#110 Top VC CFO Posts In October (+September)

Hi everyone! đź‘‹ We’ve published >100 posts - appreciate the support/ sharing w/ friends! Welcome to our new members of @TheFundCFO crew! We recently launched a paid tier and released our VC Fund Playbook + Models @ Streamlined.Fund! Re-linking top posts: #96 The Case for 30+ Co.'s Per VC Fund, #88 Latest Takes on the State of VC, #86 VC Fund Stacks, and Full CFO Archive.

There’s a lot of great content from notable VCs, LPs, and CFOs/finance pros on the internet. Here, we’re focused on 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.

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:

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“I’ve failed over & over again in life. And that is why I succeed.” -Michael Jordan

Top VC CFO Posts by Engagement in October (+September) 2023

We’ve aggregated our top posts from October (+September) - these ones really resonated with thousands of views, shares, and feedback! Please do us a favor and like/share if you haven’t already (or forward to a friend). In the meantime, enjoy!

Earlier today, the Pitchbook-NVCA Venture Monitor was released w/ Q3’23 data. As we’ve moved through 2023, we’ve referenced data from Jamesin Seidel (Q3 2023 Funding), Crunchbase, Pitchbook, Carta, and others. In Q1’23, Bain released their annual Global Private Equity Report and Pitchbook released their Private Benchmarks Report. It’s worth revisiting today to consider what you can do about it now (before everyone else has the data). The TLDR:

Less money is flowing into private equity & venture capital (funds and companies) in 2023 and likely 2024. We believe this creates an opportunity for outstanding performance. Historical data supports this.

Diving Deeper: The Case for “Why Now?” in Charts & Data

Let’s dive deeper. What are the best charts and data points that you can leverage in your next investor update, presentation, or in conversation on the “why now?” for private equity and venture capital? We’ve reviewed the key reports and insights (linked above) to make the case clearly for the “why now?”

Investments made in a downturn outperform over time (Bain)

Venture Capital Returns Spike Post-Downturn (Pitchbook)

Welcome to Q4 - now it’s time to close Q3! At the end of each quarter, we look back at the past three months, professionally and personally. What worked well (celebrate the wins!) and what didn’t? What can we change to make the next three months even better?! We looked back at our #102 Top VC CFO Posts of Q3 2023, which included the following:

We wrote more about the quarterly closeout process in #77 VC CFO Q2 Review / Q3 Key Action Items - highly recommend checking out if you haven’t already!

Portfolio construction is a hot topic for VC funds and LP investors. Before investing, almost every LP will ask a VC: what is your portfolio construction strategy? There’s a lot of data, conventional wisdom, and strong thoughts on this. Some say concentrate. Others say diversify. What’s the right approach?

We’ve talked to a lot of VCs. Even though a lot of VCs talk about the benefits of concentration, if you look deeper, almost all of them are getting >30 investments in a fund. They may say something like “we’re concentrated - our top 10 positions make up >50% of our fund.”

The right emerging VC managers can drive real outperformance in investment portfolios and will continue to do so for decades to come. Every manager in the market today was emerging at one point, and behemoths like a16z just ~15 years ago. While we find ourselves in a slower VC fundraising environment today, capital allocators are still investing in emerging managers…

Insights on DPI from Fred Wilson (USV), David Zhou (Alchemist Accelerator), Beezer Clarkson (Sapphire), and David Clark (VenCap). When does DPI really matter? The job of a venture capitalist is simple in theory. Invest in a group of early-stage companies (often 20-30) over ~3-5 years.

If the VC sources, selects, and supports at a high level, a few “winners” will emerge over a 10-year fund life (sometimes extended to 12-15 years). Ultimately, the VC fund must “distribute” cash back to its investors, driven most by the winners in the portfolio (DPI). VCs typically target >3x TVPI/DPI and >30% IRRs…

That’s all for today folks! Thanks for your support and spreading the word! Share this on Twitter or LinkedIn to help grow “the crew!”