#114 VCs Selling (DPI), Portfolio Upside Bets, & CFO Tech Stacks

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.

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An investor's job is to deliver liquidity to their LPs, but knowing when to sell is the hard part. Things can change quickly. Dramatic market shifts can cause drastic shifts in valuations and the paper value of a firm’s portfolio.

This post dives into a topic top of mind for many fund managers: Knowing when to sell a position in a portfolio company. This is one of the hardest parts of investing and can have a massive influence on a fund’s overall performance. As Fred Wilson points out in his post Selling (1/3, 1/3, 1/3):

Your returns will have as much to do with selling as buying. And buying is a fairly rational decision. Selling tends to be emotional. And that is why selling is the hardest part of investing.

In a world where financial certainty is a rarity, the recent yield achieved by the ten-year U.S. Treasury Bond (aka T-Bill) has caught our attention. The T-Bill yield has soared to a noteworthy 5%, presenting an investment opportunity that’s hard to ignore. At that level, investors can return 1.6x their capital in 10 years with virtually no transaction or performance expenses by buying and holding one of the world’s safest, most liquid assets. Not too shabby.

So now that investors have a great way of generating 1.6x without the illiquidity, duration, or costs of venture capital, why should they bother with it?  

In general, venture capitalists invest in opportunities with high convexity – ideally unlimited upside with limited, measurable downside. Each company we invest in could, theoretically, turn into the next Apple, Google, Nvidia, or Microsoft. And because all we can lose is the amount we have invested, we can measure precisely the value at risk and the theoretical downside to which we are exposed. 

From treasury management and cash forecasting to FP&A software, we break down the tech vendors streamlining finance team workflows.

Chief financial officers (CFOs) face a multitude of challenges, from the emergence of new regulations to a constantly shifting economic landscape.

In response, many are turning to technologies — like cash & liquidity management and risk & audit solutions — to streamline and speed up routine tasks, increasing productivity while reducing manual error.

In fact, 32% of finance leaders in the US are prioritizing investment in new technologies within the finance function, according to US Bank’s 2023 CFO Insights Survey.

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