Origins - Inside Venture Capital, Hosted by a GP and an LP

Franchise Funds: Metrics To Be Extraordinary with Jessica Archibald

Jan 8, 2025

Jessica Archibald, a GP at Top Tier Capital Partners and expert in fund management, joins to discuss the nuances of franchise funds. She highlights the significance of reliable DPI metrics and the value of consistent returns over flashy numbers. Archibald delves into the critical aspects of succession planning and how it affects fund stability and franchise status. The conversation also covers communication dynamics between fund managers and LPs, emphasizing trust-building for long-term success.

53:55

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Episode guests

Jessica Archibald

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Episode notes

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Quick takeaways

The success of franchise funds largely depends on strong fundraising capabilities and satisfying past performance that fosters investor trust.

Metrics like distributions per investment and team consistency are vital for evaluating a fund's health and franchise potential.

Succession planning is essential for maintaining franchise status, requiring structured processes and clear communication with limited partners to build trust.

Deep dives

Defining Franchise Funds

Franchise funds are characterized primarily by their fundraising capabilities, which indicate strong relationships with limited partners (LPs). These funds consistently manage to gather resources without struggle, suggesting that LPs are satisfied with their past performances, leading to repeated investments. The conversation highlights the significance of performance metrics, such as distributions, valuation policies, and team stability, in determining whether a fund qualifies as a franchise fund. Essentially, a franchise fund stands out for not experiencing difficulties in fundraising due to its historical success and current investor satisfaction.

Intro

2min

Understanding Franchise Funds in Venture Capital

11min

Defining Extraordinary Performance: DPI Metrics and Fund Timelines

2min

Fund Performance Dynamics

5min

Building Bridges: Communication in Fund Management

5min

Evaluating Franchise Fund Performance

6min

Sustaining Franchise Status in Venture Capital

22min

Jessica Archibald is a GP and member of the Investment Committee at Top Tier Capital Partners, where she is co lead of the funds team and participates extensively in the capital formation efforts of the firm. She and Beezer Clarkson, LP at Sapphire Partners, sit down for the next episode in this miniseries on franchise funds - what it takes to build one, and how some firms lose their franchise status. Jessica digs into Top Tier’s numbers to discuss the importance of getting reliable DPI in a set timeframe, why it’s often better to bet on consistent 3x or even 1x returns, and the importance of succession in building a franchise fund.

Learn more about Sapphire Partners: sapphireventures.com/sapphire-partners

Learn more about OpenLP: openlp.vc

Learn more about Asylum Ventures: asylum.vc

Learn more about Top Tier Capital Partners: ttcp.com

Subscribe to the OpenLP newsletter for a monthly roundup of the latest venture insights, including the newest Origins episodes, delivered straight to your inbox.

CHAPTERS:

0:00 Welcome to Origins

2:10 Jessica’s Time with Top Tier

4:08 Fund Graduation Rates

8:43 Who is a Franchise Fund Today?

13:21 ”Is There a DPI Number Somebody Has to Hit to Be Considered Extraordinary?”

17:10 Can You Become a Franchise Fund By Doing Secondaries?

25:08 The Range of Strategies in Franchise Funds

31:32 Maintaining Franchise Status

35:33 What Do Founders Want?

39:42 ”Are You a Franchise Fund If You Haven’t Had Some Level of Succession?”

48:02 End of Year Guidance For New Venture Funds

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