000 to going public at $11bn and I am having trouble remembering them.

In the long run, companies that improve the world in a meaningful way are much more satisfying than those that just made the most money. I would urge you to think long and hard about what you care about. It will correlate with success so much better than being a momentum investing, arbitrage-seeking opportunist. This tactic will not work long-term.

Secondly, on strategy. Early on, don’t just follow other venture funds and the warmth of the herd. 

Bill Joy has a saying that “people outside your company, on aggregate, are smarter than people inside your company”. Don’t assume you are smarter and can out-execute others, it is a doomed scenario if you do. This cannot be a basis of long-term strategic advantage.

Focus on what differentiates you. Most new entrants are working much harder than me and many other established VCs. Go where the rest of the herd is not looking and where the puck isn’t moving.

Here is a great anecdote. In 2015, SpaceX raised $1bn. This amount exceeded all historical investment into space by the venture industry by 2X. Subsequently, it has gone up to multiple billions every single year. There are now over 500 venture investments into space. In stark contrast, when we got in, there were 5 at most. 

This content is provided by VC Lab, the venture capital accelerator. 

The free 16 week VC Lab program provides guidance, structure and a network to complete a fund closing in 6 months or less. Since mid 2020, VC Lab has helped launch over 100 venture capital firms around the world.

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The Domicile Report

Fund Domicile – Netherlands

Netherlands Summary

Fund Structure CV, NV and Coop
CostThe AFM charges €4,400 for a small managers regime registration
Formation can become costly depending on the law firm or tax advisor engaged
TimingVaries depending on the regulatory regime
Small Managers Regime is considerably quicker and better suited for new fund managers
Fund Marketing Fund Managers are subject to AIFMD
AIFM required to gain approval from AFM prior to marketing fund to investors in the EU
Tax TreatmentDependent on the tax regime – open / closed and many other variables
Netherlands Private Equity & Venture Capital Association https://nvp.nl/en/

Netherlands Overview

The Netherlands is quickly becoming a hot spot for new fund managers due to its relatively cheap costs in the EU and tailor-made “Small Managers Regime” for smaller funds. As a jurisdiction with one of the most double tax treaties and clear-cut cross-border capital deployment regulations,  fund managers can partake in many of the investment opportunities across Europe and raise capital with relative ease. The Netherlands’ other strengths come from its stable, albeit slightly complex legal framework, as well as its decades-long reliable economic environment.  

While the Netherlands is a favorite spot for corporations to hold their IP in a tax avoidance scheme referred to as the Double Irish with a Dutch Sandwich, it is not as beneficial for established and large AIFs. Though the Netherlands has not traditionally been seen as a jurisdiction to domicile an AIF, as mentioned it’s emerging as a well-suited domicile for new managers and has been experiencing a gradual increase in registered small fund managers falling under the AIFMD regime. This can partly be attributed to the strong service industry that is comparatively cheaper for small funds and their managers. 

New fund managers should note the difficulty in setting up a fully licensed fund as the structure is very difficult to navigate. The costs associated with establishing a fund heavily depend on the structure and vehicles chosen by the fund managers.  The Dutch regulatory body (AFM) has a stringent process for the fully licensed regime, under which the AIFMs must obtain a license from the AFM to operate. A 26-week review period of the application may be suspended if additional documentation is required. The AFM then has one month to make a decision which can also then be extended by another month. Suffice it to say this process is not for the faint-hearted and primarily where this regime loses its appeal to new fund managers with small funds.

Consequently, the lighter “Small Managers Regime” is the preferred choice by new managers entering the Netherlands as it is much quicker to form a fund in comparison. To qualify for the said regime, a manager’s total assets under management in the AIF (and other vehicles including managed accounts) must not exceed €100m. Additionally, participation must be offered to less than 150 professional investors or each investor must invest a minimum of €100,000.

Once the structure is agreed upon fund managers can providently begin the preparation of documents such as memos, pitches, and presentations for pre-marketing to investors. If the AIF is managed or marketed to professional investors outside the Netherlands, a marketing passport needs to be obtained, pursuant to the Dutch implementation of Article 32 of the AIFMD circa August 2, 2021.

Overall, the Netherlands presents a unique value proposition as an AIF domicile for new fund managers and should be carefully considered. The lighter regime provides a good offering for funds with less than €100m AUM. The legal complexity is somewhat offset by the readily available and affordable set of local advisories for new managers. The long time to market due to new regulations regarding KYC is a trend seen in recent years, especially in Europe. Most neighboring domiciles also face challenges in balancing access to their market with security and the welfare of the ecosystem as a whole. 

More Domicile Analysis

For more information on fund domiciles, including details and analysis below: