For me, 2024 can be described as turbulent or challenging. Remember, as a VC, we sign up for years such as this... it's not all up and to the right! While such seasons of life are stressful, stepping back, these instances can teach us a lot. Thank you, 2024 for teaching me some things.
Some of what I learned last year:
- In venture markets akin to 2024, strong raises are a combination of "great" businesses operating in a hot market. This means that "good" business outside of a hot market can go unfunded and never have a chance to achieve greatness. And that's just how life goes.
- Few VCs are well-suited to endure the rigors of supporting a robotics startup. I've come to observe that long sales cycles, working capital intensity, and scaling a "full stack" model can be challenging to investors who predominantly think about the world through the lens of software. Founders tread carefully!
- A quality co-investor can only have one superpower. A limited number of investors can have one or two more superpowers but consider that the exception. It's helpful for both founders and VCs to take note of this.
- Don't assume someone else on the cap table is doing the work, do it yourself. If you think there's something important to work on with a start up, don't rely on a co-investor to lift that big rock, that's on you.
- Helping a portfolio company raise follow-on funding from your network of VCs is a three-part function. That function = people who like you + trust you + share an interest in the startup subject matter you share. I've come to find that if one element is missing, there is no follow-on.
- Memories are short and emotions run high in VC. Short memories mean that lessons from the past can be forgotten. I've found it helpful to surround oneself with those who've seen a "few more battles" but to periodically revisit lessons directly learned. On the other hand, emotions are an important part of building and realizing one's vision but can be perilous when investing. Building processes, systems, and culture to invest objectively and limit the role of emotions in decision-making are crucial.
- Many LPs allocate the first six months of the year and not much thereafter. There are exceptions to this, notably FoF but VCs raising a new fund should remember that the summer slowdown is real and the fall brings peak AGM season. Plan accordingly!
- You can't coach one to be more hungry and driven. But if one has these traits, it's easier to coach them to success.
- Portfolio construction must adapt to the funding environment. Whatever your approach to portfolio construction is, it's important to revisit and recalibrate based on new data. As graduation rates revert to norms from 8-10 years ago, a couple more shots on goal appear to be prudent even if it means holding less reserves. Also, don't wait for a new fund, be nimble and do this as you deploy!
What did 2024 teach you?