The National Venture Capital Association and Startup@Berkeley Law partnered to democratize access to education on venture capital for emerging funds. The result of this partnership: VC University, most recently hosted at Tulane University’s Freeman School of Business.
TSC Cofounder Erica Wassinger was awarded a generous scholarship to VC University and shares her takeaways.
There are very few mentors geographically within reach that have the muscle memory to guide me through constructing, raising and managing a venture fund. The ones I do have I hold very closely and pester frequently with questions.
I needed to expedite my muscle formation on venture capital fund development and management. I wanted to learn from teams that had seen and executed thousands of term sheets, hundreds of follow-on funding rounds and dozens of successful exits. That led me to VC University.
Questions rattling around in my head prior to VC University included:
- How could I accelerate success by avoiding common failure points?
- How could I sharpen my dealmaking skills so they were both founder-aligned and future-investor friendly?
- What do the great VCs know that I don’t?
- In our current fund and for our future fund, am I fully aware of our bright and blind spots?
Some of the key takeaways:
Fund thesis = Fund construction and vice versa.
At face value, these are not intertwined functions of a venture fund, but if you are promising any type of return they must be intimately supportive of each other.
Our current fund is built on an objective set of customer-related triggers and a tight geographic radius — our thesis. Yet, our fund’s construction was not as tightly defined as it should be. We built our initial term sheets on what we considered a one-size-fits-most traditional venture model.
While these customer-related triggers act as our due diligence – and many of our co-investors’’ due diligence too – they don’t necessarily take into consideration how our terms will convert later based on the startups’ profitability or subsequent rounds of venture capital.
As a result, we are exploring new variants of term sheets to better serve our founders for the long haul.
If you want the deal, get the deal done.
It was eye-opening to me just how much information we have on an angel-stage deal, comparative to nearly all investors before we get to the term sheet.
By nature of TSC’s methodology, we are riding shotgun to a founder for no less than four months but more likely a year prior to making an investment decision.
We know the founding team’s tendencies, superpowers, and Achilles’ heels. And, more importantly, they know ours. If they want us as a partner in their business for the next 10+ years and vice versa, then let’s make this deal happen.
We could stand to be more flexible on terms. We are toying with an additional set of criteria that supports a more tailored, founder-aligned valuation. Some valuation considerations are incredibly well outlined in this recent post by Bill Gurley.
Not all deal flow is created equal, term sheets can evolve.
Perhaps one of the most glaring differences between what is happening in Silicon Valley vs flyover country was the prolific use of KISSs, SAFEs and Convertible Notes in early-stage deals. Outside of Convertible Notes, we have not yet seen an abundance or even a pattern of KISSs and SAFEs hit the midwest.
I’ll admit that I am sold on the value of Convertible Notes as the easiest means to get a deal done and can set the proper stage for a company’s first act, second act and third act of financing.
But, I am not yet sold on the traditional fund model that anticipates only one or two deals should return an entire fund. Perhaps it is our homegrown geographic thesis. Perhaps it’s my goal to see more sustainable companies grow for the long haul. Hell, maybe it is my inability to ride the waves of boom or bust in startup land.
Whatever my bias is in this one, I am growing even more keen on models like Indie.VC and Earnest Capital. And, Fred Wilson’s recent blog post on the Great Public Market Reckoning only fanned the flames on this thinking.
All that opining to say, VC University was hands-down one of the best experiences I have made thus far in my career. The NVCA and Berkeley team helped me leapfrog years of skinned-knee lessons. If you are considering more angel investments or launching a fund, it’s a no brainer.
Meanwhile, follow these great minds on Twitter for ongoing education:
Adam Sterling @adambsterling
Director, Berkeley Center for Law and Business
Maryam Haque @nighthaque
SVP of Industry Advancement, National Venture Capital Association
National Venture Capital Association @nvca