Registration for the Spring 2026 Venture Deals course is open. The course kicks off on March 2nd and, as always, is free.

Since we revamped the course in 2022, over 32,000 people have enrolled. This version includes entirely new video content and two sections we added that I think are important — Diversity, Equity, and Inclusion in Venture Capital, and Mental Wellness in Entrepreneurship.

The course is self-guided and based on our book Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist, now in its fourth edition.

Sign up at venturedeals.techstars.com .

I did a talk with a private community of 100 GPs and investors in venture capital called Aces last week. It’s an off-the-record, confidential group organized by a few people, including Max Beaumont , who said I could mention him in this post.

Max sent me the following summary. I asked him if I could post it, and he said yes.

Thank you again for taking the time to join us yesterday, and for staying well past the scheduled end.. I could tell how meaningful the conversation was for those who stayed..

A few takeaways that stuck with me:

• Venture ≠ Asset Management – The game has drifted from backing outlier founders to chasing AUM. A painful reset might be needed before things get healthy again.
• Build a firm you enjoy – Not one optimized for market cycles. Sovereign wealth and busted endowments will keep distorting VC until liquidity dries up. Best to play your own game.
• Absurdism as antidote – Life is inherently absurd, so stop optimizing for status. Just be here now, with people you actually like.
• Beware the “grinfuckers” – Never tell people what they want to hear just to “gain.” The long game is living in alignment with your own beliefs.
• Stop passively avoiding – If something’s broken, confront it quickly. Avoidance only prolongs the pain.

Very grateful for your time and most importantly, your candor.. I find it hard to get “real” answers from most GPs today.. Too much incentive to bullshit. You were refreshing.

While there is plenty to unpack in each of those bullet points, especially since the conversation went on for about an hour (instead of the scheduled 30 minutes), the bolded headlines are an excellent summary of several of my core beliefs. None of this was scripted, thought through in advance, and all was summarized from Max’s perspective. I’m sure how I explained some things wasn’t as precise as if I had sat and written a long blog post about it.

So, look at the bold and apply your frame of reference to it. I’ve already written about The Cost of Passive Avoidance , so maybe there will be posts on the other topics, although I’ve also already covered Grinfuckers in the past.

The Venture Deals course is free and starts on June 20, 2023 .

This is the fourth time we are running the new version of the course (v2!) that was co-created with Techstars  and Kauffman Fellows .

If interested, sign up now . I hope to see you in one of the AMAs we will host for anyone who takes the course.

There have been many different language translations of Venture Deals since it was first published in 2012. The first German translation of Venture Deals 4e is out , and Florian Kreis did an amazing job.

Florian aimed to modify the book as little as possible, even if the relevant passages did not correspond 100% to German best practices but were still feasible to implement. He believes the structures originally developed in the U.S. have become the international standard and are a great role model for Germany.

However, the challenge in revising the book this way is putting these structures into the context of German law. Sometimes, this required minor changes or simply using the correct language. In other cases, it was a lot more challenging.

Following, in Florian’s words, are several examples of things he had to modify more extensively.

Corporate law: In Germany, most companies in general and most VC-financed companies are structured in the legal form of a “Gesellschaft mit beschränkter Haftung” (GmbH). Larger companies often convert to the “Aktiengesellschaft” (AG) later, especially if they want to go public. Both the GmbH and the AG are corporations. In addition, many GmbH & Co. KG companies exist in Germany. They correspond in their structure roughly to a Limited Liability Company (LLC). GmbH & Co. KG companies have decisive tax disadvantages for startups and are, therefore, rarely used in this area. The GmbH has a great advantage in that it can be structured very flexibly. You can deviate from the legal regulations to a very large extent, and in practice, you do so. Most of the VC structures from the US best practice can be integrated into the GmbH structure. Often, this integration results in VC-financed GmbH companies having little to do with the GmbH as envisaged by the law.

Board of Directors: There is no board of directors in Germany. In the GmbH, the most important body is the shareholders’ meeting. The shareholders are represented there and usually have voting rights in proportion to their shareholdings. In addition, there are the managing directors as executive bodies. In the VC sector, it is common to introduce a third body in addition to the shareholders’ meeting and the management. This third body is often referred to as an advisory board (Beirat), sometimes also as a supervisory board (Aufsichtsrat). In practice, certain functions of the shareholders’ meeting are transferred to such an advisory board, for example, the appointment and supervision of the managing directors or the decision-making capacity in the case of protective provisions. In the end, however, it is the shareholders’ meeting that remains the most important body in the GmbH.

Conversion right: In Germany, there is generally no conversion right entitling the holder of preferred shares to convert them into common shares at any time. This may not seem like a big deal at first glance, but it has extensive implications under various aspects, such as the structure of the liquidation preference. In the USA, the conversion right ensures that holders of preferred shares are not disadvantaged compared to holders of common shares; in Germany, this legal consequence must result directly from the structure of the preferred shares. In some cases, this causes confusion in terms of terminology: In Germany, the participating preference is referred to as the “nicht anrechenbare Liquidationspräferenz” (non-compensable liquidation preference), while the non-participating preference is referred to as the “anrechenbare Liquidationspräferenz” (compensable liquidation preference). Hence, the negation is exactly in reverse. However, the lack of a conversion right also has implications for anti-dilution protection: in the U.S., this is usually done by adjusting the conversion price. In Germany, anti-dilution protection is achieved by issuing additional preferred shares. The lack of conversion rights must also be considered when structuring voting rights.

IPO issues: Possibly the biggest problem for German venture-backed companies is the very low number of IPOs in Germany. The boom years of 1998 (79 IPOs), 1999 (175 IPOs), and 2000 (142 IPOs) are long gone. In 2022, just as in 2009, there was only one IPO; typically, there are between three and 16 per year. Since the attractiveness of investments is also largely related to exit channels, this aspect affects the availability of capital and company valuation at every stage. It is not uncommon for companies wanting to go public to relocate their registered office to the USA at an early stage. There are also legal differences: Registration Rights, for example, are not legally binding. Piggyback rights are permissible, but due to legal regulations, they are not mandatory. Even though the regulations may not be binding or necessary in individual cases, they can help to bring the topic of going public into focus at an early stage and make it a subject of discussion.

Employment Issues: There are significant differences between Germany and the U.S. regarding employee issues. There is a reason why on page 264 of Venture Deals 4e, it states, “We’ve encountered some challenging situations in certain states in the United States that made firing almost as challenging as firing in parts of Europe.” This must have meant Germany… If a company regularly has more than ten full-time employees, terminations may only be made for certain reasons. Then you may only terminate those employees you actually still want to keep. These issues were problematic twenty years ago when the unemployment rate in Germany was relatively high, and terminated employees could not easily get a new job. Today, things are different: For some years, German has had a shortage of skilled workers, and companies are usually happy if they can find suitable employees.

Employee option pool: The framework conditions for employee option pools remain a major problem in Germany. The tax framework and valuation issues are particularly complex and not very employee-friendly. While there was a major law reform in 2021, the regulations are still inadequate. Even after the 2021 reform, employee option pools will continue to be structured via phantom stocks, as this is the only way to reliably avoid the dry-income problem. This topic is important and complex, so I dedicated a separate chapter (chapter 20) to it in the German edition.

Regulatory framework: There are major differences between the U.S. and Germany in the regulatory framework, which in Germany is supervised by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). This affects not only the large IPO in the late stage but also the small crowdfunding round in the early stage.

Other special features: At various points in the book, there are references to the German Standards Setting Institute (GESSI), which was founded by the Business Angels Netzwerk Deutschland e.V. (BAND) and the Bundesverband Deutsche Startups e.V. (German Startups Association). GESSI develops standardized sample contracts comparable to the National Venture Capital Association in the USA, which are available online at www.standardsinstitute.de . The book also contains information on the INVEST program, with which the Federal Republic of Germany supports investments in early-stage companies. Unfortunately, some of the explanations in this regard are already out of date following the most recent amendment to the law on February 6, 2023.

Samples: The samples in the Annex of the German edition, i.e., the Term Sheet and the Letter of Intent, are essentially based on the samples of the U.S. edition. The detailed work here was probably the most time-consuming. In the case of sample contracts, every word and every concept must be correct and corresponds 100% to the German legal situation. Both samples are bilingual. I partially dealt with the additional space requirements associated with bilingualism by merging the two-term sheet samples from the US edition into a single document.

Florian – thank you for the incredible and time-consuming effort here.

The course is free and starts on March 21, 2023.

This is the third time we are running the new version of the course (v2!) that was co-created with Techstars  and Kauffman Fellows .

If interested, sign up now . I hope to see you there in one of the AMAs we will host for anyone who takes the course.

There have been many different approaches to ranking VC Firms over the years I’ve been an entrepreneur and a VC. Each approach I’ve seen has issues. Most are easily gamed or have statistical bias issues.

I got the following note from Roy Bahat at Bloomberg Beta a while ago about a new approach called Founder’s Choice .

We and a few other firms sponsored a “founders choice” version of the Midas List, with a legit (IMHO) rating methodology, built by two Penn students. No vitriol possible (unlike The Funded, etc.). We’ve wanted this to exist for a long time — NPS of us as a firm is too forgiving a metric, everyone scores well.

My first question was:

How are they dealing with sampling bias on this one? For example, we send to all our founders and say “please fill this out and give us high scores.” Mostly just curious on methodology.

Roy had a thoughtful answer that made me a believer after a few more questions.

You are literally the only one (and I’m relieved someone did) to ask on sampling bias. For context, the general way it works is founders auth with LinkedIn and then the product tosses away their identity (or, more accurately, only keeps a hash and disconnects it from their ratings). Then the founders get asked for pairwise comparisons of only the VC firms who have backed them (so this is about who founders like as investors, not who has sour grapes from a pitch). How this addresses, to a degree, sampling bias:

1. Dampens outliers: because it only asks for pairwise comparisons between firms (like an ELO rating in chess, if you’re familiar), one very un/happy respondent can only affect so much, and same for a sample. (As opposed to giving one firm a 10 and everyone else 2’s or something.)

2. At the same time, it forces comparisons. A firm can ask founders to rate them highly, but ultimately founders have to choose who gave them more value. Can’t rate everyone a 10.

3. This is why we’re looking for as broad participation as possible, because the sampling bias will actually probably most show up in which firms even have enough ratings to count. (Like ELO in chess, more ratings doesn’t necessarily help you — you get more “points” if a founder rates you as better than a highly-rated firm. More ratings can just as easily hurt as help.)

If you are a founder, go spend five minutes and anonymously rank your VCs on Founder’s Choice .

Registration for the Venture Deals Fall 2022 course is open .

The course is free and starts on September 20, 2022. This is the second time we are running the new version of the course (v2!) that was co-created with Techstars and Kauffman Fellows .

If interested, sign up now . I hope to see you there in one of the AMAs we will host for anyone who takes the course.

Connie Loizos is one of the long-time tech industry writers who I respect. I don’t respond to many interview requests these days, but I’ll always talk to her.

She has a good article today in TechCrunch titled Embrace the down round (it’s going to be okay, maybe) . I like the quote she pulled out of me in our conversation.

[Brad Feld] says his “strong belief” that “just doing a clean resetting — at whatever the valuation so that everybody is aligned and dealing with reality —  is much, much better for a company.”

Now, I’m not encouraging anyone to do a down round if unnecessary., especially when many existing investors are currently willing to add on additional dollars at the most recent valuation. If you can do this cleanly, take the money.

Rather, when you have a choice between a financing at a lower valuation and a financing with all kinds of crazy structure to try to maintain a previous valuation, negotiate the best price you can but do a clean financing with no structure.

If you don’t know what I mean by structure, they are terms like:

• Multiple liquidation preferences (you’ll start seeing lots of 2x and 3x on new money)
• Participating preferred on new money
• Weird ratchets (other than the typical weighted average), including full ratchets, on next round financings
• Annual preferred return, including PIK and cash pay on new money
• Blocks on all kinds of things that a new investor should not have blocking rights on

… and a bunch of other things.

Sometimes, given your syndicate configuration, you have no choice but to take structure in a new round. But if you can do a clean financing at a lower price, I always think that’s a better option for everyone (founders, employees, and existing investors.)

While my optimistic personality hopes this downturn/adjustment is short-lived, I fear it won’t be. So, as an entrepreneur, I encourage you to deal with reality.

Like many people, I’m currently deep in SPACland. I’ve been writing privately about it a lot but have now crossed over into a zone where I feel like writing more publicly about it.

When Jason and I wrote the first edition Venture Deals in 2011, we built off a series of 30+ blog posts we wrote in 2005 about Term Sheets . It’s fun to explore them for historical reference since Jack Bauer plays a major part in the posts.

While these posts were the seed for what is now a book (Venture Deals: Be Smarter Than Your Lawyer And Venture Capitalist), it was also a way for us to think through all the elements of a VC financing, back at a time when there was enormous opacity about how these worked, along with massive information asymmetry between people who did them all the time (e.g., us) and the entrepreneur, who did a few of these over her lifetime.

While the web is a much noisier place in 2021 than it was in 2005, the opacity and information asymmetry around SPACs are remarkably similar to what existed 16 years ago around venture deals.

The cliche “everyone’s an expert, but no one knows anything” applies. Yes, there are some experts, but not that many. And the amount of misinformation, misperception, opacity, and information asymmetry is enormous.

As I continue to write privately, I’m going to start writing more publicly. And I encourage comments, feedback, and corrections.

While there is much debate about SPACs, I believe they are a long-term part of the capital stack. They are evolving rapidly, which is part of what is so interesting about them, at least to me.

We are running the Venture Deals Online Course  from March 7, 2021 – April 30, 2021.

We’ve moved the Venture Deals Community from Slack to Mighty Networks where we have much more functionality and flexibility.

Once again, we’ll do a weekly AMA with a variety of people participating.

For now, registration is open. Please sign up if you want to take the Spring 2021 Venture Deals Online Course .

We are running the Venture Deals Online Course  from September 13, 2020 – November 6, 2020.

Our summer session had over 10,000 registrants and over 2,000 people completing the course. We got a lot of feedback about things to improve, several of which we are introducing into the Fall session.

Once again, we’ll do a weekly AMA with a variety of people participating. We are also creating a new Venture Deals online community available to all past and current participants of the course. We’ll provide the link for the online community on day one (we’ll be using Mighty Networks, which I’ve loved for my virtual Startup Community.)

For now, registration is open. Please sign up if you want to take the Fall 2020 Venture Deals Online Course .

I had a really nice week off the grid. More on that in another post.

I woke up this morning with a very long run in mind. The air quality in Longmont is awful because of the forest fires and, after checking the weather on my iPhone and seeing an air quality index of 138, I decided that a run wasn’t going to happen.

So, I ate breakfast with Amy and read the Sunday New York Times.

That was an error. Breakfast was great, but the NY Times was awful. Well, the paper wasn’t awful, but it made me feel awful. I hadn’t read any news all week, including any tech news, and 15 minutes of turning the pages made me anxious.

I think that’s the last time I’m going to read the NY Times.

I needed a palate cleanser. I saw on Slack that my partner Moody released episodes two and three of his Venture Kills vlog . Since I’d finished off The Last Dance during the week, I figured watching Moody might work to shift my mood.

I should have just watched this and skipped the NYT. I feel mostly back to normal now.

My partner Chris Moody decided to be a vlogger and has started a new video series. I suggested he hang out on TikTok but he prefers trying to get famous on Youtube.

So far he has 57 Views but 102 Subscribers. I find that fascinating.

Enjoy!

We are running the Venture Deals Online Course again this summer. But before I get to that, I want to highlight a blog post from a Black colleague. I’m getting, and reading, many of these each day. For the foreseable future, I’ll highlight and amplify one at the beginning of each post I do, in case you are interested.

Today’s post is from Ruben Porras , who is a Techstars alum (Director of Operations at CreatorBox.) He wrote Black Lives Matter. At Work. In Life.

The country, collectively, has grieved five times in 60 years. People of color have collectively grieved five times in 2 weeks. And we carry that into work, school, our relationships, and are expected to be okay— even if and when we’re not.

…

Well, white friends, white allies, I’m done being uncomfortable alone. If you’re a white ally in racial justice, if you’re committed to being anti-racist, if you see that our peace, our harmony, our healing, and progress are bound together, then its time for you to share in this uncomfortability.

I encourage you go to read Ruben’s post Black Lives Matter. At Work. In Life.

We are running the Venture Deals Online Course from June 28, 2020 – August 21, 2020. We usually only run it twice a year (Spring and Fall), but given the Covid crisis, we’ve had many requests to run it this summer.

We’ve now had over 20,000 people take it. The last cycle was particularly fun as several of the AMAs I did had around 1,000 people on it. Someone also set up a Slack channel for the course which I was active in and met a number of new friends.

Registration is open now. Please sign up if you want to take the Summer 2020 Venture Deals Online Course .

I do a lot of random podcasts and especially like to be an early guest on new ones to help get them started.

001 – Brad Feld

The first five episodes are with me, David Cohen, Susan Conover, Amos Schwartzfarb, and Charlie O’Donnell.

Andrew Waine is the producer. He’s currently a senior at the University of Florida finishing his Bachelor’s degree in the Summer of 2020.

He reminds me of a young Harry Stebbings of the 20 Minute VC who reached out to me early (I was on Harry’s 65th episode in 2015), hustled, and did a fun interview with me where we cover the following topics.

• What is in the new edition of Venture Deals
• My time as an entrepreneur and entry into venture capital
• Advice from Jack Tankersley, an early mentor
• The differences between raising fund I vs. fund II at a VC Firm
• How fund sizes impact investing strategies
• How a startup can weather the storms of an economic downturn and the characteristics of the companies that survived the 2008 recession
• My opinion on USV founder Fred Wilson’s blog post about the importance of follow-on capital
• Why Foundry Group invests capital into other VC funds
• What startup accelerator Techstars looks for in its applicants
• Some resources and advice for a young person looking to gain knowledge about VC and Startups

You will even find out where I learned that “even pigs can fly in a hurricane” around minute six.

Harry Stebbings just released a new episode with me on the 20 Minute VC. I love how Harry uses all caps to title the episodes.

20VC: BRAD FELD ON WHY MARKET SIZE AT EARLY STAGE IS NOT HELPFUL, HIS BIGGEST LEARNINGS FROM THE BOOM & BUST OF THE DOT COM AND HOW THE BEST VCS WORK FOR THEIR CEOS

I adore Harry. I did an interview with him early on (#65) so it’s particularly fun to do an interview number that is great than this year.

We cover the following topics, among others. Plus, there is a special book giveaway and a few other gems buried in the episode.

1.) How Brad made his way into the world of venture following 40 angel checks and how that led to his co-founding Foundry Group? Why did Brad find the transition from angel to VC in the early days such a challenge? What 2 core things did he focus on when writing angel checks? How has that changed now as a VC?

2.) How did seeing the boom and bust of the dot com impact Brad’s investing mindset today? How does Brad think about investing through market cycles and the right way to think about investment cadence? Why does Brad believe that to be successful as a VC you have to be fundamentally optimistic?

3.) Where does Brad believe we are today in the cycle? Does he agree with Bill Gurley on the biggest challenge being the “oversupply of capital”? What must entrepreneurs understand with regards to market cycle dynamics and how they can and need to future-proof their business?

4.) From analysing his best investments, why has Brad come to the conclusion that TAM in the early days is really not helpful? What are the commonalities in how Brad’s most successful companies approach experimentation?

5.) What does Brad mean when he says, “don’t have fake CEO or fake VC days”? What does he mean when he often says, “run your fucking business”? What in Brad’s mind would constitute a “fake day” vs moving the needle for your business? What does Brad think is the best way for VCs to truly get to know one another? Why is, “hey let’s do a deal together one of the most hollow and fake statements in venture?”

6.) Brad has sat on some of the most meaningful boards of the last 2 decades, what have been Brad’s biggest learnings on what it takes to be a great board member? How does that change with the progression of your career? What advice would Brad give to me, having just gained my first board seat? If the VC does not support the CEO, what is the right process? Why does Brad believe the VC should work for the CEO?

7.) What is Brad’s biggest advice when it comes to learning how to say no? What advice does Brad hear most often that he commonly disagrees with? Why does Brad feel we are in a moment of peak noise in the ecosystem today? To be a great leader, what 2 skills does Brad believe you need to have?

There are some blog posts that every entrepreneur should read.

Hunter Walk at Homebrew recently wrote one of them.

It’s titled Oh Shit, Your VC Just Quit Her Fund! What a Good CEO Should Do Next.

He covers three cases:

• Bullish aka You Are Absolutely Killing It
• Written You Off
• Too Early To Tell – Some Good Stuff, Some Challenges But A Lot To Do

The real gold in this post is in the Too Early To Tell category. Hunter has a great lead in:

“Here’s where I think founders and cap tables should be more proactive. The default is to let the firm assign another person at the fund (hopefully a GP) and then just keep working on the plan of record as if nothing changed. My experience suggests this will be neutral to negative long term, unless you end up in the “killing it” camp by next fundraise.”

Hunter’s notion that founders and the CEO should be proactive here is right on the money.

At Foundry, we periodically load balance our boards . This is a different phenomenon than the one Hunter is talking about, although we’ve learned to be clearer about what we are doing when we are doing it. I recall a personal low point when a founder/CEO who is a close friend asked to go for a walk and started the conversation with “You could have told me that you were leaving my board in a more graceful way than a one paragraph email.” Very true.

The lesson once again is things change, communicate clearly, and be proactive.

My partner Seth Levine has written several posts over the years on the topic of how to get a job in venture capital.

His 2019 post, titled creatively How To Get A Job In Venture Capital is excellent. Things have changed in the last decade since his 2008 post titled How to get a job in venture capital (revisited) , which was an update from his 2005 post titled How to become a venture capitalist . All three posts are worth reading.

Following is a teaser for each of the key points Seth makes.

• Take the long view. Despite the relative increase in the number of venture firms, there still aren’t all that many jobs in venture.

• Get involved in your community. Venture and entrepreneurship aren’t spectator sports and are best experienced from within.

• Get involved in companies. There are lots of great ways to help out companies directly. 

• Network. Most people are terrible networkers. They treat networking transactionally and they are always looking to take from their networks vs. give to them (good networkers adhere to the #givefirst  mentality)

• Engage. Lots of venture capitalists put out a lot of content and it has never been easier to engage with the venture community. Comment on blog and Medium posts, follow VCs that you respect on Medium and Twitter, send them ideas and thoughts on what they’re writing about and investing in. Stay active and top of mind. 

• Look for any way in. Your first job in venture is typically the hardest to get.

• Work for a startup or start one of your own. This was true 10 years ago and it remains true today.

• Invest if you can. With investment becoming slightly less regulated there are opportunities to put even modest amounts of money to work through platforms like AngelList and others. If you have the ability, it’s not a bad way to show an interest in investing and give you something to talk about in your networking. 

• Persevere. Getting a job in venture is hard and can take a while. Likely it won’t happen. Keep the long game in mind, have fun while you’re going through the process and keep at it.

If you are interested in a job in venture capital, go read Seth’s posts How To Get A Job In Venture Capital (2019) . And How to get a job in venture capital (revisited – 2008) . And How to become a venture capitalist (2005) .

Several years ago, I wrote a post titled Why VCs Should Recycle Their Management Fees .

From the start of Foundry Group in 2007, we have felt strongly about this. We feel that if an LP gives us a $1 to invest, we should invest at least that $1, not $0.85 (the average fee load over a decade for a typical VC fund is 15%.) Our goal for each fund is actually to invest closer to 110%, which means if an LP gives us a $1 to invest, we are actually investing $1.10.

Our long-time friends and LPs at Greenspring recently wrote a great post titled Creating GP-LP Alignment: Why Terms Matter . The post specifically discussed three items: Management Fees, Recycling, and Carried Interest.

The entire post is worth reading, but I especially liked their section on Recycling which includes a handy chart showing that recycling means that you only need to generate a 3.65x gross multiple to achieve a 3.00x net multiple to your LPs, vs. a 4.10x gross multiple if you don’t recycle. The section from their post follows:

In addition to management fees, the process of reinvesting realized proceeds into new investments, or recycling, can also meaningfully impact net returns and alignment. While management fees cut into the dollars available for investment, recycling can have the opposite effect, increasing the investable pool of capital while offsetting a proportion of management fees. To illustrate this point, we revisit our $100 million fund example, and in this case show how recycling $15 million, equivalent to the fund’s management fee, positively impacts the fund.

The fund that chooses to recycle fees requires a 3.65x gross multiple to achieve a 3.00x net multiple, whereas the fund that does not recycle proceeds to offset management fees requires a 4.10x gross multiple to achieve a 3.00x target net multiple. As long as re-invested capital is prudently deployed into opportunities capable of generating strong results, recycling is an impactful way for GPs to increase net returns, which ultimately benefits investors and themselves.

Now, imagine if you recycled 110%. Your investable capital would be $110m. You now require a 3.45x gross multiple to achieve a 3.00x multiple. Plus, as a bonus, you get $56m of carry (vs. $50m of carry in the case where you don’t recycle proceeds.)

Many fund agreements, including ours, require us to pay back all fees and expenses before taking carried interest. We think this is another element of GP-LP alignment and have supported this from our first fund. As a result, if you recycle at least 100%, it is more realistic to think of your management fee as a risk-free, interest-free loan against future carried interest, instead of additional compensation.

As a result, our goal is to generate as much of a return on the dollars invested, and get as many dollars invested as we can in each fund. Recycling allows us to do this and brings the gross and net returns closer together, reducing the spread to the carried interest from profits on investments.

While many GPs focus on their gross numbers, in the end the only numbers that really matter to LPs over time are the net multiples.

That’s worth remembering.

I’m a recent conversation with Eric Paley , he gave me an amazingly wonderful analogy for how the career of a VC unfolds. He said:

“Being a VC is like taking a walk from Boston to San Francisco”

I’d never heard that before so I said: “tell me more.” He went on an awesome ramble, which I’ll try to capture below.

You start out on a sunny day in Boston. You put on your new, clean walking shoes. It’s just walking. It’s fun, fresh, and exciting. It’s a new experience, with lots of hopes and expectations in front of you. You get tons of support and encouragement from all of your friends. You meet plenty of new and interesting people. It’s just walking.

After a few days, you feel like you are getting into a rhythm. You feel you are good at this. It’s still easy and exciting, but now you know what to expect each day.

At some point, you find yourself in the middle of Ohio. It’s raining. Your shoes are worn out. You’ve got blisters and a sore ankle. Your backpack smells – a lot. While it’s still just walking, it’s not much fun anymore. But you grind through it, buoyed by the occasional sunny day, even though it’s now cold outside.

By the time you get to Chicago, you can’t remember why you are walking San Francisco. But you keep walking.

I’ve been doing this for 25 years. While it’s just walking, I’ve crisscrossed the country a bunch of times. And I keep walking.