Good morning 👋
I banged out 100 pullups in <15 minutes yesterday. If you can beat that, you have my respect.
GP spinouts are just about the only emerging managers who are raising new funds nowadays.
The logic from many LPs is that these managers are more backable due to their pedigree, but I have always had some thoughts around whether or not that is correct.
Here are some of those thoughts …
ICYMI: Did you know you can get free stuff from us just by telling your friends to subscribe?
We’ve even made a how-to guide that shows you how some other readers have unlocked more and more free stuff from us …
Today’s highlights
Some thoughts around GP spinouts
SaaS is NOT dead
The great liquidity shift
Rethinking the IPO window
TOP
The problem with GP spinouts 👇
There is a growing trend of investors from tier-one funds spinning out to launch their own fund. We’ve covered some of our thoughts on the VC musical chairs (here, here, here, and here), and the trend doesn’t seem to be slowing down any time soon.
From the spinout GPs perspective, it makes sense.
It is easier than ever to start your own fund (at least in terms of setting up the infrastructure)
You own the majority of the carry split (probably the biggest reason)
You control decision-making and outcomes more
And some of these spinouts have attracted huge checks from LPs due to their pedigree.
When I sat on the LP side, I always had reservations around this idea that spinouts are a safer bet, and this tweet captures some of my thinking.
Here are some more thoughts on the topic:
Track record coming from a megafund is largely irrelevant for most (not all) of these GPs. Were they able to win allocations because of the brand of the firm they worked under, or were they able to win because the founder chose to work with them as the partner leading the deal?
None of the resources from a megafund transfer over when you have to do it alone. Operating from a constrained set of resources is a totally different environment and skillset that is not built from working in an environment with an abundance of resources at your disposal.
Right to win evaporates without the megafund. There are only a handful of investors who can command the right to win allocations on their name alone. Not saying that all spinouts lack this right, but I am saying that it becomes a LOT harder to win without billions in AUM and the potential for future follow-ons to dangle as a carrot.
There are plenty of spinouts that have bucked this trend, but I’m naturally skeptical of any spinout GP that doesn’t have a plan to address some of the concerns listed above.
At least when it comes to new seed funds, many of the best emerging managers I have spoken with started with orthogonal experiences, and I would bet that many of them would argue that not coming from a megafund has actually given them an advantage over the long-term.
SPONSOR
~$49,000 in pipeline from one email 💰
Harsh reality: if you want to grow your business, you’re going to have to spend.
Good news: the right spending will make you more revenue than what it costs
At least that has been the experience of some of the sponsors we have worked with in the past.
Companies like Brex, Affinity, Sydecar, and Harmonic have seen ROI from advertising in this newsletter.
Check out how we work with advertisers, and see if it’s the right fit for you …
TWEET
HEADLINES
Post-CoreWeave, Venture Investors Rethink Their Outlook on IPOs (WSJ)
Andreessen Horowitz is trying to nab a piece of TikTok with Oracle, report says (TechCrunch)
Runtime Ventures Launches with $32M Debut Fund to Empower Seed Stage Cybersecurity Innovators (Yahoo Finance)
Stablecoin giant Circle files for IPO (Pitchbook)
RECS
Wait … you’re still renting your audience?! 📶
Our business wouldn’t exist without beehiiv, and we’ve become a walking billboard telling all of our friends to start or scale their newsletter with their platform.
Advanced analytics dashboard on your list
Automated user journeys
Zero-fee premium subscriptions
Full-service ad network to help you monetize more
We really don’t understand why newsletter writers choose any other platform.
You can get started on their free plan at no cost, but if you’re looking for all of their best features …
LINKS
🆓 I Invested $45,000 in Alex Hormozi’s Workshop—Here’s Everything I Learned For Free: Dickie Bush paid $45k for a full business audit and shares every single golden nugget he learned
💧 The Great Liquidity Shift: Tomasz Tunguz uses the data to make the argument a structural evolution is occurring in venture capital that makes the secondary market a significant part of venture capital liquidity for both employees and investors
👂 The Art of Listening to Customers: Pillar VC provides this guide to help founders understand how to conduct customer discoveries
⛓️💥 Breaking the Mold—The Power of GTMfund’s Operator-Led Model: Today’s founders are looking for investors who understand the intricacies of scaling a business
👀 An Inside Look at How VC Funds Actually Operate, Invest, and Think: Rubén Domînguez Ibar breaks it all down
Thanks for reading this far and giving us a little bit of your attention this week.
Feel free to unsubscribe whenever this stops becoming valuable to you.
- Clay
(Founder @ Confluence.VC | GP @ Outlaw)
