Should venture capital be treated as a decades-long career commitment requiring deliberate firm-building, rather than a short-term venture?

Harry Stebbings · Oct 18, 2023

Venture is misunderstood as a ten-year commitment — it's really fifteen to twenty years

38:55 20VC: Are LPs Open For Business? What Does it Take to Raise a Fund Today? How Has What LPs Want to See in Fund Investments Changed? Why Do LP Incentive Mechanisms Need to Change? Which Funds Will be Hit Hardest with Beezer Clarkson @ Sapphire Partners

Beezer Clarkson · Oct 18, 2023

Fifteen to twenty years is the horizon for a single fund, and becoming a GP is a wide financial services business rather than something you can treat as a short-term venture

If you want a pop-up business, do direct investing or take a job where compensation and equity structures let you try things over four or five years; bringing in other people and other LPs makes it a full financial services undertaking

Scope: assumes you're not running it off AngelList

39:05 20VC: Are LPs Open For Business? What Does it Take to Raise a Fund Today? How Has What LPs Want to See in Fund Investments Changed? Why Do LP Incentive Mechanisms Need to Change? Which Funds Will be Hit Hardest with Beezer Clarkson @ Sapphire Partners

Harry Stebbings · Oct 21, 2022

Firms should temporally stage product expansion — earning the right to each new vehicle over years — rather than launching five new products in two years.

Rapid product proliferation destroys morale overnight, whereas adding a vehicle every few years lets you stage culture progression much more easily.

29:31 Stage new fund vehicle launches over years rather than launching many at once to protect culture

Beezer Clarkson · Oct 18, 2023

Building an enduring firm requires interplay between who you are as an investor and how you construct the firm, and most people underestimate this

Great managers understand this specificity; those who treat it as an easy business to pop up end up with a smaller business rather than a long, enduring firm

38:32 Enduring firms require matching investor identity to firm construction

Beezer Clarkson · Oct 18, 2023

The industry should celebrate managers who choose to stop raising funds; because a venture career is a thirty-to-forty-year body of work, people should be allowed to stop

At roughly fifteen years per fund, staying the course is an extraordinarily long time to do one job

43:11 Managers should be celebrated for choosing to stop raising funds rather than continuing indefinitely

Beezer Clarkson · Oct 18, 2023

Funds four through seven face the same failure risk as early funds because success there requires firm-building — people management and training the next generation — not just good investing

If everyone is doing deals, someone still has to think about people management and training for the firm to last long term

44:09 Later fund cycles fail without firm building skills like people management and succession

Chris Paik · May 8, 2023

Managers should give LPs maximum forward information about fund five and beyond, not just the current fund, because LP relationships must be decades long

The goal is for future GPs of the firm to have as good a relationship with the LP's investment professionals decades from now, which requires institutions aligned with the future strategy of the firm rather than just this moment

54:32 Share forward visibility into future funds since lp relationships span decades

George Zachary · Oct 12, 2020

No partner has a responsibility to keep building their firm, but those who want to should bring in competent young partners motivated by building great companies rather than by making money

Firms that last multiple generations are built by stacking multiple age cohorts and staying open to the idea that younger people see things older people miss

34:38 No partner obligation to build the firm but those who do should recruit young partners motivated by building not money

Shu Nyatta · Jul 31, 2023

A firm should build capability sequentially over time without damaging the core team that got it started, rather than growing dramatically bigger

They already have the seeds of a multi-decade firm in the small group who have worked together for four years, so the goal is not to screw that up

18:42 Grow capability sequentially without diluting the founding team