4 ms·

You wrote that back in 2015. What, in your experience, has changed since then? 2021 would've probably, I'm guessing, been a lot more favorable for founders, but

by frfl 3y ago

You wrote that back in 2015. What, in your experience, has changed since then? 2021 would've probably, I'm guessing, been a lot more favorable for founders, but 2022/23/24 is likely a lot less favorable.

AndrewKemendo 3y ago
I stepped out of investing about two years ago because i couldn’t stomach the persistent narcissistic greed dressed up as virtue once I saw it for what it was. The last I saw it was just as bad and frankly getting worse for founders, as investors pulled back when the Fed moved on interest rates. Basically everyone just stopped taking risk except for the giant institutional funds and even then, as of last year were most just doubling down on existing. I heard similar actually last month at an event I was at - funds are sitting on dry powder and not doing cap calls.
- lumost 3y ago
  Out of curiousity - how does a VC fund hold onto "powder"? Do they have terms to invest in a liquid fund, or some other arrangement? Seems like they'd face tough returns if they held powder for long.
  - AndrewKemendo 3y ago
    I don’t have enough experience at the institutional level to tell you precisely. At the smaller scale, though it just means that returns that were above and beyond distribution expectations so, for example, what the fund returns separate from the LP distribution, and then separate from distributions to partners is you know basically that net margin for the fund overall so that they would use as seeds for another fund or something like that. So effectively they are just not opening other fund lines, because none of the investments or markets that are coming up, match a risk profile for the amount of interest you can get back in other methods now.
  - whiterknight 3y ago
    Hold treasuries?
  - pcl 3y ago
    Typically, VC funds don't have much cash on hand, and when they make an investment, they issue a capital call to the limited partners (LPs) in the fund. The LPs then are on the hook to send money for the investment, typically within a week or two. So, a $100M VC fund is really a commitment by the LPs to wire $100M over the course of ~5-8 years. LPs do all sorts of different things to manage the money they've committed but not yet invested.
    - MichaelZuo 3y ago
      It's much like a miniature version of the World Bank or other MDBs.
lumost 3y ago
Anecdotally, not much changed for East coast startups. What did change is that West coast firms came to the east coast. Whereas 10 years ago it would be noteworthy to work for an SV company - it is now typical. I think the local market was outcompeted and absorbed outside of a few niches.
- AndrewKemendo 3y ago
  Interestingly, the East Coast is way more primed for large deals than the West Coast is just from a population volume and infrastructure perspective. However, because there is just no high risk in the area, it just doesn’t happen. It’s literally just a physical access to rich people location thing which is crazy to me that it’s still the case but it seems to actually just be as simple as that.

by frfl 3y ago

AndrewKemendo 3y ago

I stepped out of investing about two years ago because i couldn’t stomach the persistent narcissistic greed dressed up as virtue once I saw it for what it was. The last I saw it was just as bad and frankly getting worse for founders, as investors pulled back when the Fed moved on interest rates. Basically everyone just stopped taking risk except for the giant institutional funds and even then, as of last year were most just doubling down on existing. I heard similar actually last month at an event I was at - funds are sitting on dry powder and not doing cap calls.

lumost 3y ago
Out of curiousity - how does a VC fund hold onto "powder"? Do they have terms to invest in a liquid fund, or some other arrangement? Seems like they'd face tough returns if they held powder for long.
- AndrewKemendo 3y ago
  I don’t have enough experience at the institutional level to tell you precisely. At the smaller scale, though it just means that returns that were above and beyond distribution expectations so, for example, what the fund returns separate from the LP distribution, and then separate from distributions to partners is you know basically that net margin for the fund overall so that they would use as seeds for another fund or something like that. So effectively they are just not opening other fund lines, because none of the investments or markets that are coming up, match a risk profile for the amount of interest you can get back in other methods now.
- whiterknight 3y ago
  Hold treasuries?
- pcl 3y ago
  Typically, VC funds don't have much cash on hand, and when they make an investment, they issue a capital call to the limited partners (LPs) in the fund. The LPs then are on the hook to send money for the investment, typically within a week or two. So, a $100M VC fund is really a commitment by the LPs to wire $100M over the course of ~5-8 years. LPs do all sorts of different things to manage the money they've committed but not yet invested.
  - MichaelZuo 3y ago
    It's much like a miniature version of the World Bank or other MDBs.

lumost 3y ago

Anecdotally, not much changed for East coast startups. What did change is that West coast firms came to the east coast. Whereas 10 years ago it would be noteworthy to work for an SV company - it is now typical. I think the local market was outcompeted and absorbed outside of a few niches.

AndrewKemendo 3y ago
Interestingly, the East Coast is way more primed for large deals than the West Coast is just from a population volume and infrastructure perspective. However, because there is just no high risk in the area, it just doesn’t happen. It’s literally just a physical access to rich people location thing which is crazy to me that it’s still the case but it seems to actually just be as simple as that.