How quickly should a venture fund deploy its capital, and what pace should managers promise LPs?

Brad Feld · Sep 30, 2019

A fund manager should define investment pacing as part of strategy and adhere to it rather than speeding up to reach the next fund or slowing down to stretch capital

A constant cadence transcends cycle dynamics, and time diversity is valuable in portfolio construction; Foundry has made roughly ten new investments a year since 2007 through the financial crisis

Scope: some variability is fine — eight in some years, twelve in others

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Michael Eisenberg · Feb 8, 2021

Venture firms should invest a roughly consistent number of companies every year rather than concentrating deployment into a short window

Innovation is constant while markets fluctuate; if you had deployed everything two or four years ago you'd never have encountered things like DeFi, so consistent pacing is how you get shots at each new technology stack and at the next founder with a new view of the world

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Bill Gurley · Dec 6, 2021

Time diversity in a fund's portfolio is a major benefit, so spending a fund in nine months is a mistake

Having lived through cycles, time diversity affects entry prices and sector bets, and a single stinker fund can impede raising the next one

Scope: framed from the perspective of wanting to raise from LPs for a long time

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Semil Shah · Nov 21, 2022

For a seed fund the right deployment promise to LPs is 24-30 months, not 36

He concluded a 36-month cycle wasn't possible in the seed market and told LPs 24-30 months, then raise new funds

19:02 Seed funds should promise 24 to 30 month deployment not 36 months

Harry Stebbings · Nov 21, 2022

Most managers in the last cycle deployed their funds in about twelve months and many now regret that speed

19:25 Twelve month deployment pace common in the last cycle is now regretted

Semil Shah · Nov 21, 2022 · hedged

A manager who deploys a fund very fast cannot credibly go back to LPs in this environment unless they have a deep relationship or a history of returns

19:33 Fast deployment without deep lp relationships or track record blocks the next raise

Frank Rotman · Aug 26, 2021

Investing at the pace at which good companies appear — even if that means deploying a fund far faster than planned — is the right approach, rather than forcing three-year temporal diversification

If you're right it's because everyone is right and if you're wrong it's because everyone is wrong; you won't diverge from your vintage, so what matters is your decision process, edge and brand within the vintage

21:40 Deploy at the pace of opportunity not forced time diversification