This Week in Startups

Fund of funds: origins, evolution and deep dive with Michael Kim | E1890

Jan 31, 2024

Michael Kim, a fund of funds expert, shares insights on the evolution and dynamics of early-stage investing. He discusses the concepts of alpha, beta, and quality indices, and dives into why micro VCs are gaining traction. Kim reveals the increasing interest of limited partners in pre-seed and seed investments, highlighting the factors driving funding in these areas. He also emphasizes the importance of consistent returns and the critical relationships between fund managers and startup founders in navigating today's startup ecosystem.

01:02:21

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Episode guests

Michael Kim

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Episode notes

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Quick takeaways

The shift from casual 'tourist founders' to committed entrepreneurs reflects a more sustainable and promising startup ecosystem.

Fund of funds play a vital role by filtering and diversifying capital allocation, allowing LPs to access high-potential early-stage investments.

Seed-stage investing has evolved, with pre-seed funding now offering greater ownership and the potential for significant returns.

Deep dives

The Shift from Tourist to Committed Founders

In recent years, there has been a noticeable shift from 'tourist founders'—those who enter the startup space without a true commitment—to more serious entrepreneurs who genuinely understand the demands of starting a company. This was especially evident during the peak of 2021 when many, inspired by friends' successes, jumped into the startup scene without fully grasping the challenges. As the market has corrected, many of these casual entrants have exited, leading to a more normalized environment where dedicated founders are increasingly ready to seize growth opportunities. This transition marks a return to a more sustainable entrepreneurial landscape with authentic commitment from those launching new ventures.

Intro

3min

Understanding Fund of Funds in Venture Capital

7min

Navigating B2B Marketing and the Evolution of Micro VCs

5min

The Rise of Early-Stage Investments

7min

Understanding Large Venture Funds and Institutional Investments

4min

Navigating Venture Capital Dynamics

8min

Navigating Unicorn Claims and the Importance of Diligence in Venture Capital

5min

Navigating Startup Financing and Founder Support

19min

Connecting Founders: The Power of Peer Collaboration

5min

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Today’s show:

Cendana’s Michael Kim joins Jason for a deep dive on fund of funds (3:32), how to examine alpha, beta, and quality indices in early-stage investing (28:38), current market trends, future startup outlook (45:11), and more!

Timestamps:

(0:00) Michael Kim joins Jason.

(3:32) Overview of Fund of Funds, their Strengths and “Achilles heel”.

(7:01) Attraction factors for investors in pre-seed and seed startups.

(10:42) LinkedIn Marketing - Get a $100 LinkedIn ad credit at http://www.linkedin.com/thisweekinstartups

(12:04) The rise and definition of “micro VCs” with insights by Michael Kim.

(15:16) How the early seed stage carved a niche and its growing appeal to LPs.

(22:07) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at http://www.Squarespace.com/TWIST

(23:12) Fund enablers and the importance of “consistent returns”.

(28:38) Examining alpha, beta, and quality indices in early-stage investing.

(34:21) Lemon.io - Get 15% off your first 4 weeks of developer time at https://www.Lemon.io/twist

(35:29) The significance of portfolio management as networks and building a ‘why' for founders to pick you as an investor.