The Full Ratchet (TFR): Venture Capital and Startup Investing Demystified

On this special replay, Jaclyn Hester of Foundry Group joins Nick on a special Crisis Coverage installment to discuss GP and LP Alignment, Challenges for Emerging Fund Managers, and How the Explosion in Seed Fund Volume Plays Out.

Guest Update: Jaclyn is now Partner at Foundry Group. Congratulations Jaclyn! 

In this episode, we cover:

  • Tell us about your background and path to VC
  • For those who don’t know talk about the approach at Foundry with both the LP and GP model
  • Foundry traditionally had no apprenticeship model and no junior investors… were you the first?
  • Pandemic… Are you making investments currently and what are you hearing from other LPs?
  • What’s your advice for GPs re. building relationships and momentum w/ LPs during these uncertain times?
  • What’s the biggest mistake emerging managers make when fundraising?
  • What do new fund managers underestimate when starting a venture firm?
  • Does it matter how specific a thesis is? Do you need to see a unique, focused and compelling edge or are you just as receptive to a generalist w/ a strong network and track record?
  • What question tends to trip up GPs?
  • What are some of the most important things GPs should ask LPs when raising?
  • What do you think are the most important things GPs and LPs need to be aligned on for a successful relationship?
  • How does the explosion in volume of seed funds affect you approach to selection?
  • How do you think this plays out — most funds fail? Returns more evenly distributed? Power law no longer applies (or is less pronounced)?
  • Fast forward 5 years and let’s assume there’s been a fundamental shift in early stage Venture. What do you think is the most likely, largest change that’s occurred?
  • What advice do you have for young people that aspire to be a VC someday?
  • Not going to ask for favorite GPs but, I will ask, if you could break quarantine to grab a cocktail w/ one GP — who do you choose? ; )
  • 3 Data Points…
    • You’re approached by an emerging VC firm raising fund II. The fund manager did not work for a large, brand-name venture firm before and she has never had an institutional investor. Net TVPI is 1.4, and Net IRR is 35% and it’s a 2018 vintage.
    • The catch is you can only ask 3 questions (for 3 additional data points) to make your decision.
    • What 3 questions do you ask?