Origins - Inside Venture Capital, Hosted by a GP and an LP Minisode: Franchise Funds: Why do LPs & Founders Care?
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Dec 17, 2024 Laura Thompson, Partner at Sapphire Partners and a vet in venture capital, joins Beezer Clarkson to dissect what makes franchise funds tick. They explore the differences in franchise hallmarks between GPs and LPs, and ponder whether consistency in performance really suffices. Parallels with sports franchises illustrate branding's critical role. The duo also examines how access to top founders can translate into superior returns and the intricate dynamics of managing talent and fees. It's a deep dive into strategic thinking in venture capital!
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Franchise Fund Roles
- Franchise funds play different roles in venture ecosystems.
- Their importance varies for GPs, founders, and LPs depending on their goals.
LP Assumptions
- LPs presume that access to top founders leads to better returns for franchise funds.
- Having a "right to win" with founders is a key aspect of a franchise fund's appeal.
Fund Size and Returns
- Achieving high returns (5x or 10x) can be challenging with larger fund sizes.
- A consistent 2-3x return might suffice for some LPs, raising the question of what truly defines a franchise fund.