Lessons From 21 Years of VC Fund Investing | Alan Feld, Vintage Investment Partners
May 31, 2024
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Alan Feld, Founder of Vintage Investment Partners, discusses the value of VC funds, importance of differentiation, and lessons from 21 years of investing. Topics include fund size impact on returns, buying secondaries, successful entrepreneurs' traits, and advice for raising a VC fund.
Invest in high-performing companies for exceptional returns.
Match entrepreneurs effectively to minimize wasted time and enhance value proposition.
Entrepreneurs' personal background and resilience crucial for successful ventures.
Deep dives
Focus on Top-Performing Companies for Higher Returns
Emphasizing the significance of investing in high-performing companies, the podcast reveals that 10% of companies generate about 80% of returns. Overexpansion can lead to investing based on fund size rather than company needs, resulting in inflated prices and reduced chances of exceptional returns.
Strategic Approach to Entrepreneurial Matching with Corporations
By prioritizing corporate feedback on buying intentions, budgets, and previous startup collaborations, successful funds match entrepreneurs effectively, leading to a one in eight introduction-to-deal conversion rate. This proactive strategy minimizes wasted entrepreneur time and enhances the value proposition, fostering successful deals and productive relationships.
Importance of Selecting Quality Entrepreneurs and Future Growth Vision
The core lesson from a seasoned investor is the critical impact of entrepreneurs' personal background and resilience in building successful ventures. Emphasizing a long-term focus beyond short-term metrics, the discussion highlights the necessity for entrepreneurs to lead decisively, integrate feedback, and focus on building enduring, visionary businesses amid market fluctuations.
Key Considerations for Running a Fund Raise Process
When embarking on a fund raising journey as a VC, it is crucial to first truly commit to the endeavor for the long term. Many venture funds have longevity spanning over a decade, making it imperative to ensure your dedication. Additionally, selecting a compatible partner is vital, with emphasis on thoroughly understanding each other's values, as partnerships in venture funds are akin to long-term commitments. Setting yourself apart with a unique investment strategy or value offering is essential in a competitive landscape where differentiation is key for attracting top-tier entrepreneurs.
Scalability and Succession Planning in VC Firms
As a VC firm considers scaling its operations, critical questions arise about the scalability of its investment strategies and the culture within the organization. Deciding whether to grow vertically with experienced growth investors or maintain individual investment autonomy impacts the firm's dynamics. Succession planning becomes paramount for long-term sustainability, requiring careful selection and development of future leaders within the firm to uphold its values and drive continued success.
Feld is the Founder and Managing Partner of Vintage Investment Partners. Vintage is one of the largest fund of funds in the world, managing over $4 billion across what is mostly investments into other venture funds, plus some secondary and direct startup investments at the growth stage.
Timestamps:
00:00 Intro
03:53 What is Vintage
05:40 Why VCs adding value can waste a founder’s time
09:01 VC, where the asset chooses the investor
10:14 Fund size is the enemy of returns in VC
14:57 What people get wrong about FoFs
16:01 The value FoFs bring to LPs
17:11 Why entrepreneurs drive VC returns
17:55 Vintage’s unique FoF model
19:05 Does replacing the founders with an outside CEO work?
21:39 Starting Vintage after the Dot Com Crash in 2002
23:41 Buying secondaries at 70-80% discounts
25:13 Biggest mistakes when buying secondaries
26:18 Research around what makes the best entrepreneurs
31:09 Lessons from six downturns
34:41 Comparisons between 2002 and 2022
37:07 Advice for raising your first VC fund
41:16 The importance of differentiation
45:57 Sustainable ways to differentiate
49:05 What Vintage looks for in new fund investments
49:57 Advice for scaling a VC firm
53:47 Succession planning
57:50 What Alan’s doing post-Vintage