E34: Aakar Vachhani of Fairview on What The Top 1% of GP’s Share in Common
Jan 18, 2024
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Aakar Vachhani, from Fairview, discusses the role of data in venture capital, Fairview's unique structure, and their co-investment program. They also explore the discipline of making investment decisions, the advantages of a fund of funds, and the importance of team cohesion in VC firms.
In an investment pitch, prioritize discussing the team first as it is the most important aspect for investors, providing a strong foundation for the pitch.
After discussing the team, focus on presenting a compelling case for the strategy and market opportunity, including the investment thesis, market potential, and competitive advantages.
Including a transparent and accurate track record with performance metrics, such as net IRR, net TVPI, and net DPI, builds trust with potential investors and avoids damaging credibility.
Deep dives
Importance of Team in Investment Pitch
When presenting an investment pitch, it is crucial to prioritize discussing the team first. Too often, the team is mentioned near the end or given lesser importance. However, the team is the most important aspect for investors. They want to know who you are, your motivations, and what drives you. Highlighting the team's experience and expertise sets a strong foundation for the pitch.
Emphasis on Strategy and Market Opportunity
After discussing the team, the next key point in an investment pitch should focus on the strategy and market opportunity. Clearly articulate the investment thesis, market potential, and any competitive advantages you have, such as sourcing and deal flow expertise. It is crucial to present a compelling case for why your strategy aligns with the market needs and how you plan to capitalize on the available opportunities.
The Significance of Track Record and Performance Metrics
Another important aspect of an investment pitch is the inclusion of a track record and performance metrics. It is essential to provide a transparent and accurate representation of your past performance, preferably in the form of net IRR, net TVPI, and net DPI. Gross numbers and misleading performance calculations can damage credibility and hinder fundraising efforts. Being upfront about performance builds trust with potential investors.
Emerging managers face challenges in raising capital
Emerging managers in the investment industry often struggle to raise capital due to the higher risks associated with their strategies. However, difficult fundraising environments can attract some of the best investors who have conviction in their strategies. Grit and commitment are crucial qualities that drive the success of emerging managers. The diligence process for selecting emerging managers involves assessing their investment experience, commitment to building a firm, and the ability to intersect with top founders in their areas of focus.
Long-term commitment and enduring culture drive success
Investors in emerging managers should have a long-term perspective and be prepared for the journey to success, understanding that no firm's story is linear. A strong enduring culture and a guiding light, or North Star, are important for navigating challenges in the industry. Some key factors that contribute to enduring culture and success include having conviction in the firm's strategy, making sound decisions, being disciplined on pricing and terms, and building an institutional infrastructure. The investor diligence process involves deep relationships and evaluating the management team, the strategy, and the ability to adapt and learn from challenges.
Aakar Vachhani sits down with David Weisburd to discuss the role of data in venture capital, Fairview's unique structure, and their co-investment program. They also delve into the discipline of making investment decisions, the advantages of a fund of funds, and the importance of team cohesion in VC firms. Vachhani also shares best practices for data rooms and advice for LPs as Fairview celebrates its 30th anniversary.
The 10X Capital Podcast is part of the Turpentine podcast network. Learn more: turpentine.co
(0:00) Introduction and Aakar Vachhani's background
(1:43) The role of data in decision making and returns in venture capital
(6:55) Fairview's history, unique structure, and co-investment program
(15:58) The discipline and strategy in making investment decisions
(20:18) The advantages and arguments for a fund of funds
(26:50) Qualitative factors and enduring culture in venture capital firms
(33:30) Re-investing in tenured firms and the diligence process for emerging managers
(39:44) The importance of team cohesion and the ability to adapt in VC firms
(42:41) Best practices for data rooms and creating an ideal emerging manager deck
(53:23) Continual engagement with GPs and adjusting investment strategies for potential risk
(58:17) Celebrating Fairview's 30th anniversary and advice for LPs
(1:00:04) Launch of the 10X Capital Podcast Newsletter
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