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Mutual Funds Entered Late-Stage Venture Because Micro-Cap Public IPOs Disappeared
“So if your whole micro-cap public market has gone, where are you going to go for emerging growth companies? So it makes perfect sense for Fidelity and T. Rowe and all these guys to come in.”
Venture Platforms Scale Best by Treating Portfolios as Founder Communities
“Rather than the venture capitalist being the hub in the middle of this kind of hub and spoke network, could you push, you know, he called it the Napster of venture, right? Could you push the interactions out to the frontier where entrepreneurs are interacting …”
Douvos: The 2000 vintage venture benchmark ended slightly positive
“I think the benchmark actually is like positive, like one point of seven percent or something for the 2000 vintage.”
Douvos: Seed valuation resilience is an artifact of unfunded marginal deals
“One thing that's interesting is I actually just saw some data that I think said that seed valuations were up year over year. And anecdotally, that's what I'm hearing as well. And I think that's actually just a data composition issue because the marginal ideas …”
Douvos: University deep tech works with small exits if ownership math is right
“The material sciences guys, you know, none of their companies will ever sell for more than two hundred million dollars, but when you can own 35% of the company for 750 K, and you got a twenty-five million dollar fund, the arithmetic works in your favor.”
Douvos: Integrating Web3 human-computer interaction and crypto will take 10 years
“We've got some managers that are really leaning into human computer interaction that really starts to look like web three. And yes, crypto becomes kind of the secure and identity driven data layer of that. And that's what I'm excited about. But I think that's …”
Douvos: Early VC Holders Should Sell Partial Positions to Return Capital
“Don't sub-optimize exits, but when you see an opportunity maybe to sell into around, if you're an early holder and can sell part of your position, put that moolah in the coolah.”
Crossover investors like Tiger and Addition accelerated the venture market tempo
“And at the top end of the market, we've seen some non-traditional investors, the tigers and additions and global and such come in with huge sums of money and very quick cadence. And that's also contributed to the change in tempo.”
First Round Capital compressed its deal decision time to 50 hours
“And when they came into the venture business in 2005, They started tracking time from when they saw a deal to when that deal was done, whether or not they actually did that deal. And I think in 2005, it was a hundred days. In 2016 or 17, when they said, man, t…”
Pessimists sound smart in investing, but optimists make all the money
“Pessimists sound smart, but optimists make all the money.”
Partner time and engagement are the true scarce resources in seed investing
“One thing that we heard constantly from entrepreneurs in those days is it turns out that the Capital's not the scarce resource. It's the time and the engagement. And so surmounting that engagement hurdle, I think, is one thing that's really challenging, and I …”
Startups are cheaper to launch today but far costlier to scale
“Paradoxically, I think the thing that's the biggest change in my career is it's gotten both cheaper and more expensive paradoxically to get a startup from inception to exit. Cheaper in the early days because the cost of inputs has gotten so much lower with AWS…”
Broad crypto bull markets obscure which fund managers are truly all-weather
“There's been so much noise and so little signal because all those trees have been growing to the sky. You're just like, I don't know who's a great all weather manager.”
Failing VC generational transitions outnumber successful ones by orders of magnitude
“The number of firms that have failed in generational transition outnumbers by orders of magnitude the numbers of firms that have had successful generational transitions.”
First Round has historically stayed within 1.5 to 2x original fund sizes
“First Round has been historically a very size disciplined firm, whereas a lot of their peers have now grown to managing in each fund many, many hundreds of millions of dollars. They've still stayed pretty much only one and a half to two times their original si…”
By 2017, Approximately 350 Seed VC Firms Existed With Institutional Backing
“Today, by the way, there are about 350 firms in this space trying to do this. And I think, like, 80% of them have an institutional backer”
Douvos Allocates 80% of His Flagship Fund Capital to Top Four Managers
“Like, in my, in the fun that I spend most of my time on, my top four managers are 80% of the dollars.”
True Outperformance Requires Taking Career Risk to Be Right and Alone
“They're so afraid of being wrong and alone and taking that career risk that they migrate from being alone and having conviction to being with the crowd. But when you migrate towards the crowd side, you take the right and alone box out of play. And that's where…”
Median seed deal sizes and pre-money valuations have risen 2.5x
“In terms of my area of the waterfront, it looks like the amount that's being raised in seed deals, like the medians, Has gone up by about two and a half X. The pre monies have gone up again, two and a half X.”
August Capital's 2000 fund succeeded by taking Seagate private
“August Capital, a longtime manager, well-established Sandhill firm, in what's otherwise a wasteland of 2000 vintages, They put up a monster fund because at the tail end of it, but they had Seagate in there. So there's the take private with a third of their fun…”
Allocators must test managers' competitive advantages and their own evaluation abilities
“You're always testing a joint hypothesis. Is this manager an outstanding manager with a sustainable competitive advantage is hypothesis one. The second is, am I sufficiently aware and educated that I can ascertain that?”
First Round employs 75 people across platform, investing, and content
“I mean, there's 75 people working on Platform initiatives, investing, content production, et cetera.”
Endowment Management Offers Infinite Time Horizons and Structural Flexibility
“He said, you know, it's the most amazing job. It's like the closest you'll ever come to managing your own multi-billion dollar fortune. You have incredible flexibility low liquidity needs, Long, if not infinite time horizon, few tax headaches, a single client,…”
Michael Porter Predicted in 1999 That Warren Buffett Would Buy Burlington Northern
“He goes, a young, charismatic, putatively smart guy like you should be able to get into railroads. You'll be CEO of Burlington Northern within 15 years and watch Warren Buffett will buy it.”
Douvos Split His Diligence Time Equally Between Founders and Venture Capitalists
“For every hour I spent with a venture capitalist, I'd spend an hour with an entrepreneur.”
Average Venture Capital Partnerships Last Twice as Long as American Marriages
“It takes a lot of patience to invest in venture capital funds because the average venture partnership lasts twice as long as the average American marriage. Isn't that crazy? Average venture fund goes 10 years plus, you know, kind of three, four, five, one-year…”