Monday morning, on the other side of the table
Partner meeting at the fund, Monday
Partner Third item. Warm intro from a founder we backed in the last fund, met her twice.
Second partner Is it ours, though. We say we do infrastructure and this is a workflow product with an infrastructure paragraph on slide four.
Partner It is at the edge. But the founder is the reason to be at the edge.
Second partner Everybody says that about the deals that fail the thesis.
Model Numbers first. At the price they are asking, our cheque gets us seven percent. The model wants twelve. Either the cheque grows or the round shrinks.
Partner We could take seven now and buy the rest at the A.
Model With whose money. Reserves for this fund are ninety percent committed already, and we are two years from the end of it.
Second partner Then be honest about what that means. If we go in small and pass on the next round, every fund she talks to reads it as a verdict on her, not on our reserves.
Partner Which is exactly why I want us to lead or leave it. Half in is the worst of both.
Model There is also the marked-up position from the B last month, if anyone was going to bring it up. On paper we look wonderful and not one share has been sold.
Second partner Nobody is buying groceries with a markup.
Partner Look, one company in this fund pays for the whole fund and we do not know which. I would rather be wrong about her than sensible about all of them.
Second partner Fine. Take it to committee with the ownership problem named on the first slide, not the last.
The founder is not in the room, and this is where the answer is decided. Twenty minutes, three people, and most of the argument is about the fund rather than the company.
A fund argues about arithmetic before it argues about a company
The opening words are about supply and fit. The middle ones are the fund’s own mathematics: how much of a company it has to own, and what it has kept back to stay there. The last ones are about what other people will read into the answer.
Deal flow
The stream of investment opportunities a fund sees, and how good and plentiful that stream is.
Their deal flow at seed is the best in the city.
What a fund is really selling to its own investors, and the thing partners are quietly measured on between meetings.
Investment thesisTesis de inversión
The stated logic behind what a fund invests in, or the argument for one specific deal.
It is outside their thesis, they only do infrastructure.
Written to be a filter and used as an argument. Every fund has one, and every fund has a company that contradicts it.
Partner meetingReunión de socios
The regular meeting where a fund's partners hear deals and decide which ones move forward.
You are on the agenda for Monday's partner meeting.
The hour a founder waits for without being able to attend it. Where a warm answer on a call becomes a yes or a no.
Investment committee (IC)Comité de inversión
The formal body inside a fund or institution that approves or rejects an investment.
The partner is a yes, but it still has to clear IC.
The step after the room, and the reason "the partner loves it" is not yet money.
Ownership targetPorcentaje objetivo
The percentage of a company a fund aims to end up with, which drives how large its cheque has to be.
Their model needs 12% ownership, so the cheque has to grow.
The arithmetic underneath the enthusiasm: a fund that has to hold a certain slice cannot write a small cheque, however much it likes the founder.
ReservesReservas del fondo
Money a fund holds back from its first cheques to support existing portfolio companies in later rounds.
They reserve about a dollar for every dollar of first cheque.
The half of a fund that never appears in an announcement. Whether a founder gets a second cheque was settled here, long before they asked.
Follow-on investmentFollow-on
An additional investment by an existing investor in a later round of the same company.
They did the follow-on in the B but skipped the C.
The moment a fund is asked to prove it still believes, in the only way that counts.
Power lawLey de potencias
The pattern where a very small number of investments produce almost all of a venture fund's returns.
Power law: one company returns the fund and the rest are rounding.
The shape of the whole business, and the reason a fund can be wrong nine times and still succeed. It is also the excuse for every decision that ignores the model.
Dry powder
Committed money a fund has not yet invested and can still deploy.
There is a lot of dry powder in the market and not much of it moving.
Money that exists and has not moved. A market can be full of it and still feel shut to anyone raising.
Markup
An increase in the reported value of an investment, usually triggered by a later round done at a higher price.
That is a paper markup, nobody has sold a single share.
Where a fund’s reported performance and its bank account stop agreeing. Reads as success right up until someone tries to sell.
Signaling riskRiesgo de señal
The risk that a well-known existing investor declining to follow on will tell the market that something is wrong.
If they pass on the A, the signaling risk follows us to everyone else.
The cost of an existing backer sitting out. It is a reason to lead or step away, and it is why "we will do a small amount" can be the unkindest answer.
Lead investorInversor lead
The investor who sets the terms, runs the main diligence and usually takes the largest part of a round.
We have $1.5M soft-circled and still no lead.
The one investor a round is actually waiting for, while everyone else waits for that investor.
The founder hears one sentence on Tuesday
Nothing of Monday travels with it. Somewhere on the other side of a similar table, the one waiting for the sentence will be you.
Questions and answers
What about the rest of the venture words?
On the deck page, all 150. These twelve are the ones a single partner meeting uses.
Why is there Spanish on the card?
Funds run their internal language in English wherever they are based, and the conversation around the table happens in Spanish. Both forms sit on one card.
Where do the definitions come from?
From the Startups & Venture deck — the same cards as in the app.
Next Monday the same room will run on a different twelve.
The Startups & Venture deck holds the rest — in the app they come a few a day.
