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The Helpful VC
How to Position Your Unique “Value-Added” Superpowers
for Better Branding, Marketing, Fundraising & Dealflow
Dave McClure
June 2019
How You Help -> Brand + Competitive Positioning
YOU
(THE AWESOME VC)
● What you can do (well)
● What you do better / different
● What you promote / promise
(your brand value)
TARGET
PORTFOLIO
COMPANIES
● What they want
● What they need
● What makes a
difference
COMPETING
INVESTORS
● What they say they can/will do
● What they actually can/will do (well)
● What they do that really matters
Investment Thesis
● What Kind of VC do you want to be?
○ Stage, Geography, Industry Vertical
○ Fund Size, Check size, Follow-on
○ Lead rounds? Board seats?
● Why You? Are you sure you can do this? (3X / 20%)
○ 1) can you raise money?
○ 2) can you get dealflow?
○ 3) can you help companies? how?
Q: Are there competitors with a similar thesis? Why are you different / better?
Why will great companies come to *you* instead of other competitors?
VC Dealflow Funnel
● Thesis: what/how you plan to invest
● Brand: use your value-add to attract companies
● Marketing: activities that generate dealflow
● Evaluation: filter dealflow *before* taking mtgs
● Meetings: in-person evaluation & DD Qs
● Deal Memo: document deals you want to do & why
● Negotiation: specify terms and make / close offer
● Investment: wire the money!
● …
● … (then wait 7-15 years) ...
● …
● OMG UNICORNS!
BRAND + MARKETING
DEALFLOW
EVALUATION
MEETING
DEAL MEMO
TERM SHEET
INVEST!
THESIS “VALUE-ADD”
UNICORNS!
(hopefully)
Branding & Marketing: How to Generate Dealflow
● Brand: what’s your name / logo / soundbite / unique value proposition?
○ What’s the story you’re going to tell the market?
● Superpower: what makes you special / why are you different?
○ Is there something you can do that will make companies come to you?
● Marketing: activities / communications to LPs, founders, press, etc
○ Content: writing/blogging, speaking, training
○ Services: are there services you can provide to startups to generate interest?
○ Founders: where do the founders you want to invest in hangout? FIND THEM!
○ Networking: who do you need to know in the industry? VCs? Scientists? Partners?
○ PR strategy: who can help generate news about you / your firm / your strategy?
○ Events & Conferences: should you speak / attend industry events? Should you run events?
○ Online Platforms / Other Investors
Help Framework: Why, Who, When, What, How?
● Why Help Companies?
○ Just help them win! (goodwill)
○ Help them with something you’re good at
○ Find out how they are doing (metrics)
○ Build your reputation -> better dealflow
○ Earn right to participate in future rounds
● Who Should You Help? For How Long?
○ Only Winners? Everyone? Even Losers?
○ Until next round? Forever?
○ Until they “win” (or FAIL to win...)
○ Board Seats / Advisor seats?
○ Define when / how you will pull the ripcord
● Define your “Help Framework.”
○ What will you do?
○ Who will you help?
○ For how long?
○ Until something happens? Or forever?
○ Tell them what you expect to get back
● What is Your Unique Help Superpower?
○ Product Development
○ Marketing/Sales
○ People/Recruiting/Hiring
○ Operations/Process
○ Raise More Capital (*not unique)
Limited Partner Profiles/Issues
Types of LPs
● Institutional
○ Pension Funds
○ Foundations / Endowments
○ Financial / Insurance Companies / Banks
○ Corporates
○ Government / Community
● Private
○ HNW Individuals (“High Net Worth”)
○ Family offices (SFO, MFO)
○ FFF (Friends, Family, Fools)
○ You, Your Dog, Your Cat.
Issues for Potential LPs
● Asset Allocation
○ Equities, Bonds, Cash, Real Estate, “Alternatives”
○ Alternatives = Hedge Fudns, PE, VC, etc
● Time-horizon / Liquidity needs (short vs. long)
● Investing Motivations
○ Pure Economic Returns (perception vs reality)
○ Strategic (innovation/IP, M&A, people, product)
○ Access to Dealflow (industry vertical focus?)
○ Economic Development (Jobs, Ecosystem)
○ Marketing/PR (“It’s cool to invest in VC/tech”)
● Have they invested in VC funds before?
● Have they invested in startups before?
● Interest in Emerging Managers / Early-Stage?
Fundraising: Key Slides in Your Pitch Deck
Core Deck (10 slides)
● Cover: Name / Brand / Image
● Thesis: Basic Fund Concept + Goals
● Team: Bios / Academic / Work Experience
● Track Record: Prev Portfolio / Top 3 Deals
● Superpower: Services / Value-Add
● Competition: Differentiation / SWOT analysis
● Dealflow: Marketing / How to Get Deals
● Selection: Criteria / DD / Process
● Fund Model: [spreadsheet]
● Capital: AUM / Current LPs / Fundraising
Appendix Slides
● Investment Thesis / More Details
● Winners / Case Studies (1 slide per win)
● Team Bios (1 slide per GP)
● Advisors / Mentor Network profiles
● Examples of dealflow-generating activity
● Sample Deal Memo
● Fund Terms / Legal
* emphasize items in blue if you have “hot”
thesis, pedigree, experience, track record
* emphasize items in red if you don’t
EXAMPLE: Wingnut Investment Fund
Wingnut Ventures ($20M seed fund)
● Stage: seed investments + some follow-on at Series A/B
● Vertical: internet-connected hardware/software devices
● Geo: US-centric (mostly US tech metros, some non-US)
● Allocation: 40 seed checks @ ~$250K + 10 Series A/B @ ~$1M
● Lifecycle: 10 yr fund + 2 x 1yr extensions; 5 yr initial investment period
● Reserves/Recycle: 50% 1st checks + 50% follow-on; recycle up to 120%
● Fees/Carry: 2% avg mgmt fees, 20% carry (after 1X returned)
● Team: 1-2 partners + 1-2 associates + 0-1 admin
APPENDIX
Distribution of Investment Outcomes
Source: Correlation Ventures (2014).
Portfolio Size vs. Returns; Likelihood of
“Outlier”
Sources: left panel, Steve Crossan; right panel, Clint Korver
Portfolio Construction / Fund Model
Spreadsheet model that calculates returns
(gross/net TVPI) based on several factors:
● Fund size ($)
● Portfolio size (#)
● Check size
● Reserves / Recycling
● Valuation / Dilution
● Size / Frequency of Exits
● Timing of investments
● Timing of distributions
Fund Model Decision(s) Framework
○ Ownership vs. Diversification (equity vs. portfolio size)
○ First Check vs. Reserve Allocation (should i follow-on / how much / when / why?)
○ Frequency / Pace of Investment (how fast to deploy capital)
○ Outcome assumptions: probability & distribution of exits (how big? how often?)
○ Timing of investments, exits, recycling, etc.
Operational Budget

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The Helpful VC (June 2019)

  • 1. The Helpful VC How to Position Your Unique “Value-Added” Superpowers for Better Branding, Marketing, Fundraising & Dealflow Dave McClure June 2019
  • 2. How You Help -> Brand + Competitive Positioning YOU (THE AWESOME VC) ● What you can do (well) ● What you do better / different ● What you promote / promise (your brand value) TARGET PORTFOLIO COMPANIES ● What they want ● What they need ● What makes a difference COMPETING INVESTORS ● What they say they can/will do ● What they actually can/will do (well) ● What they do that really matters
  • 3. Investment Thesis ● What Kind of VC do you want to be? ○ Stage, Geography, Industry Vertical ○ Fund Size, Check size, Follow-on ○ Lead rounds? Board seats? ● Why You? Are you sure you can do this? (3X / 20%) ○ 1) can you raise money? ○ 2) can you get dealflow? ○ 3) can you help companies? how? Q: Are there competitors with a similar thesis? Why are you different / better? Why will great companies come to *you* instead of other competitors?
  • 4. VC Dealflow Funnel ● Thesis: what/how you plan to invest ● Brand: use your value-add to attract companies ● Marketing: activities that generate dealflow ● Evaluation: filter dealflow *before* taking mtgs ● Meetings: in-person evaluation & DD Qs ● Deal Memo: document deals you want to do & why ● Negotiation: specify terms and make / close offer ● Investment: wire the money! ● … ● … (then wait 7-15 years) ... ● … ● OMG UNICORNS! BRAND + MARKETING DEALFLOW EVALUATION MEETING DEAL MEMO TERM SHEET INVEST! THESIS “VALUE-ADD” UNICORNS! (hopefully)
  • 5. Branding & Marketing: How to Generate Dealflow ● Brand: what’s your name / logo / soundbite / unique value proposition? ○ What’s the story you’re going to tell the market? ● Superpower: what makes you special / why are you different? ○ Is there something you can do that will make companies come to you? ● Marketing: activities / communications to LPs, founders, press, etc ○ Content: writing/blogging, speaking, training ○ Services: are there services you can provide to startups to generate interest? ○ Founders: where do the founders you want to invest in hangout? FIND THEM! ○ Networking: who do you need to know in the industry? VCs? Scientists? Partners? ○ PR strategy: who can help generate news about you / your firm / your strategy? ○ Events & Conferences: should you speak / attend industry events? Should you run events? ○ Online Platforms / Other Investors
  • 6. Help Framework: Why, Who, When, What, How? ● Why Help Companies? ○ Just help them win! (goodwill) ○ Help them with something you’re good at ○ Find out how they are doing (metrics) ○ Build your reputation -> better dealflow ○ Earn right to participate in future rounds ● Who Should You Help? For How Long? ○ Only Winners? Everyone? Even Losers? ○ Until next round? Forever? ○ Until they “win” (or FAIL to win...) ○ Board Seats / Advisor seats? ○ Define when / how you will pull the ripcord ● Define your “Help Framework.” ○ What will you do? ○ Who will you help? ○ For how long? ○ Until something happens? Or forever? ○ Tell them what you expect to get back ● What is Your Unique Help Superpower? ○ Product Development ○ Marketing/Sales ○ People/Recruiting/Hiring ○ Operations/Process ○ Raise More Capital (*not unique)
  • 7. Limited Partner Profiles/Issues Types of LPs ● Institutional ○ Pension Funds ○ Foundations / Endowments ○ Financial / Insurance Companies / Banks ○ Corporates ○ Government / Community ● Private ○ HNW Individuals (“High Net Worth”) ○ Family offices (SFO, MFO) ○ FFF (Friends, Family, Fools) ○ You, Your Dog, Your Cat. Issues for Potential LPs ● Asset Allocation ○ Equities, Bonds, Cash, Real Estate, “Alternatives” ○ Alternatives = Hedge Fudns, PE, VC, etc ● Time-horizon / Liquidity needs (short vs. long) ● Investing Motivations ○ Pure Economic Returns (perception vs reality) ○ Strategic (innovation/IP, M&A, people, product) ○ Access to Dealflow (industry vertical focus?) ○ Economic Development (Jobs, Ecosystem) ○ Marketing/PR (“It’s cool to invest in VC/tech”) ● Have they invested in VC funds before? ● Have they invested in startups before? ● Interest in Emerging Managers / Early-Stage?
  • 8. Fundraising: Key Slides in Your Pitch Deck Core Deck (10 slides) ● Cover: Name / Brand / Image ● Thesis: Basic Fund Concept + Goals ● Team: Bios / Academic / Work Experience ● Track Record: Prev Portfolio / Top 3 Deals ● Superpower: Services / Value-Add ● Competition: Differentiation / SWOT analysis ● Dealflow: Marketing / How to Get Deals ● Selection: Criteria / DD / Process ● Fund Model: [spreadsheet] ● Capital: AUM / Current LPs / Fundraising Appendix Slides ● Investment Thesis / More Details ● Winners / Case Studies (1 slide per win) ● Team Bios (1 slide per GP) ● Advisors / Mentor Network profiles ● Examples of dealflow-generating activity ● Sample Deal Memo ● Fund Terms / Legal * emphasize items in blue if you have “hot” thesis, pedigree, experience, track record * emphasize items in red if you don’t
  • 9. EXAMPLE: Wingnut Investment Fund Wingnut Ventures ($20M seed fund) ● Stage: seed investments + some follow-on at Series A/B ● Vertical: internet-connected hardware/software devices ● Geo: US-centric (mostly US tech metros, some non-US) ● Allocation: 40 seed checks @ ~$250K + 10 Series A/B @ ~$1M ● Lifecycle: 10 yr fund + 2 x 1yr extensions; 5 yr initial investment period ● Reserves/Recycle: 50% 1st checks + 50% follow-on; recycle up to 120% ● Fees/Carry: 2% avg mgmt fees, 20% carry (after 1X returned) ● Team: 1-2 partners + 1-2 associates + 0-1 admin
  • 11. Distribution of Investment Outcomes Source: Correlation Ventures (2014).
  • 12. Portfolio Size vs. Returns; Likelihood of “Outlier” Sources: left panel, Steve Crossan; right panel, Clint Korver
  • 13. Portfolio Construction / Fund Model Spreadsheet model that calculates returns (gross/net TVPI) based on several factors: ● Fund size ($) ● Portfolio size (#) ● Check size ● Reserves / Recycling ● Valuation / Dilution ● Size / Frequency of Exits ● Timing of investments ● Timing of distributions Fund Model Decision(s) Framework ○ Ownership vs. Diversification (equity vs. portfolio size) ○ First Check vs. Reserve Allocation (should i follow-on / how much / when / why?) ○ Frequency / Pace of Investment (how fast to deploy capital) ○ Outcome assumptions: probability & distribution of exits (how big? how often?) ○ Timing of investments, exits, recycling, etc.