Latest / Best of LinkedIn: Strategy, M&A & Investments / Best of LinkedIn: Venture Capital CW 51 - 02

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Best of LinkedIn: Venture Capital CW 51 - 02 · Best of LinkedIn: Strategy, M&A & Investments

• 0:00
  Speaker 1: Welcome to the Deep Dive.
• 0:01
  Speaker 1: This analysis is provided by Thomas Allgaier and Frennus based on the most relevant LinkedIn posts about venture capital from calendar weeks fifty one and oh two.
• 0:10
  Speaker 0: And for those unfamiliar, Frennus specializes in B to B market research for venture capital teams.
• 0:16
  Speaker 1: That's right, they do landscape screenings, startup segmentations with a really strong focus on the tech space.
• 0:21
  Speaker 0: And this was a crucial two-week period.
• 0:23
  Speaker 0: we're looking at, right?
• 0:24
  Speaker 0: The transition to the new year.
• 0:25
  Speaker 0: Yes,
• 0:25
  Speaker 1: CW-Fifty-One and O-Two.
• 0:27
  Speaker 0: And what we saw was this clear trend.
• 0:31
  Speaker 0: There was renewed fundraising momentum, for sure.
• 0:34
  Speaker 0: What would it catch?
• 0:34
  Speaker 0: A big one.
• 0:36
  Speaker 0: an intense, almost unforgiving focus on operational maturity, both for founders looking for capital and, you know, for fund managers looking for LP commitments.
• 0:44
  Speaker 1: And hanging over all of it was AI.
• 0:46
  Speaker 1: It's just the central narrative now, from sourcing all the way to strategy.
• 0:50
  Speaker 0: Absolutely.
• 0:51
  Speaker 1: So our mission today is to really distill the top VC trends from that period.
• 0:55
  Speaker 1: We're cutting straight to the actionable knowledge for you, whether you're in M&A, private equity or consulting.
• 1:00
  Speaker 0: Exactly.
• 1:01
  Speaker 0: If you can understand the calculus, the incentives driving these venture decisions, You can structure your own deals better.
• 1:07
  Speaker 1: You can assess your targets better, advise your clients on capital strategy.
• 1:12
  Speaker 1: It all connects.
• 1:13
  Speaker 0: So where shall we start?
• 1:15
  Speaker 1: Let's jump into our first theme, the Founder's Blueprint.
• 1:18
  Speaker 1: We're talking traction, psychology, and alignment.
• 1:22
  Speaker 1: For years, it felt like the playbook was all about having the perfect deck.
• 1:26
  Speaker 0: Right.
• 1:26
  Speaker 1: But the whole discussion has shifted.
• 1:28
  Speaker 1: Now it's about investor psychology, founder perception, and all those non-financial signals of credibility.
• 1:35
  Speaker 0: That shift is profound, and the sources we looked at really confirm it.
• 1:39
  Speaker 0: Customer momentum is the primary signal now.
• 1:41
  Speaker 1: It trumps a perfect pitch deck.
• 1:43
  Speaker 0: Every single time.
• 1:44
  Speaker 0: Vigil Singh shared this fascinating story about his funding journey in India.
• 1:48
  Speaker 0: Oh,
• 1:48
  Speaker 1: I remember this one.
• 1:49
  Speaker 1: He got
• 1:49
  Speaker 0: hard rejections at first, even had a drone demonstration, literally crash.
• 1:54
  Speaker 1: You can't make that
• 1:55
  Speaker 0: up.
• 1:55
  Speaker 0: But he was persistent, he had strong references, and he got these crucial introductions that eventually turned those rejections into real conviction for a successful round.
• 2:05
  Speaker 1: That story really says it all, doesn't it?
• 2:07
  Speaker 1: Sheer tenacity can outweigh a few early flaws.
• 2:10
  Speaker 0: It does.
• 2:11
  Speaker 0: And it reinforces what Alejandro Cremides was saying, that the pitch starts before the pitch.
• 2:16
  Speaker 1: Right.
• 2:16
  Speaker 1: They're judging you before you even open the laptop.
• 2:19
  Speaker 1: Your presence, your clarity.
• 2:20
  Speaker 0: Which, if you're in M&A doing early diligence, that's a key thing to watch.
• 2:25
  Speaker 0: You're assessing the nonverbal risk signals of the leadership team just as much as the numbers.
• 2:30
  Speaker 1: And that leaves right into the intense scrutiny on the founder themselves.
• 2:34
  Speaker 1: Henry, she noted that most deals are won or lost before the first slide even goes up.
• 2:39
  Speaker 0: It boils down to one simple question in that investment committee meeting.
• 2:43
  Speaker 0: Is this founder special?
• 2:44
  Speaker 1: Okay, but what does special actually mean in a diligence process?
• 2:48
  Speaker 1: It sounds a little bit fluffy.
• 2:49
  Speaker 0: It's not fluff at all.
• 2:50
  Speaker 0: It's the core of the VC portfolio strategy.
• 2:53
  Speaker 0: She defines it pretty clearly.
• 2:55
  Speaker 0: Okay.
• 2:55
  Speaker 0: It's conviction that comes from seeing world-class execution or, you know, unique technical expertise or maybe some proprietary insight they gained from living the problem.
• 3:06
  Speaker 1: So for a PE operating partner, you're looking past growth rates to find that thing that makes them unique, the thing that lets them solve problems.
• 3:14
  Speaker 1: no one else can.
• 3:15
  Speaker 1: Exactly.
• 3:15
  Speaker 0: It's that core belief that says, even if the market goes sideways, this person will figure it out.
• 3:21
  Speaker 1: But that belief is necessary because of the structural tension between the VC and the founder.
• 3:26
  Speaker 1: It's enormous.
• 3:28
  Speaker 0: Gil Mubishu highlighted this.
• 3:31
  Speaker 0: VCs are playing a numbers game.
• 3:33
  Speaker 0: a portfolio game.
• 3:35
  Speaker 0: They're okay with seven out of ten investments failing.
• 3:37
  Speaker 1: But the founder is playing all in.
• 3:39
  Speaker 1: It's their entire career.
• 3:41
  Speaker 0: Precisely.
• 3:42
  Speaker 0: And because of that difference, you have founders like Among Goal advising a much more disciplined approach.
• 3:47
  Speaker 1: Stay cash flow positive.
• 3:48
  Speaker 0: Stay cash flow positive and only raise capital when it unlocks a very specific strategic goal, not just because the money is there.
• 3:56
  Speaker 0: Right.
• 3:57
  Speaker 1: Maintaining profitability gives you leverage in those future negotiations.
• 4:00
  Speaker 1: M&A teams should really note that.
• 4:02
  Speaker 0: Definitely.
• 4:02
  Speaker 0: And we also saw this reframing of failure as a strategic tool.
• 4:06
  Speaker 1: I liked this one.
• 4:07
  Speaker 1: Roy Samuel shared an anecdote about a term sheet that just completely fell apart.
• 4:11
  Speaker 0: which feels devastating of
• 4:12
  Speaker 1: course but that setback forced his team to fix critical flaws they've been ignoring
• 4:19
  Speaker 0: and it led to a much better deal later on.
• 4:21
  Speaker 0: it's the difference between seeing a setback as a failure versus seeing it as a mandatory learning loop to sharpen your positioning.
• 4:30
  Speaker 1: For consultants, that's a huge insight.
• 4:33
  Speaker 1: Being transparent about past struggles can actually build credibility as long as you can show you
• 4:37
  Speaker 0: fix them.
• 4:38
  Speaker 0: Okay, so let's switch gears completely.
• 4:39
  Speaker 1: Let's do it.
• 4:40
  Speaker 1: Moving from founder psychology to the cold, hard mechanics of VC fund strategy, dilution, and alternative capital.
• 4:49
  Speaker 0: This is where the math of the industry gets, well, brutal.
• 4:52
  Speaker 0: It really
• 4:52
  Speaker 1: does.
• 4:52
  Speaker 0: It dictates everything.
• 4:54
  Speaker 0: Both Thomas Pagali and Yen Tran Hai confirm the reality of the power law.
• 4:58
  Speaker 0: Which
• 4:58
  Speaker 1: just doesn't go away.
• 4:59
  Speaker 0: Never.
• 5:00
  Speaker 0: VCs need one or two percent of their portfolio to deliver returns of, like, a hundred X or more.
• 5:05
  Speaker 1: Just to compensate for the eighty percent or more of bets that return less than one X.
• 5:09
  Speaker 0: Which is why there's this obsessive focus on massive market size.
• 5:13
  Speaker 1: So, for the PE and MNA analysts listening, this means that VC-backed targets aren't optimized for steady growth.
• 5:20
  Speaker 0: No, not at all.
• 5:21
  Speaker 1: They're optimized for massive structural asymmetry.
• 5:25
  Speaker 1: And if that outlier trajectory stalls, The VC might just lose interest pretty quickly.
• 5:31
  Speaker 0: Exactly.
• 5:32
  Speaker 0: And that pressure leads us right into the mechanics of early stage funding.
• 5:36
  Speaker 0: Okay.
• 5:37
  Speaker 0: Peter Dimof noted that pre-season seed capital is now increasingly driven by these niche micro VCs.
• 5:43
  Speaker 1: Not the big brand name mega funds.
• 5:47
  Speaker 0: Right.
• 5:47
  Speaker 0: They often just lack the bandwidth or conviction for those really early risky stages.
• 5:51
  Speaker 1: And Remain B had a pretty concerning data point on this.
• 5:54
  Speaker 0: Yeah.
• 5:55
  Speaker 0: That pre-seed valuations are rising.
• 5:57
  Speaker 0: which
• 5:57
  Speaker 1: is driven by higher entry standards, bigger initial rounds.
• 6:00
  Speaker 1: But if you increase the entry valuation while the exit environment is still tight, you're compressing that critical multiple.
• 6:06
  Speaker 0: You're squeezing the exit over entry ratio, which fundamentally impacts every investor that comes in later.
• 6:11
  Speaker 0: Right.
• 6:11
  Speaker 1: So if the seat is priced higher, the Series A and B investors have less room to hit their own target MOIC.
• 6:18
  Speaker 0: And that forces stricter performance metrics much earlier in the company's life.
• 6:23
  Speaker 1: You just mentioned MOIC multiple on invested capital.
• 6:26
  Speaker 1: Let's just unpack that for a second.
• 6:28
  Speaker 1: Sure.
• 6:28
  Speaker 1: For a founder or an M&A team looking at a cap table, what does that metric practically mean, especially with dilution?
• 6:36
  Speaker 0: It is the true measure of success.
• 6:39
  Speaker 0: As Chris Topman's analysis showed, dilution is sort of the silent killer that rewrites the final outcome.
• 6:45
  Speaker 1: A headline exit of, say, a hundred million pounds might sound amazing.
• 6:49
  Speaker 1: Of
• 6:49
  Speaker 0: course.
• 6:50
  Speaker 0: But if a founder is anchored on that number, instead of their final ownership percentage and the MOIC, they might be deeply disappointed.
• 6:58
  Speaker 1: And the key mechanism there is liquidation preference, right?
• 7:01
  Speaker 1: The VC gets paid back first.
• 7:03
  Speaker 0: First.
• 7:04
  Speaker 0: Often one, two, even three times their money back before the founder sees a dime of their own equity.
• 7:09
  Speaker 1: So the headline is just a headline.
• 7:11
  Speaker 1: The cash you walk away with is all about ownership discipline.
• 7:14
  Speaker 0: Which brings us to alternative capital stack.
• 7:16
  Speaker 0: Yeah.
• 7:16
  Speaker 0: Ron Bauer's capital stack strategy is getting a lot of traction.
• 7:19
  Speaker 0: His advice is pretty simple.
• 7:20
  Speaker 1: Use equity only for strategic partners.
• 7:23
  Speaker 0: The ones who open doors.
• 7:25
  Speaker 0: And then use non-dilutive debt like term loans or revenue-based financing for predictable operational expenses.
• 7:32
  Speaker 0: It just lowers your cost of capital and you maintain control.
• 7:36
  Speaker 1: And Inamar Novik even argued that many founders actually end up wealthier by bootstrapping.
• 7:41
  Speaker 0: Yeah, because VC forces you into that growth at all costs mindset, sacrificing profitability for scale.
• 7:47
  Speaker 1: whereas a bootstrap company that sells for a smaller amount to a PE firm, but the founder has high ownership.
• 7:53
  Speaker 1: They
• 7:53
  Speaker 0: can often have a much, much larger personal payout.
• 7:56
  Speaker 0: It's a huge incentive for profitable M&A targets.
• 7:59
  Speaker 0: All
• 7:59
  Speaker 1: right, let's pivot hard.
• 8:00
  Speaker 1: now to the operational shift.
• 8:03
  Speaker 1: AI do diligence and fund management.
• 8:05
  Speaker 1: The whole investment process is becoming, well, intensely institutionalized.
• 8:09
  Speaker 1: It's being driven by tech and higher demands from LPs.
• 8:12
  Speaker 0: And AI is really moving VC from what was in art to more of a science.
• 8:17
  Speaker 1: That phrase moving from art to science.
• 8:19
  Speaker 1: that came directly from Dr.
• 8:20
  Speaker 1: Andre Redarath's work, right?
• 8:22
  Speaker 0: It did.
• 8:22
  Speaker 0: His VC investor tool stack, twenty twenty six.
• 8:26
  Speaker 0: He showed how AI is reshaping every workflow.
• 8:30
  Speaker 0: from sourcing and screening tens of thousands of documents to the initial diligence.
• 8:34
  Speaker 1: Which creates unprecedented speed.
• 8:36
  Speaker 0: It does.
• 8:37
  Speaker 0: But, and this is a big but, Adeo Resi emphasized that while AI handles the work,
• 8:42
  Speaker 1: the processing, summarizing, humans
• 8:44
  Speaker 0: still make the decisions.
• 8:45
  Speaker 0: You still need human conviction.
• 8:47
  Speaker 0: You need trust.
• 8:48
  Speaker 0: You need that final call on a founder.
• 8:50
  Speaker 1: And this actually increases the pressure on founders, doesn't it?
• 8:53
  Speaker 1: The diligence gets more rigorous.
• 8:54
  Speaker 1: It
• 8:54
  Speaker 0: does.
• 8:55
  Speaker 0: Nina Redd pointed out that founder materials matter more than ever.
• 8:59
  Speaker 0: Not just for the analysts who's reading them.
• 9:00
  Speaker 1: But for the AI they're feeding.
• 9:02
  Speaker 0: Exactly.
• 9:03
  Speaker 0: If your documents are disorganized, the AI flags it instantly.
• 9:06
  Speaker 0: It speeds up the rejection process just as much as the approval process.
• 9:10
  Speaker 1: So in a market saturated with AI where the tech is easy to copy, what becomes the real differentiator for a startup?
• 9:16
  Speaker 0: Sebastian Mueller argued that the focus is shifting away from the tech itself.
• 9:21
  Speaker 0: To things like accountability, operational outcomes, and liability, trust and a repeatable process now beat pure technical novelty.
• 9:31
  Speaker 1: That's a huge insight for M&A teams.
• 9:33
  Speaker 1: If you have two startups with similar tech, the one with better operations and governance becomes the safer, more valuable acquisition.
• 9:40
  Speaker 0: Absolutely.
• 9:41
  Speaker 1: So let's talk about the internal operations of the VC fund itself, where LPs are driving this change.
• 9:48
  Speaker 0: Murtilalacos's research shows LP diligence on first time.
• 9:52
  Speaker 0: fund managers is getting much more intense around process and repeatability.
• 9:56
  Speaker 1: And the biggest threat to a new fund isn't a bad deal market.
• 9:59
  Speaker 0: No, it's poor.
• 10:00
  Speaker 0: vendor selection during the setup phase.
• 10:02
  Speaker 0: It's
• 10:02
  Speaker 1: surprisingly simple things, right?
• 10:03
  Speaker 0: Yeah, like using general corporate lawyers who've never handled fund formation or using QuickBooks for fund accounting.
• 10:09
  Speaker 1: Which can botch capital calls or mess up the waterfall calculation?
• 10:13
  Speaker 1: Wait,
• 10:13
  Speaker 0: let's stop there.
• 10:14
  Speaker 0: If the waterfall calculation is messed up, what's a practical consequence for, say, a PE firm looking at that fund as a partner?
• 10:21
  Speaker 1: It just signals a massive lack of operational maturity.
• 10:25
  Speaker 1: A sophisticated LP, like a pension fund, will see that immediately as a huge governance risk.
• 10:30
  Speaker 1: Right.
• 10:31
  Speaker 0: And Mark Kleiner noted that setting up a fund is about building a proper operating system, not just filing paperwork.
• 10:37
  Speaker 1: It's an operating system that assures LPs you can handle the complex fiduciary duties.
• 10:42
  Speaker 0: Finally, Alec Ferguson added this fascinating nuance on alignment.
• 10:46
  Speaker 0: GP commitment, you know, skin in the game is critical.
• 10:50
  Speaker 0: Of course.
• 10:50
  Speaker 0: But the data suggests performance actually drops off beyond the ten to thirteen percent commitment range.
• 10:56
  Speaker 1: That is counterintuitive.
• 10:58
  Speaker 1: Why?
• 10:58
  Speaker 0: Excessive personal commitments, say twenty or thirty percent, might actually make the GPs too risk averse.
• 11:04
  Speaker 0: They start focusing on capital preservation instead of going for those huge power law returns.
• 11:09
  Speaker 1: So for Elkies, it's about finding that sweet spot.
• 11:12
  Speaker 1: Enough commitment, but without paralyzing fear.
• 11:15
  Speaker 0: All right, final segment.
• 11:16
  Speaker 0: Let's look at the macro picture.
• 11:18
  Speaker 1: Global capital flows and liquidity dynamics.
• 11:20
  Speaker 1: The market structure feels like a barbell now, right?
• 11:22
  Speaker 0: Totally.
• 11:23
  Speaker 0: You have the massive scale of US mega funds on one end and these specialized niche micro funds on the other.
• 11:29
  Speaker 1: And the scale of US concentration is other.
• 11:33
  Speaker 1: It's just hard to comprehend.
• 11:34
  Speaker 0: It really is.
• 11:36
  Speaker 0: Ria Mamazzata and Peter Osco highlighted that a single major Silicon Valley firm might raise a fifteen billion dollar fund,
• 11:44
  Speaker 1: which is a figure that nearly doubles the entire VC funding raised in some large European countries in a year.
• 11:50
  Speaker 0: It just ensures US dominance, especially in strategic sectors like AI, defense and energy.
• 11:55
  Speaker 0: And
• 11:55
  Speaker 1: Pavel Prada pointed out that firms like Lightspeed, with their nine billion dollar raise across six different vehicles,
• 12:01
  Speaker 0: they're treating fund architecture as a competitive weapon.
• 12:04
  Speaker 1: They're creating a full product shelf for LPs, giving them diversified access across stages and geographies.
• 12:09
  Speaker 0: Which just makes the scaling cap in Europe look even more acute.
• 12:12
  Speaker 0: Oliver
• 12:12
  Speaker 1: Mollender said Europe struggles because its big enterprises are just less willing to acquire startups early.
• 12:18
  Speaker 0: Compared to the US counterparts, yeah.
• 12:20
  Speaker 0: That lack of an early M&A exit stars the ecosystem.
• 12:23
  Speaker 1: And Aipepoe Verda went even further.
• 12:25
  Speaker 1: He argued it's not a funding problem, but a training problem.
• 12:29
  Speaker 1: A training
• 12:29
  Speaker 0: problem.
• 12:30
  Speaker 0: Yeah,
• 12:30
  Speaker 1: that investors and institutions in Europe often like the ability to recognize and scale deep tech breakthroughs, leaving billions in value on the table.
• 12:39
  Speaker 0: Wow.
• 12:39
  Speaker 0: Okay, so turning to exits, liquidity is starting to build up again, which is good.
• 12:43
  Speaker 1: It's crucial.
• 12:45
  Speaker 1: Mikhail Sklyarov confirmed the IPO market is building momentum.
• 12:49
  Speaker 0: And Thomas Zeleny provided some great context there.
• 12:52
  Speaker 0: He noted that while VC backing increases the probability of a big IPO,
• 12:56
  Speaker 1: the better predictor of long-term success is real company revenue,
• 13:00
  Speaker 0: specifically over a hundred million dollars at the time of the listing.
• 13:04
  Speaker 0: That's the metric.
• 13:05
  Speaker 0: M&A and PE teams should be tracking.
• 13:07
  Speaker 1: And beyond IPOs, the secondary market is accelerating.
• 13:10
  Speaker 0: Materially, Morgan Duranda reported this and it's driven by high private valuations and the need for earlier liquidity.
• 13:17
  Speaker 1: That acceleration opens a huge opportunity for private equity.
• 13:20
  Speaker 1: Krista Morgan noted that the window to acquire and reposition that post-COVID overfunded cohort is expanding.
• 13:27
  Speaker 0: You mean the startups that raised too much at inflated valuations?
• 13:31
  Speaker 1: Exactly.
• 13:32
  Speaker 1: But it requires restructuring expertise that really understands VC dynamics, not just traditional corporate restructuring.
• 13:38
  Speaker 0: Right.
• 13:38
  Speaker 0: You have to understand the liquidation preferences, the control rights.
• 13:42
  Speaker 0: It's a different game.
• 13:43
  Speaker 1: And finally, let's not forget the regional bright spots.
• 13:47
  Speaker 0: Pankaj Singh confirmed India is seeing this disciplined re-acceleration with fresh funds and faster decisions, especially in AI and fintech.
• 13:55
  Speaker 1: And Jabid Hossain and Sam Marchant highlighted Dubai as a rapidly growing global startup hub.
• 14:01
  Speaker 1: So
• 14:01
  Speaker 0: the capital might be concentrating in the
• 14:03
  Speaker 0: U.S.,
• 14:04
  Speaker 0: but the operational hubs are definitely diversifying.
• 14:07
  Speaker 1: So what does this all mean for you if you're operating in M&A, private equity, or consulting?
• 14:12
  Speaker 0: I think the core message from this period, from CW-Fifty-One to O-Two, is really about unforgiving rigor.
• 14:19
  Speaker 1: Unforgiving rigor, I like that.
• 14:20
  Speaker 1: VC today demands intense discipline from everyone.
• 14:24
  Speaker 1: From
• 14:24
  Speaker 0: founders in capital efficiency and defining their special edge.
• 14:27
  Speaker 1: And from investors in operational maturity and institutionalizing their diligence with AI.
• 14:32
  Speaker 0: You're operating in a bifurcated market.
• 14:34
  Speaker 0: You have to know if your target is positioned for that one hundred X outlier growth or if it's built for a disciplined cash flow positive acquisition.
• 14:42
  Speaker 1: Which raises a pretty important question for you the listener to think about as you plan your strategy.
• 14:48
  Speaker 0: Given that extreme concentration of capital in US mega funds and this split in the market, what is the new competitive edge for a niche non-consensus fund manager in?
• 15:00
  Speaker 1: Is it purely proprietary access to deals the big players miss?
• 15:04
  Speaker 0: Or can specialized verifiable operating expertise truly outweigh sheer financial scale in the
• 15:10
  Speaker 1: long run?
• 15:10
  Speaker 1: That's something critical to mull over.
• 15:12
  Speaker 1: If you enjoyed this deep dive, new additions drop every two weeks.
• 15:15
  Speaker 1: Also check out our other additions focusing on private equity, M&A, and strategy and consulting.
• 15:20
  Speaker 0: Thanks for tuning in.
• 15:20
  Speaker 1: And remember to subscribe!