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- Top VC CFO Posts of Summer (June/July/Aug)
Top VC CFO Posts of Summer (June/July/Aug)
Hi Everyone! đź‘‹ Welcome to the new members of @TheFundCFO crew! We recently launched a paid tier and released our VC Fund Playbook + Models @ Streamlined.Fund! Re-linking some top 2023 posts: #67 Top VC CFO Posts & References & #65: WTF is Going On in VC (+ New Fund Model Data).
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:
Tuesday: insights + interviews. Free for everybody.
Thursday: deeper dives on VC GPs, CFO/COO strategy, more insights from LPs/GPs, and our take on what it all means (from 15+ yrs. of experience). Exclusive to Paid subscribers (most of whom expense these insights).
“It is our choices that show what we truly are, far more than our abilities.” -J.K. Rowling
Top 5 Posts by Engagement in Summer (June/July/August)
We’ve aggregated our top five posts from June/July/August - these ones really resonated with thousands of views, shares, and feedback! Please do us a favor and like/share if you haven’t already. In the meantime, enjoy!
“Emerging VC back-office complexity is a hell of a thing. The problem for most new managers is that there is an absence of what 'good' looks like when selecting fund admin, tax, and audit partners.” -Eric Bahn, The Hustle Fund
We’ve written a lot (and have a lot of experience implementing) different VC fund stacks. What works well? What would we never do again? You can read more in #60 Emerging VC Fund Tech Stacks & #61 VC CFO Data & Efficiency Stack.
Recently, we participated in a VC fund stack survey with our friends at Weekend Fund where they wrote the following about fund managers…
Venture capital firms and industry providers have reported Q2’23 valuations and portfolio updates at this point. Pitchbook released the Q2’23 Venture Monitor. CB Insights shared the State of Venture Q2’23. Carta released the State of Private Markets: Q2 2023 report.
Industry participants such as Tom Tunguz shared Surprising Data Points about the VC Market. Notable VC investor Bill Gurley and Brad Gerstner joined the The All-In Podcast, E141 to discuss Q2 in detail with David Sacks. Notable topics covered included the State of Series A’s, Dry Powder Misconceptions, VC Market Update, the IPO Window Opening, Incentives to Go Public Soon, and Macro. Highly recommend checking this episode out for great insights.
What’s the CFO take on the State of Private Markets: Q2 2023 and how it relates to VC? Here are some of our top takes in the context of updating your valuations, fund models, and adjusting your go-forward investment strategy. First, key data points:
This is one of the most common questions we get as LP investors and VC CFOs for hundreds of funds over the past three decades (collectively w/ Eddie Duszlak). There’s no one right answer here! We think it’s best to simplify by asking yourself a question.
What is the most valuable place to spend my time? How much time am I spending on the “other stuff?” We’ve seen great VC investors maximize time focused on:
Investing: making great investment decisions (driven by research, pipeline)
Supporting the companies you’ve invested in
Fundraising (so that you have money to do more of #1 #2)
VC investors (and investors of all types, including PE/VC, public) can follow this simple framework to arrive at the right answer. For VC funds, the most common times we see funds hire a VC fund CFO are when they hit some combination of the following milestones, although it’s not a hard and fast rule:
Portfolio: >50 companies
AUM: $20m - $200m
Growth: planning to raise their next fund in +/- 1 year and want to have great data, materials, and processes in place
For years, we’ve been saying that every VC fund manager needs a fund model (portfolio construction and reserves). Why? A fund model provides a plan for investing, is often required by investors, and can drive outsized returns (and help avoid value-destroying mistakes)!
While our fund models typically get super-detailed with various scenarios in play, we always find it helpful to simplify VC fund math (credit Fred Wilson in 2008) to something like the following:
1/3 of your investments lose money
1/3 of your investments breakeven
1/3 of your investments make money, with “~6% of investments generating ~60% of total returns” (credit Chris Dixon on the power law, citing Horsley Bridge industry data)
This point can’t be overstated! In a VC fund portfolio with 30 investments, this means that ~2 companies will drive ~60% of the total returns.
You need to hit home runs to deliver superior performance to your investors!
“After meeting thousands of PE/VC fund managers and investing in hundreds, I was able to build my own VC fund playbooks, fund budgets, and fund models that aggregated best practices, organization, and insights. Recently, I partnered with my old friend Eddie Duszlak to take all those learnings and streamline them into one place, Streamlined.fund. We’d appreciate if you check it out and share with someone who may benefit from it! You’ll find all of our free models / budgets there, as well as some souped-up versions and our new VC Fund Playbook.”
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!”