Friends challenge me harshly about becoming a VC: “so you gave up building companies to sit back and write checks instead”? One actually sent me the picture above with “BORING…” in the email subject, as a practical joke, of course. What’s interesting is that building Las Olas VC (LOVC) has been largely like building my next company, so no offense taken :).
I decided to answer my friends by summarizing some of the things I’ve learned after launching and operating a VC firm for the last twelve months. I don’t claim to know all there’s to be known in venture capital, and I confess that everyday comes with challenges and learning experiences, which I love.
As a VC you need a vision: samir kaji puts it best in his post when saying all VC should constantly ask themselves this question: “why do I exist”? Mark, Dean, Paul, Nate, and I delved deep into that question before launching our first fund at LOVC.
It’s our core belief that in the next decades many legendary companies will be built outside of Silicon Valley. Especifically, we think that emerging startup markets in the U.S. will produce category shaping companies, and that today those are being overlooked by VC investors, which is our opportunity. That’s why we exist.
- We aim to be the leading VC platform in the Southeast for early stage b2b software. We augment our investment strategy by extending our reach into New York, Boston, and Chicago, leveraging our network.
- We’re doing the hard work that coastal VC don’t want (or need) to do. We will travel to emerging ecosystems, and build a grassroot network and brand.
- Atlanta, North Carolina, and Florida represent 88% of the deal volume in the Southeast. We’re based in Florida and establishing physical presence in Atlanta. With three general partners and an associate we can easily cover this geography.
- Our focus is investing behind ~20 extraordinary entrepreneurs and helping them scale their companies from $1M annual recurring revenue (ARR) to +$xxM ARR. We’ll help some of them realize an exit, and others raise money from later stage investors that can help them get to the next growth stage (i.e. +$100M revenue).
You need an edge: a.k.a. unique value proposition to convince investors to invest in your VC fund(s), and to attract the best entrepreneurs. If you’re only as good (or bad) as the next guy, then get in line, and hope for a lot of good luck.
There are a few things that differentiate us at LOVC:
- We’re becoming the most active, founder led, early-stage VC firm in the Southeast.
- We’ll write larger checks than most seed and early series A stage investors in the region, typically ~$1M.
- We’re serial entrepreneurs turned VC. We’ve launched eight startups, and realized four exits resulting in +$1Bn in enterprise value.
- We’ve started and managed businesses through all business stages, start-up through IPO.
- We’ve raised over $250MM in seed, venture, private equity, public equity and debt financing.
- We’ve completed over a dozen company sales, mergers and acquisitions.
You operate a business model: A VC firm is a two sided marketplace that doesn’t scale. On one side you have entrepreneurs looking for capital, support, introductions, know-how, and all sorts of “value add” that can help them win a market. On the other end you have return hungry (yet risk adverse) investors looking for unique investment opportunities with asymetrical upside. The VC firm is the platform where such value is exchanged.
However, venture capital is inherently inneficient. As a VC your product is money and knowledge, so it’s capital and people intensive. You need access and informational advantage in order to get into the best deals, which means you need to have relationships and add value in deals. You don’t expect to make an equal amount of money on every transaction (i.e. investment), but rather a lot of money from a small subset. As a result your goal isn’t to maximize scale, but to maximize outcomes.
You have clients to add value to: A VC’s client are the entrepreneurs and investors. A VC can theoretically add value in many ways, but in practice very few do. At LOVC we surely work very hard to support our founders. This often means rolling up our sleeves and shouldering work — always being careful of not getting in their way. Very frequently we’re making introductions to customers and key talent. At times we also find ourselves having mental spars with founders, examining the hard questions that bring focus to scrappiness and growth. We don’t claim to know the answers to all the questions an entrepreneur faces, yet our prior experience gives us a foundation to try and be helpful.
Conclusion: Everything in life is a matter of perspective. For me operating a VC has been like running a startup, but a different kind of “startup”. One in which we’re going against conventional wisdom by investing in places where many wont. One in which we’re partnering with amazing founders and building more than one company at a time. One that requires us to deliver better than top quartile performance to be successful, which is a whole new level of “hard”. One which can have meaningful impact by being part of advancing humanity through technological innovation.
In my view this is the opportunity of a lifetime, and I’m immensely grateful to have it.
Originally posted on Medium: