E66: Why Inception Investing Beats Traditional Seed with Ed Sim of Boldstart
Nov 26, 2024
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Ed Sim, founder and managing partner of Boldstart Ventures, shares insights on growing his firm from a $1 million to an $800 million portfolio. He discusses the innovative inception investing model, emphasizing early engagement with technical founders and the shifting dynamics of venture capital. Sim highlights the importance of quality over quantity in startup selection and the necessity of strong board relationships. The conversation also touches on the evolving tech landscape, particularly the impact of AI on investment strategies.
Boldstart Ventures focuses on inception stage enterprise investing by partnering early with technical founders for idea validation and team assembly.
The firm's growth from a $1 million fund to $800 million highlights the necessity of adapting funding strategies to market demands.
Ed Sim emphasizes the significance of discerning AI investments that provide real business solutions over merely supporting model providers.
Deep dives
Inception Stage Investing
The firm specializes in inception stage enterprise investing, focusing on engaging technical founders early in their process. By partnering before official incorporation, the firm aids in idea validation and assembling initial teams, which allows companies to hit the ground running. Check sizes typically range from $500,000 to $10 million, enabling founders to secure necessary early funding while building their foundations. This unique approach establishes strong relationships with founders, positioning the firm as a go-to source for capital and guidance.
Evolution of Fund Size
The firm has experienced significant growth from a $1 million inception fund to over $800 million in assets, evolving its fund strategies according to market demands and founder needs. The focus has shifted from smaller checks to larger amounts, which allows for leading rounds and taking board seats. This evolution emphasizes the importance of adapting to market conditions and understanding how much capital is necessary to support strong founders and their ventures. Maintaining the right fund size has been crucial for capturing opportunities with second and third-time founders.
Opportunities in AI
The firm highlights the immense potential of AI in transforming enterprise solutions, viewing it not merely as a trend but as a critical evolution in business processes. Investing in AI requires discernment, as the firm avoids backing model providers due to the high capital required in that space. Instead, it seeks opportunities in applications of AI that directly solve business problems and deliver lasting impact. A successful investment in AI must demonstrate an unbounded potential and align with the firm's goal of being early-stage players.
Challenges in Investment Landscape
Navigating the intricate landscape of early-stage investments involves balancing risks associated with variable market conditions and evaluating whether current valuations can sustain future returns. The conversation highlights concerns over whether current high valuations will hold amidst a rising tide of venture capital investment. Adjustments in portfolio strategy and increased capital allocations may be required to ensure resilience against market fluctuations. The firm emphasizes continual adaptation and maintaining strategic foresight in funding decision-making processes.
The Future of Capital in Startups
The venture capital ecosystem is expected to evolve, particularly as enterprises continue to adopt AI and technology, making investments appear more enticing to capital allocators. The growth of venture capital is forecasted to remain strong despite potential downturns due to the accumulation of wealth among successful startups. Ongoing advancements in technology, especially in AI, will likely lead to unprecedented capital influx and opportunity creation. The firm seeks to be at the forefront of this evolution, capturing value in both established and emerging markets.
This week on Turpentine VC, Erik Torenberg interviews Ed Sim, founder of boldstart, on growing the firm from a $1 million fund to $800 million in assets, with a focus on early-stage enterprise and AI investments. For full show notes, visit: https://highlightai.com/share/d0139578-d85f-4171-b879-059dd2813450
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