The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: How to Build Anti-Fragile Venture Portfolios Today | Why Diversification is Overrated in Portfolio Construction | How to Think Through Sizing Investments, Market Sizing and Pricing in Today's Environment with Mike Chalfen @ Chalfen Ventures

Jul 8, 2022

Mike Chalfen, Solo GP at Chalfen Ventures, brings over 20 years of experience as an early-stage investor in Europe. He discusses the broken customer experience in VC partnerships and the shift in mentality shaped by past booms and busts. Chalfen delves into portfolio construction, arguing against traditional diversification, and emphasizes the importance of understanding unit economics for sustainable growth. He also shares insights on navigating market corrections and the critical elements of effective VC partnerships.

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ANECDOTE

Managing Career vs. Money

Mike Chalfen learned the value of every dollar at Apex Partners, where he had to handle legals and financials himself.
However, he realized he was managing his career more than investments, exemplified by a missed reinvestment opportunity.

INSIGHT

GP-LP Misalignment

There can be a misalignment between GPs and LPs, where showcasing portfolio companies to multi-stage firms takes priority.
This focus on appearances may lead to missed opportunities for greater ownership and returns.

INSIGHT

Chalfen Ventures' Origin

Mike Chalfen's journey led him from Apex Partners to angel investing, Mosaic Ventures, and finally Chalfen Ventures.
He realized he wanted to focus on working closely with entrepreneurs rather than building a firm.

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Mike Chalfen is a solo GP with Chalfen Ventures and one of the most respected and successful early-stage investors in Europe over the last two decades. Among Mike's incredible portfolio includes the likes of King.com (makers of Candy Crush), Houzz, Tipalti, Snyk, and Tray.io, to name a few. Some incredible facts on Mike, he has a 15x career track record, he has a portfolio value of over $40BN+ and he joined the venture industry, the year of my birth!

In Today's Episode with Mike Chalfen You Will Learn:

1.) Entry Into Venture and The Broken Customer Experience of VC:

How did Mike make his original entry into venture way back in 1996?
What does Mike mean when he speaks of the difference between "managing your career vs the money you invest"?
What does Mike believe are some of the greatest challenges of venture partnerships today?
What does Mike believe that the customer experience in venture partnerships for founders is broken today?
How did seeing the prior booms and busts impact Mike's investing mentality today?

3.) Portfolio Construction 101:

How does Mike think about portfolio construction today?
With 9-10 core positions, why does Mike disagree with the traditional notion of "diversification"?
How does the decision-making framework for Mike change when considering new investments vs re-investments?
Does Mike believe that pro-rata is a lazy notion? What does Mike need to see on the upside to re-invest?
How does Mike feel about the importance of temporal diversification? Why did Mike increase the cadence of his investing in 2021? Does he regret the increased speed?

3.) The Market 101:

How does Mike think about the importance of market sizing? If we always underestimate the size of our winners, is this market sizing exercise not destined for failure?
Why does Mike believe so many over the last few years have poorly sized markets they invested in?
How does Mike assess market timing risk? What market risk is he willing vs not willing to take?
What have been some of Mike's biggest mistakes when analyzing markets in the past? How did it change his perspective?

4.) Boards 101:

How would Mike describe his style of board membership today? How has it changed over time?
Why does Mike believe that boards at seed are not valuable? When do they become valuable?
What is the single biggest mistake Mike sees so many young board members make today? What is his biggest advice to young board members?
How does Mike advise founders on preparing for boards? What does he want to see?
What are the biggest mistakes founders make when conducting board meetings?

Items Mentioned in Today's Episode with Mike Chalfen:

Mike's Favourite Books: Don't Let's Go to the Dogs Tonight: An African Childhood, Days Without End

Mike's Most Recent Investment: Opply