It demonstrates a strong signal to the market and further demonstrates stability in the investor base. While there are often good (or not so good) reasons why not to join the follow-on round, from my perspective it is particularly important to join the round following your initial investment. (i) Having pre-emptive rights to join the next round is a right but also a responsibility. To be a stable CVC investor, a few homework points: It is a very valuable and healthy perspective in Board discussions, hearing pain-points of clients and product opportunities in addition to the pure investor perspective. I observe the CVC taking the mid/longterm “client” role in Board discussions (voting or non-voting). Moreover, the CVC can provide additional advice and perspective to the startup strategy. This provides a startup a more diversified investor base and stability. CVCs are often measured not purely on financial return of the investment, but also on strategic KPIs (such as the number of product deployments, impact/return from using the product and the number of cross-selling opportunities). to build out the startup's product roadmap or extend the runway in challenging times. I have experienced several cases, where in particular CVCs added fresh capital e.g. Especially during challenging times, having an investor dedicated to the product can add stability. This increased emphasis on the product results in better-aligned interests for the startup. By being a client of the startup, the CVC's attention to the actual product is crucial for the startup's development and the CVC's role. The primary focus of CVC is centered on the growth and profitability of the startup, as well as its product offerings. (6) Sizable capital available for investments as advantageĬorporate venture capital (CVC) typically maintains both strategic and financial focus. (2) Shift to focus on growth & profitability combined In my view, it's the perfect time for CVC.Īs such I am sharing an update on an article I posted last year with 6 reasons, why I believe value-added CVC will increase plus I re-added again some “CVC homework” to achieve such growth: the SVB collapse, the overall market turmoil in light of increased interest rate environment and valuation softening, I receive often the question what this means to #corporateventurecapital. If you can’t do that, eventually, you’ll be fired or washed out.With the recent events incl. You are judged on how many unicorns you produce a year in VC. So yes, the later stage the firm, the less it’s like being a founder.īut you do have to deliver. These fees start to “stack” on top of each other to some extent, and thus, your salary can double (along with your gains). You can also see from this why many VC firms now are raising new funds every 2 years (vs 3–4 years before). And if you are investing well, the carry should dwarf the cash over time. Note though, that at this size, the “buy-in” also can be large. There are enough fees here that the senior partners will make $1m+. In a $760m+ fund, that’s $15m+ a year in fees. Series B+ Fund: $1m+ a year for top partners.The general partners often make $300k-$500k a year, and it can be as much as $1m year if you are ‘stacking’ multiple funds on top of each other. In a $250m fund, that’s $5m a year in fees. In say, a $150m fund, that’s $3m a year in fees. Potentially much more once you are 3 funds in. Series A Fund: $300k-$500k a year in salary.A $50m fund with 3 partners and 1 associate has $1m a year to split across salaries, expenses, partners, and associates. Smaller funds often do 2.5%, but still, there’s only so much to go around. 2% of a $20m fund is only $400k a year for all expenses. Pre-seed: $100k or less a year in salary.Those important points noted, then … on the cash / salary side, here are some rough yardsticks for a ‘full’ partner (likely 10 years in) before carry might make once 2–3 funds are under management: (I’m ignoring recycling here, it doesn’t matter for the answer). So roughly 20%-25% of the fund size is, over the life of the fund, set aside for costs and salaries. That’s what you’re dividing up among expenses (rent, travel, etc) and salaries. Third, generally, 2%-2.5% of the fund size each year for up to 10 years is set aside for costs and salaries.
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