The Hidden Strategies of Venture Capital - E687
episode
BRAVE Southeast Asia Tech: Singapore, Indonesia, Vietnam, Philippines, Thailand & Malaysia Startups, Founders & Venture Capital VC (English)
9 min
1 speaker
5 chapters
transcribed 19 days ago
Transcript
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Transcript generated automatically by AI and may contain errors.
How do venture capitalists collaborate and compete across funding stages?
Across stages, VCs are collaborative with one another. Now obviously what they'll always ask me, hey, what is the best two or three startups is because they know that and it is in my interest to tell them what they are because then he can explore them, edit his notes, track them and explore investing in them. And I can't write that big a check and now I want them to spread their wings and take off to the next level.
However, within the same vertical, VC fans are often competitive with one another. For example, if you look in Southeast Asia, for example, you're talking about the Series A investment stage, and they're all competing originally, for example, to make those investments. They're competing with one another because there's only a limited opportunity to get an investment into that point of time in the startup lifecycle. VCs are categorized from pre-seed to growth stage. You can see pre-seed is normally self-funded. Minimal viable product, seed is like, for example, one $2 million check. There'll be a seed VCs and Angels. You have some early adoption. Then you go to Series A, Series B, Series C, and then Series C.
You start doing growth venture capital, and they expect for you to see market leadership. They expect to see rapid expansion. They expect you to see defensibility. The larger you are, the more professionalized and more financialized the investor will be. And the earlier stage you are, then the VCs will be much more focused on evaluation. Waiting the team or the idea rather than the proven economics because there are no economics at the pre-seed or seed stage. As a result, every great VC must do four things. They must be able to source, they must be able to select, they must be able to support the startups, and then they have the exit.
What are the four core functions every great VC must perform?
Right? VC funds generally have four strategies that you should be aware of. The first is the index portfolio. If you believe that the majority of returns were generated by very few companies, the fund should invest widely. To diversify and be disciplined. The second type of company AC are much more concentrated bets. So basically, they invest in fewer companies because they believe that if we are doing the work to select them, we can do and write larger checks into it, we have more conviction about it, and we're gonna do more support for each of these individual companies. So they're gonna be on a board, they have control rights, they have a lot more support. Then you see something called multi-stage investors.
These are large capital agglomerations. Or aggregators, and they basically say that hey, a startup at every stage only has one opportunity to raise capital. Each company that is going to become that unicorn only has an opportunity to invest at a C stage once, F once. At each of those stages is a finite opportunity to get money in. So as a result, if you can keep identifying them early and you keep doubling down across each of these stages, then you can have massive wins. And lastly, of course, is venture builder. Venture builders are basically saying we want to find founders to work on ideas that we have. And this is often a belief because they believe there's something broken about the talent or team formation of that market.
So for example, you may see biotech companies that are saying, look, we want to go to the university and look for multiple patents, and then we are going to hire founders and leadership teams to shepherd each individual patent through the commercialization stage. Because the secret source is in the patent commercialization and exploration. There are also venture builders, for example, in different markets because they say, hey, this market has a lot of great founders, but this corporate or this fund believes that they can generate ideas and they can hire the executive data to do it. So for example, you can see BCG Digital Ventures, which is an arm of Boston Consulting Group. Obviously, we saw that for Rocket Internet.
So they very much had that approach where they were funding localized. Versions of US companies.
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Chapters
5 chapters
1
How do venture capitalists collaborate and compete across funding stages?
0:00–1:32
2
What are the four core functions every great VC must perform?
1:32–3:48
3
Which four fund‑strategy models do VC firms use and how do they differ?
3:48–6:20
4
When do VCs choose minority investments versus taking management control?
6:20–8:32
5
Why do concentrated‑bet funds like Union Square Ventures have higher unicorn hit rates than index funds?
8:32–9:37
Speakers
1 identifiedMore from BRAVE Southeast Asia Tech: Singapore, Indonesia, Vietnam, Philippines, Thailand & Malaysia Startups, Founders & Venture Capital VC (English)
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