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Best of LinkedIn: Venture Capital CW 43/ 44 · Best of LinkedIn: Strategy, M&A & Investments

• 0:00
  Speaker 0: provided by Thomas Allgaier and Frennus, based on the most relevant LinkedIn posts about venture capital in CW, forty three and forty four.
• 0:08
  Speaker 0: Frennus specializes in BDB market research for venture capital teams, providing landscape screenings and startup segmentations with a strong focus on the tech space.
• 0:17
  Speaker 1: Welcome to the deep dive.
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  Speaker 1: Our focus today is really synthesizing the most crucial insights and top venture capital trends we saw circulating on LinkedIn during calendar weeks, forty three and forty
• 0:28
  Speaker 0: four.
• 0:28
  Speaker 0: Yeah.
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  Speaker 0: And we're aiming this squarely at professionals like you across MNA, private equity, VC and consulting.
• 0:34
  Speaker 0: The mission is simple.
• 0:36
  Speaker 0: Cut through the noise, deliver the key signals.
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  Speaker 1: We want to unpack what's driving this while massive urgency and capital deployment right now.
• 0:42
  Speaker 0: Exactly.
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  Speaker 0: and why AI is still, you know, the dominant theme, plus how LPs and founders are navigating this frankly pretty pressurized environment.
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  Speaker 1: Okay, so let's dive into that core conflict first, the tension around the capital clock and LP dynamics.
• 0:54
  Speaker 1: The starting point is just the sheer scale of dry powder.
• 0:57
  Speaker 0: Right.
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  Speaker 1: VCs are sitting on a staggering five hundred and eighty billion dollars that needs to find a home.
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  Speaker 0: That number is just huge.
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  Speaker 0: And it's not sitting comfortably, is it?
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  Speaker 0: Kevin Jiang pointed out something crucial.
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  Speaker 0: Those funds raised back in say, twenty nineteen to twenty twenty one, they're now hitting that critical five to seven year window.
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  Speaker 0: He calls it the deploy or die territory.
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  Speaker 1: Yeah, bluntly put, but accurate.
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  Speaker 1: If you can't get that capital committed, you risk having to return it.
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  Speaker 0: Which is death for raising your next fund, basically.
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  Speaker 1: Absolutely.
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  Speaker 1: And that pressure cooker environment directly informs the rigor we're seeing from LPs now.
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  Speaker 1: Tumas El and he put in really well.
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  Speaker 1: How so?
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  Speaker 1: He said LPs aren't giving capital to VCs for safety.
• 1:40
  Speaker 1: They're not looking for stability here.
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  Speaker 1: They demand asymmetric, really outsized returns.
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  Speaker 1: Okay.
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  Speaker 1: So if a fund is underwriting an early stage deal, the minimum expectation, the floor, is now a three X net return.
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  Speaker 0: Wait, three X net minimum.
• 1:54
  Speaker 0: That's significant.
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  Speaker 0: How does that actually change the investment strategy on the ground?
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  Speaker 0: Doesn't that force VCs to chase only the absolute moon shots?
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  Speaker 0: It
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  Speaker 1: absolutely does.
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  Speaker 1: It just reinforces that VCs fundamentally about hitting home runs, not singles or doubles.
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  Speaker 1: If your fund isn't structured to capture those massive outliers, you're just not going to meet that LP mandate.
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  Speaker 1: It means maybe passing on deals that look merely safe or incrementally profitable.
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  Speaker 0: OK, and speaking of rigor.
• 2:19
  Speaker 0: There was that crucial point from Arshad Chowdhury about safeguards.
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  Speaker 0: It reflects this kind of high stakes, maybe slightly wary environment.
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  Speaker 1: What was that?
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  Speaker 0: LPs are demanding direct unfiltered conversations with the general partners.
• 2:34
  Speaker 0: really validating the strategy, but also screening for any potential fraud signals.
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  Speaker 1: Yeah, exactly.
• 2:40
  Speaker 1: And even the smallest detail can apparently trigger deep skepticism now.
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  Speaker 1: Chattery mentioned LPs getting highly suspicious about any changes to recipient bank account details for wire transfers.
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  Speaker 0: Ah, interesting.
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  Speaker 0: Like, even if there's a legitimate reason.
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  Speaker 1: Apparently so.
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  Speaker 1: The due diligence is just tightening up everywhere, making sure the money flows exactly where the GP says it will.
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  Speaker 1: Okay.
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  Speaker 0: But despite all that, regular capital is flowing.
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  Speaker 0: particularly in certain places, right?
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  Speaker 0: Europe seemed to lead in October.
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  Speaker 1: That's right.
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  Speaker 1: Europe saw about ten billion dollars raised in October.
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  Speaker 1: And interestingly, the lion's share of that went into the very earliest stages, pre-seed and seed.
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  Speaker 1: Okay.
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  Speaker 0: So still appetite for early risk.
• 3:18
  Speaker 1: Definitely.
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  Speaker 1: And we saw some major fund closes that confirmed that institutional confidence is still there for, you know, specific proven teams.
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  Speaker 1: Sequoia closed an early stage vehicle at seven hundred and fifty million dollars.
• 3:30
  Speaker 1: Wow.
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  Speaker 1: Box Group raised five hundred and fifty million dollars across two funds.
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  Speaker 1: And Lifeline Ventures, the Finnish firm, they secured.
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  Speaker 1: So the money's concentrated, it's selective, but it's definitely ready to move for the right managers.
• 3:43
  Speaker 1: Right.
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  Speaker 0: Okay, let's shift gears a bit then.
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  Speaker 0: Moving from the flow of capital to the structure of the VC firms themselves.
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  Speaker 0: This is especially relevant for aspiring managers launching their first funds.
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  Speaker 0: Ritalolico's outlined some critical pieces often overlooked.
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  Speaker 1: Yeah, she really emphasized things beyond just sourcing deals and doing diligence.
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  Speaker 1: You absolutely must define your LP base clearly.
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  Speaker 1: And ensure... Total strategic alignment.
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  Speaker 1: So if you're building, say, a specialized FinTech fund, every angel deal you've done, every blog post you write, your entire pipeline has to scream FinTech.
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  Speaker 0: So LPs, look at you and think, OK, they are the obvious choice for this niche.
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  Speaker 1: Precisely.
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  Speaker 1: It's about focus.
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  Speaker 0: And that structural part, setting up the fund, that's actually getting cheaper, which I found fascinating.
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  Speaker 0: Lollicos noted the cost has dropped dramatically.
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  Speaker 1: Yeah, from maybe fifty thousand to one hundred and fifty thousand dollars previously, down to only about five thousand dollars today to get the basic infrastructure up.
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  Speaker 1: Which
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  Speaker 0: sounds great, but...
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  Speaker 1: But it's a double-edged sword, right?
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  Speaker 1: Easier entry means way more competition for that limited LP capital.
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  Speaker 1: And that makes the next hurdle she mentioned attribution even more critical.
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  Speaker 0: Ah, attribution rights.
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  Speaker 0: This seems to blindside so many new GPs coming out of established firms.
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  Speaker 0: Can you unpack why that's such a big deal?
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  Speaker 0: It's
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  Speaker 1: basically a legal and, well, financial roadblock.
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  Speaker 1: You can't legally claim your track record or reference those successful deals from your previous firm when you're talking to LPs.
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  Speaker 1: Well,
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  Speaker 0: you can't even mention them.
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  Speaker 1: Not unless you specifically negotiated attribution rights when you joined that firm or, more likely, when you left.
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  Speaker 1: That track record, it belongs to the firm, not the individual VC, legally speaking.
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  Speaker 1: So without those rights, you're essentially starting from zero in terms of provable institutional history.
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  Speaker 1: You have to rely solely on maybe your proprietary deal flow, your angel investments, your network.
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  Speaker 0: That really highlights the power dynamic within those big firms.
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  Speaker 0: Okay, so this kind of sets the stage for that persistent debate, spray and pray versus conviction investing.
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  Speaker 0: Ruben Dominguez, Ibar and Peter Walker actually brought data to this.
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  Speaker 1: Right, using simulations.
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  Speaker 1: Comparing a high volume diversified approach, lots of small checks versus a concentrated one, fewer bigger bets.
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  Speaker 0: And what do the simulations show?
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  Speaker 1: Well, the data suggested diversification generally wins out.
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  Speaker 1: The portfolio with, say, a hundred startups getting four hundred thousand dollars each consistently outperformed the one with twenty startups getting two million dollars
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  Speaker 0: each.
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  Speaker 0: In terms of returns.
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  Speaker 1: Yeah, higher average and median fund multiples.
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  Speaker 1: The diversified approach showed a two point six X mean multiple versus two point one X for the concentrated one in their simulation.
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  Speaker 0: And crucially, what about downside protection?
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  Speaker 0: Capital preservation.
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  Speaker 1: significantly better with diversification.
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  Speaker 1: The simulated diversified fund had like a ninety-nine point seven percent chance of returning at least one X capital.
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  Speaker 1: So the data points towards diversification being the safer, more reliable path for most
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  Speaker 0: funds.
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  Speaker 0: Okay, so the numbers lean towards spreading bets.
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  Speaker 1: They do.
• 6:37
  Speaker 1: As they put it, venture isn't a picking game, it's a portfolio game.
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  Speaker 1: Concentration, according to the data, only really pays off if you happen to be in that elite top five percent of all funds.
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  Speaker 0: Which raises that fascinating question about VC ego, doesn't it?
• 6:50
  Speaker 0: Dan G called it the illusion of skill.
• 6:52
  Speaker 0: If the math favors diversification for ninety-five percent of funds, why do so many VCs still push the narrative of concentrated high-conviction bets?
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  Speaker 1: That's the million-dollar question, isn't it?
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  Speaker 1: Is it truly about optimizing LP returns or is it more about building a personal narrative of being the genius outlier picker?
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  Speaker 1: Hmm,
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  Speaker 0: yeah.
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  Speaker 0: seems like a potential misalignment.
• 7:13
  Speaker 0: It's almost like self-sabotage for the average GP if they follow that concentrated path without being truly exceptional.
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  Speaker 1: And Corey Epstein offered a maybe more philosophical take on why so many funds fail.
• 7:24
  Speaker 1: He suggested it's because many VCs lack deep, genuine industry expertise.
• 7:29
  Speaker 0: So they invest in what they know.
• 7:31
  Speaker 0: or think they know.
• 7:32
  Speaker 1: Exactly.
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  Speaker 1: They gravitate towards founders who kind of mirror their own blind spots, confirming their existing level of understanding.
• 7:39
  Speaker 1: And that leads them to pass on the truly complex, maybe contrarian ideas they just don't get.
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  Speaker 0: Okay, interesting.
• 7:45
  Speaker 0: Let's pivot then to the founders themselves.
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  Speaker 0: Theme three, guidance in pitching discipline.
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  Speaker 0: The big shift seems to be resilience over just pure polish.
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  Speaker 0: Raymond Kim emphasized founder market fit being paramount now.
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  Speaker 1: Absolutely.
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  Speaker 1: VCs are scrutinizing the jockey much more than just the horse.
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  Speaker 1: They're looking for those intrinsic qualities, grit, you know, genuine resilience.
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  Speaker 1: A unique, maybe non-consensus insight into the market, deeply held beliefs, and critically a real unfair advantage.
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  Speaker 1: Why are you and your team uniquely capable of weathering the storm and winning?
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  Speaker 0: And that resilience, that insight, It has to stand up under some pretty intense scrutiny during the pitch, right?
• 8:24
  Speaker 0: Haram Chodari shared a fascinating story about using an AI investor simulation tool.
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  Speaker 1: Yeah, that was interesting.
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  Speaker 1: Tell me more.
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  Speaker 0: So this founder used a tool that basically simulated different investor types, Angel, VC, corporate, and adapted its questions accordingly.
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  Speaker 1: Wow.
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  Speaker 1: Oh, OK.
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  Speaker 1: And what happened?
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  Speaker 0: It provided immediate, almost brutal clarity.
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  Speaker 0: The simulated angel investor is zeroed in on some questionable market research, the VC simulation.
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  Speaker 0: It drilled right into the unit economics and instantly flagged that the cash-y LTV ratio was, well, broken.
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  Speaker 0: They'd lose money as they scaled.
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  Speaker 0: Ouch.
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  Speaker 1: The classic scaling problem.
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  Speaker 0: And the corporate investor, Sam, asked the most practical thing.
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  Speaker 0: How does this shiny new thing actually integrate with existing messy enterprise workflows?
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  Speaker 1: The killer question for B to B.
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  Speaker 0: Exactly.
• 9:09
  Speaker 0: And the founder apparently didn't have a good answer.
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  Speaker 0: The tool generated like, twelve pages of red flags.
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  Speaker 0: It just shows how specialized and deep the diligence is getting.
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  Speaker 1: And that ties perfectly into the three key red flags that Richard Stroup highlighted, citing Juan Carlos Pacheco.
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  Speaker 1: The immediate fundraise killers.
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  Speaker 0: Which are?
• 9:26
  Speaker 1: One, arrogance.
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  Speaker 1: Yeah.
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  Speaker 1: Kills the partnership potential instantly.
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  Speaker 1: Two, weak command of the numbers.
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  Speaker 1: Signals operational chaos.
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  Speaker 1: Three, saying you have no competition.
• 9:38
  Speaker 0: OK, arrogance, weak numbers, those make sense.
• 9:41
  Speaker 0: OK.
• 9:41
  Speaker 0: Arrogance, poisons.
• 9:42
  Speaker 0: Well, weak numbers mean you don't know your business.
• 9:45
  Speaker 0: But why is saying no competition such a huge red flag?
• 9:48
  Speaker 0: Isn't that good?
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  Speaker 1: It's actually a sign of market naivety.
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  Speaker 1: If a founder genuinely thinks there's zero competition, it usually means one of two things.
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  Speaker 1: Either they haven't researched the market deeply enough, or they're defining their market way too narrowly.
• 10:01
  Speaker 1: Often, competition is actually proof that a market exists and that customers are willing to pay.
• 10:05
  Speaker 1: It's validation, not just a threat.
• 10:07
  Speaker 0: Ah, OK, that makes sense.
• 10:09
  Speaker 0: So switching slightly, let's talk access, getting in the door.
• 10:12
  Speaker 0: Patrick Casey shared some hard numbers confirming what we probably all suspect.
• 10:16
  Speaker 1: Warm intros still rule.
• 10:18
  Speaker 0: Massively.
• 10:19
  Speaker 0: Response rates jump to sixty percent plus with a warm introduction compared to maybe one percent to five percent for cold emails.
• 10:26
  Speaker 0: The network is still absolutely dominating the top of the funnel.
• 10:30
  Speaker 1: But that reliance on warm intros, it inherently brings up the flip side.
• 10:35
  Speaker 1: the pedigree bias that Shreme Ha called out.
• 10:38
  Speaker 0: Right, he shared that anecdote.
• 10:39
  Speaker 1: Yeah, the viral story about the founder who got ignored then created a fake profile IIT in Stanford credentials and boom!
• 10:46
  Speaker 1: Suddenly, top VCs who'd ignored his actual idea were falling over themselves to talk to the fake profile.
• 10:51
  Speaker 1: Oof,
• 10:52
  Speaker 0: that story is depressing.
• 10:54
  Speaker 0: but really instructive about initial screening.
• 10:56
  Speaker 1: It absolutely signals that bias is still deeply embedded, right?
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  Speaker 1: Whether it's automated filters or just human pattern matching.
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  Speaker 1: While VCs should counter this, respond to every credible outreach regardless of source, the reality is that bias toward perceived elite backgrounds still exists, especially at that first gate.
• 11:12
  Speaker 0: Okay, let's move to our final theme then.
• 11:15
  Speaker 0: Market focus and the enduring AI thesis.
• 11:18
  Speaker 0: No surprises here, AI is still running the show largely.
• 11:21
  Speaker 0: Evelina Deneva and Agatha Theory confirmed its dominance in Europe.
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  Speaker 1: Yeah, over thirty-five percent of recent European funding rounds were AI related, and Sun Choy really captured the prevailing Silicon Valley view on why.
• 11:35
  Speaker 1: He called AI a multi-leveraged structure.
• 11:38
  Speaker 1: Stress that the real motes aren't just clever algorithms anymore, it's about massive infrastructure, huge data scale, and Frankly, deep pockets.
• 11:47
  Speaker 1: That dynamic makes it incredibly tough for smaller players to build truly defensible AI platforms.
• 11:52
  Speaker 0: That makes sense for pure play AI.
• 11:55
  Speaker 0: But we're also seeing a really interesting strategic rotation of capital, which feels even more significant, maybe.
• 12:00
  Speaker 0: Russell Sean Langodoc highlighted that huge Apollo eight VC partnership.
• 12:04
  Speaker 1: Ah, yeah, deploying billions into industrial infrastructure, real assets, buildings, logistics.
• 12:08
  Speaker 1: Exactly.
• 12:08
  Speaker 0: And the argument there, as Langodoc put it, is that AI becomes the competitive moat in these non tech businesses.
• 12:14
  Speaker 1: Right.
• 12:14
  Speaker 1: Not by being the product itself, but by optimizing legacy processes.
• 12:19
  Speaker 1: Procurement find thirty percent plus savings there through AI.
• 12:22
  Speaker 1: That's massive, immediate EBIT gain in previously unsexy industry.
• 12:27
  Speaker 1: And that's
• 12:28
  Speaker 0: where the real leverage shifts, potentially.
• 12:30
  Speaker 0: Okay, but let's temper all this enthusiasm with the harsh reality of founder outcomes.
• 12:35
  Speaker 0: Valuations have been high, right?
• 12:37
  Speaker 0: Chris Topman shared CARTA data.
• 12:38
  Speaker 1: Yeah.
• 12:39
  Speaker 1: high benchmarks, seed median around nineteen million dollars, Series A seventy-fifth percentile nudging a hundred million dollars on paper, especially for anything AI related.
• 12:48
  Speaker 0: But paper value isn't cash in the bank for founders.
• 12:51
  Speaker 1: Exactly.
• 12:51
  Speaker 1: And that's where the grim financial math kicks in.
• 12:54
  Speaker 1: Ruedos Santos shared that sobering anecdote.
• 12:57
  Speaker 1: The
• 12:57
  Speaker 0: one billion dollar exit.
• 12:58
  Speaker 0: That one.
• 12:59
  Speaker 1: Founder sells the company for a billion dollars, a huge success by any measure.
• 13:03
  Speaker 1: Yet the founder personally walked away with less than ten million dollars.
• 13:06
  Speaker 1: Less
• 13:07
  Speaker 0: than one percent of the sale price.
• 13:08
  Speaker 0: How How does that even happen?
• 13:10
  Speaker 1: Layers and layers of dilution for multiple funding rounds coupled with powerful liquidation preferences held by later siege investors.
• 13:16
  Speaker 1: Ah,
• 13:16
  Speaker 0: the preferences.
• 13:17
  Speaker 1: If VCs have, say, two X or three X liquidation preferences, they get two or three times their investment back before the founder and often all the common shareholders see a single penny.
• 13:28
  Speaker 1: In anything other than a truly spectacular exit, those preferences can just wipe out the founder's equity entirely.
• 13:35
  Speaker 0: So a high valuation today can mean a high risk of zero pay out tomorrow if things don't go perfectly.
• 13:40
  Speaker 0: Precisely.
• 13:41
  Speaker 1: It's a crucial lesson in cap table management and understanding deal terms.
• 13:45
  Speaker 0: Okay, one last quick tactical tip for founders.
• 13:47
  Speaker 0: From Harry Stebbings.
• 13:49
  Speaker 0: He advised seed stage founders.
• 13:51
  Speaker 0: What
• 13:51
  Speaker 1: was it?
• 13:51
  Speaker 0: Avoid bringing co-founders to those very first VC pitch calls.
• 13:56
  Speaker 0: Keep that initial meeting strictly one point one.
• 13:59
  Speaker 0: Focus on building that personal relationship first.
• 14:01
  Speaker 1: Interesting.
• 14:02
  Speaker 1: Makes sense.
• 14:02
  Speaker 1: Keep it focused early on.
• 14:04
  Speaker 1: Alright, so maybe a final provocative thought for you, our listeners, to chew on.
• 14:08
  Speaker 0: Lay it on us.
• 14:09
  Speaker 1: Given the statistical data we discussed, showing diversification generally outperforms concentration for, you know, the vast majority of funds.
• 14:16
  Speaker 1: Is the prevailing VC ego that illusion of skill Dan G mentioned?
• 14:21
  Speaker 1: Is it truly optimized for maximizing LP returns and overall fun success?
• 14:25
  Speaker 1: Or does it maybe prioritize creating a personal narrative, the story of being that elite outlier spotting genius?
• 14:31
  Speaker 1: Something to think about.
• 14:33
  Speaker 0: If you enjoy this deep dive, new episodes drop every two weeks.
• 14:36
  Speaker 0: Also, check out our other editions on private equity, M&A, and strategy and consulting.
• 14:40
  Speaker 0: Thank you for joining us as we unpack the VC landscape of calendar weeks forty-three and forty-four.
• 14:45
  Speaker 0: Hit that subscribe button so you don't miss our next analysis.