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Wow, what a great post. The most interesting question for me is, if you are a company with VC money and they are on your board, does the age of the vintage of

Wow, what a great post. The most interesting question for me is, if you are a company with VC money and they are on your board, does the age of the vintage of the fund the money came from impact the strategy of the company down to a product level? It looks like you could literally calculate/estimate the time left in the fund and see how much pressure it will put on the CEO to get positioned for an exit, then predict that impact on product, and the entire culture of the company. e.g. "we're an engineering driven company," vs. "the fund that gave us the money has 2-3 years left in it, which means all our product decisions are based on getting positioned for a forced exit, so create tech debt and STFU."

alpha_squared 7y ago
If I understood the post correctly, fresh investments typically happen at the beginning of the fund. Only half of investable money is invested so that follow-on investments could be made when those portfolio companies go to raise again. It seems like the pressure might be on you, as a startup founder, if your vintage is underperforming and the fund is nearing the end of its expected return. Others in the vintage may have even had an easier time exiting, even if modestly, because they weren't encumbered with the pressure of carrying the vintage -- if that makes sense -- since they wouldn't be around near the expected return date.
- mdorazio 7y ago
  That's the "Investment Period" quoted in the tweet. In the example it's 4-5 years, which means the fund needs to do its initial investments in 4-5 years from the fund start date. If you're in the later portion of this window, you're effectively going to get less time to build your business before the firm is pushing you to exit or looking to abdicate/write you off.
davidu 7y ago
Most funds these days, at large firms, are fully deployed within three years. So a ten year fund still has 7 years left on the clock, and then there are ways to extend the clock beyond that. The huge winners take even longer to reach a liquidity point, and this class of investors are very patient.
paulddraper 7y ago
VCs worry about that sort of stuff when they decide which fund to spend out of but companies generally don't. LPs are patient with the returns, and in extreme cases VCs could even "buy out" the equity from themselves with another fund. The only thing really visible to portfolio companies is "we have X dollars for these stages".

alpha_squared 7y ago

If I understood the post correctly, fresh investments typically happen at the beginning of the fund. Only half of investable money is invested so that follow-on investments could be made when those portfolio companies go to raise again. It seems like the pressure might be on you, as a startup founder, if your vintage is underperforming and the fund is nearing the end of its expected return. Others in the vintage may have even had an easier time exiting, even if modestly, because they weren't encumbered with the pressure of carrying the vintage -- if that makes sense -- since they wouldn't be around near the expected return date.

mdorazio 7y ago
That's the "Investment Period" quoted in the tweet. In the example it's 4-5 years, which means the fund needs to do its initial investments in 4-5 years from the fund start date. If you're in the later portion of this window, you're effectively going to get less time to build your business before the firm is pushing you to exit or looking to abdicate/write you off.

davidu 7y ago

Most funds these days, at large firms, are fully deployed within three years. So a ten year fund still has 7 years left on the clock, and then there are ways to extend the clock beyond that. The huge winners take even longer to reach a liquidity point, and this class of investors are very patient.

paulddraper 7y ago

VCs worry about that sort of stuff when they decide which fund to spend out of but companies generally don't. LPs are patient with the returns, and in extreme cases VCs could even "buy out" the equity from themselves with another fund. The only thing really visible to portfolio companies is "we have X dollars for these stages".