Pretending to be a VC, how to generate 3X+ returns at the fund level and knowing what to do next.

Happy Friday.

Hello from a frigid Ashburn, VA today (where it’s only going to get colder through the weekend). Did I mention that I’m frozen? Ugh.

The 2016 tech tour is kicking off in early March but I’m throwing a kickoff party and happy hour in DC on Mon, Feb 29. If you’re in the area, I hope you’ll join me — I’ll even buy the first drink (or two)! We’ve got room for 150 smart people and 52 have already signed up as I write this to you. It’s filling up fast and It’s going to be a great time. See you there.

Finally, if you’re in the DC Metro area and looking for a place to work (and hang out), join me at Brickyard Ashburn. If you mention that you learned about it through my newsletter (or you just hit reply now), I’ll hook you up. 😉

1. “Let’s pretend we’re all forming a VC firm right now.” [Link] [Tweet]

One thing I’ve learned as an investor over the past few years: everyone’s an armchair quarterback.

If you want to understand how an investor thinks, it’s best to try being an investor yourself. As Elizabeth suggests, “Let’s pretend we’re all forming a VC firm right now.  And there’s an entrepreneur coming into the room in 10 minutes.  What questions would you ask him/her to decide if you’re going to invest?”

2. current status: outside #airstream [Link] [Tweet]

As I’m gearing up for the tech tour to start next month, I’m spending a lot more time in and around the Airstream. I’ve got two questions for you:

  • Do you know anyone that works at Instagram / Facebook? I want @paulsinghand the account appears inactive — can you help me acquire it? (I ended up with@paulsingh99 and my Instagram game is weak. Any tips on getting better?)
  • I want to create a daily and weekly vlog as I pull the Airstream around North America. I’m looking for links to detailed write-ups of workflow and/or would love to speak to someone that has some experience in capturing a ton of content via GoPro/iPhone and rolling that up into daily / weekly vlogs. Help? 🙂

3. “It’s been well documented that online marketing is not only changing; the change is accelerating.” [Link] [Tweet]

A bit off the topic of the changes happening in online marketing, I found this particularly interesting:

“Marketing teams are already doing this, often going around their in-house procurement departments and paying for many of these services with corporate credit cards (as individual services are often in the $50–500 a month price range and are under the limits required of purchase orders.)”

When you’re selling something to businesses, it’s important to remember that there’s often an upper limit to what your purchaser is able to spend without approval from someone higher up the chain. Find that limit and try your very best to stay below it.

4. “in order to generate 3x+ fund returns, entry valuation price / ownership % is critical.” [Link] [Tweet]

If you’re an active investor today, particularly if you’re managing a microfund, 2016 may be exactly what you need in order to boost your overall fund returns. Raise the bar on your investments and yourself.

5. “Over $160M raised online in 2015” [Link] [Tweet]

To put that into context, AngelList has helped deploy more money in one year than most investors will deploy in a lifetime. Regardless of location, every company considering raising money (and every investor planning to deploy a single dollar) should have an AngelList account — if only to scope out the competition.

6. “The information revolution is undoing the industrial revolution.” [Link] [Tweet]

You should probably just read this one. It’ll take you less than 5 minutes and you’ll be smarter for it.

7. “In the coming months, knowing what to do next, is going to be the most important factor in startup outcomes.” [Link] [Tweet]

The key bit to understand: “Over the last few months, the venture world has shifted focus from growth -at -all -costs to unit economics. Blame oil or China or Unicorn Valuations or the IPO market or some complex interactions of all four.”

8. “Investors are rewarding cautious growth more than high-burn-rate growth” [Link] [Tweet]

While this one probably feels like an extension of the previous article, it’s worth reading because Mark Suster’s been writing for quite some time now — particularly through the last up-down-up cycle too.

9. “Fast growth and high burn rates today put startups in a precarious position.” [Link] [Tweet]

Again, more of the same (everyone’s writing about the coming year and you guys are all clicking on it): “As the environment evolves and prices fall, the strongest BATNA for startups will metamorphose with it. In a tempestuous market, self-determination through positive cash flow may be the best bargaining chip in a fundraising conversation.”

10. “The often cited 10x revenue multiple just simply isn’t a rule anymore.” [Link] [Tweet]

OK, this is the last one related to fundraising. Next week, I’m going to filter out anything related to fundraising and see where we end up.

Firehose

You can get the full stream of the things I read, it’s all on Twitter — follow me: @paulsingh. Sometimes I write stuff too. You can always find me on Slack, apply to join.

Have a great weekend!

-P

P.S. If you loved this newsletter, share it with a friend. If you hated this newsletter, share it with an enemy.

Leave a Reply