This week on Turpentine VC, we’re sharing Erik Torenberg’s interview with Susa Venture’s Chad Byers, which originally aired in September 2023. Chad discusses the firm's journey, their fund structures, and their vision for specialized seed investing, emphasizing the importance of focus, discipline, and adapting to market dynamics.
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LINKS:
Fund V Announcement: https://www.linkedin.com/posts/chadabyers_dear-founders-were-excited-to-announce-activity-7307890222753554432-JOLt
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X / TWITTER:
@chadbyers
@SusaVentures
@eriktorenberg
@TurpentineVC
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HIGHLIGHTS FROM THE EPISODE:
- Susa Ventures evolved from a $25M fund in 2013 to multiple funds under separate brands with distinct investment focuses.
- The firm is purposely reorganizing into three distinct branded strategies for better founder experience and clarity.
- Susa maintains fund size discipline, deliberately staying under $200M for seed investments to maintain quality.
- They focus on five specific categories: FinTech, Healthcare, Logistics, B2B SaaS, and Infrastructure.
- Their investment philosophy centers on concentrated bets with 35 companies per fund and higher ownership stakes.
- Notable successes include Robinhood (which was passed on by 110 firms) and Flexport from their first fund.
- The best portfolio companies typically needed the least help from investors.
- Value-add strategy focuses on being helpful during "crux moments" rather than constant interference.
- Investors should provide frameworks and historical data instead of specific operational advice.
- Non-"hot" deals often produce better returns due to lower entry prices.
- Specialist investors are increasingly winning over generalists in the venture landscape.
- Chad predicts venture capital is bifurcating into large multi-stage asset managers and specialized firms.
- The firm aims to "maximize value creation per dollar" rather than maximize assets under management.
- Susa's goal is to become the #1 seed firm over the next decade through specialization.
- Price discipline and high ownership focus remain central to their strategy going forward.
- Venture capital is becoming more like other asset classes with potentially lower overall returns.
- The industry's power law is intensifying with the top 5% of firms generating most returns.
- There's increasing competition from former operators now working in venture capital.
