Episode Summary:

In this episode of First Cheque, hosts Cheryl and Maxine dive deep into the complexities of fund cycles, providing invaluable insights for emerging fund managers and entrepreneurs alike. They discuss the key aspects of raising and deploying funds, including the significance of understanding the timing and structure of fund cycles. Cheryl emphasises the importance of recognising that announcements of fundraising often indicate the beginning of the fundraising process rather than immediate capital deployment.

Maxine elaborates on the differences in fund management strategies, particularly in Australia, where choices about fund structures, like ESVCLP (Early Stage Venture Capital Limited Partnership), can influence tax benefits and administrative requirements. The hosts also touch on the challenges faced by fund managers, such as the necessity to maintain liquidity and the common practice of deploying smaller checks to riskier companies at the start of a fund’s lifecycle, while gradually shifting to larger, safer investments as the fund matures.

Throughout the conversation, they highlight the importance of planning for exits, the dynamics of raising subsequent funds, and the need for flexibility, especially within micro funds. They conclude by encouraging fund managers to be diligent in their planning to ensure success and sustainability in their investment journeys. This episode serves as a comprehensive guide for anyone looking to navigate the intricate world of venture capital and fund management.

Time Stamps:

00:00 – Introduction: Why fund cycles matter for investors & founders

01:21 – Who this episode is for: Emerging fund managers & startup founders

03:23 – Understanding fund cycles: Raising, deploying, and exiting

05:48 – The reality of raising a fund: Why it takes 12-24 months to close

09:35 – Deployment periods: How VCs decide when and where to invest

12:34 – The risk of running out of money—how fund managers avoid this mistake

16:57 – Fund sizes & check sizes: Why $50M is a magic number in VC

21:09 – Micro VCs vs. bigger funds: How different strategies impact returns

25:14 – Opportunity funds: When fund managers double down on winners

30:08 – The importance of liquidity planning and secondaries in VC

37:17 – Exits: How and when fund managers start planning for returns

43:59 – Final thoughts: The key takeaways from this episode

Resources Mentioned

- Angel Academy – The most comprehensive angel investing course for Australia & NZ: www.venture.academy

- Aussie Angels – Cheryl’s platform for angel investing https://www.aussieangels.com/

- Co-Ventures – Maxine’s venture capital firm https://www.coventures.vc/

- ESVCLP (Early Stage Venture Capital Limited Partnership) – How tax benefits impact Australian VC funds

- AFR & Startup Daily – Understanding VC funding announcements in the media

- Adverb Ventures (April Underwood) – Case study on fast fund cycles

- Australian Super Funds & VC – Why institutional capital is hard to secure

- Venture Fund Deployment Data (US vs. Australia) – Insights on how quickly funds deploy capital

- Fund Liquidity & Secondaries – How fund managers plan exits when IPOs & M&A slow down

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