📶 The new class of LPs: founders

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Good morning 👋

Founders pitch VCs all the time, but now the world is coming full swing.

As institutional LPs start pulling out of venture investing, GPs are looking elsewhere to find new backers for their fund.

Their newest targets: founders.

We break down what’s going on, why it’s happening, and how smart VCs can use it to their advantage in this week’s piece.

TL;DR:

• 📰 News

• 🔗 Links

• 🐥 Tweet

• 📌 Jobs

• 📶 Visual

• 🗳 Poll

• ☕️ Memes

NEWS
Funds target founders as LPs

According to Pitchbook data, more and more funds are being forced to change the LP makeup of their latest funds.

The most popular new additions? Founders.

Here’s why it’s happening and where we think this goes.

Why it matters: 

As you probably know, fundraising isn’t great right now. Actually, it’s pretty bad.

Institutional LPs have pulled back due to previous performance combined with more attractive opportunities in other asset classes. This is a painful shift for smaller funds because these LPs are usually the anchor to their funds.

So when these huge slugs of capital went away, GPs started targeting the next rungs of the ladder.

These rungs (other potential LPs) are made up of high-net-worth individuals, single-family offices, multi-family offices, and now founders who have taken money off the table.

The net of this news is that GPs are being forced to take on smaller LPs. Some will like that, and others will hate it.

We think it’s an opportunity for savvy GPs.

Here’s why.

What happens next: 

I’ll spare you the “capital is commoditized” lecture, but capital is definitely commoditized in the venture world. There are too many funds recycling the same frameworks and pitching the same value pitch.

As this trend has played out over the past decade, the winners (generally speaking) have been those who have invested in their brand.

Brand can mean a lot of things, and there are more ways than one to grow a venture brand. But one way that is playing out right now is being done through LP selection and taking capital from backers who can also help and advocate for your portfolio companies.

What’s more valuable - a smaller limited partner base that comes primarily from the institutional world or a larger collection of LPs that come from the startup world?

A behemoth institutional capital partner is a financier, but they are too far removed from the trenches to be able to truly help outside of capital. Ironically, the smaller LP checks from founders and connected families and individuals will create more value for savvy GPs.

Let us know what you think in this week’s poll section.

LINKS

💰 A Few Laws of Getting Rich: Morgan Housel’s latest

🔎 Outlier’s Path: Alfred Lin of Sequoia started sharing his thoughts in a new blog

🤖 The New Platform Shift: Benedict Evans’ annual slides on what’s going on

📧 Newsletter Lessons: 15 lessons from 30 years of doing it

👀 Internet and Attention: How to survive the fight for your attention

👉 Moore’s Law for Everything: Sam Altman breaks down how it applies to everything

📶 trillion dollar bet: What to make of the new OpenAI fundraising plans

➡️ Lessons from David Frankel: 21 frameworks from the founding partner of Founder Collective

TWEET

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JOBS

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RECS

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MEMES

Let us know if you have a better meme.

Together with Harmonic

The world is changing faster than ever.

If you’re in charge of predicting the future, you can’t do it without some help.

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There’s a reason funds like Accel, NEA, and Pear are already customers.

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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