The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
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Kim: Most LPs invest via social proof and preserve failing VC funds
“I think most LPs are social proof investors. I think that there's a substantial dynamic of you don't get fired for buying IBM. And venture funds are hard to kill. A lot of them should have been killed, but they're 10 to 12 year vehicles.”
Kim: Most VC fund of funds are terrible asset gatherers
“I think most venture capital fund of funds are terrible. They're asset gatherers. They want AUM. They want management fee. A lot of them don't even charge carry.”
Kim: Micro VC seed funds now outperform larger traditional venture funds
“Ultimately, I think our thesis proved out these smaller funds do outperform, and these smaller funds have effectively become early stage venture capital today.”
Kim: Early-stage LP direct investing suffers from severe adverse selection
“At the high level, I do think that there are substantial issues with LPs investing directly. First and foremost is adverse selection. If an opportunity is available to the LP, why are they being shown this? Is something wrong with the company? Does the fund ma…”
Kim: Top VCs maximize ownership and squeeze LPs out of Series A
“If there is, at the earliest stages, a company that is High quality with high quality investors coming in. LPs are probably the last in line in terms of getting access to that. So imagine a seed funded company by one of our fund managers, a high quality firm l…”
Kim: 1% seed stakes do not move the needle in typical exits
“The typical venture exit is between 50 to a hundred million. If you own 10% of that company, that's ten million dollars back at a hundred million dollar exit. Ten million back to a seed fund is very meaningful. If you own one percent, you get the same kind of …”
Kim predicts long-term seed startup mortality rate will be 25% to 30%
“And, you know, I do think that the longer term sort of steady state mortality rate is probably 25% to 30%, but I don't think it's 80%, but we'll see.”
Kim: Party rounds are the absolute worst early-stage financing structure
“Now, the absolute worst scenario, and Mark Suster actually talks about it in his recent post on both sides of the table, are these party rounds. I don't think these party rounds are happening as often, but these party rounds are where 20 plus individuals, you …”
Kim predicts only 1-2 of Cendana's 18 funds will reach Sequoia status
“I would say that to be realistic, maybe one or two out of You know, the 18 plus funds that we work with may ultimately emerge in that category”
Kim: Institutional LPs have already exhausted their 2016 annual capital budgets
“A lot of them did, and so now institutional LPs are largely out of capital for the year. A number of LPs I know have already spent their budget or have already allocated their budget to these re-ups, and it's also not just in the U.S. There are a lot of re-ups…”
Kim: Cendana Capital's seed portfolio mortality rate is currently under 10%
“I will tell you that through our portfolio, Of 700 companies or more, our mortality rate right now is less than 10%. What I mean by that is companies that have shut down, companies that have been written as zero.”
Kim: Startups can achieve substantial traction with just $500,000
“Contrast that to today, where it's almost an order of magnitude cheaper to start a company, you can get substantial traction with 500,000 dollars.”
Kim predicts SoftTech VC will build a multi-generational platform like Greylock
“And if you look at the absolute top tier VC funds, they've done a phenomenal job of generational shift, and, you know, the older generation handing off to the younger generation, certainly firms like Greylock, have transformed themselves, and I think that is t…”
Kim: Cendana Capital has zero interest in becoming a multi-billion dollar fund
“So we have zero interest in becoming a multi-billion dollar asset gatherer and living off our fees and having swanky offices.”
Kim: US seed rounds in 2016 typically range from $1M to $2M
“The composition of a seed round, which today is about one to two million in the U S sometimes larger as large as three million.”
Cendana operates a direct fund targeting Series B and C portfolio companies
“Specifically to Sandana, we do have a direct investment fund. So we have a standalone fund that invests directly into the portfolio companies of our fund managers. The idea here is that we would invest at the early growth stage, so series B or C. These compani…”