March 22, 2024

206. Lessons Leading: Why Most Venture Funds Don't Lead

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Transcript

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Ever wonder why so few funds lead? There are real risks for a small fund.

About AVL Growth Partners
AVL Growth Partners, founded in 2009, is the leading fractional Finance and Accounting firm supporting organizations in pivoting from growth to scale. AVL brings an experienced team of CFOs, Controllers, and Accountants to your organization, delivering transparent, strategic actions for short and long-term success. Transform your financial approach affordably with AVL, supporting companies coast to coast - get to know AVL Growth Partners at avlgrowth.com. (Sponsored)

About SpringTime Ventures
SpringTime Ventures seeds high-growth startups in healthcare, fintech & insurtech, and logistics & supply chain. We look for founders with domain expertise, forging a path with a truly transformative technology. We only invest in software-based businesses in the USA. We bring a people-focused approach, work quickly, and reach conviction independently. Our initial check size is $600k. You can learn more about us and our approach.

Transcript

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We're going to wrap up this week with why most venture funds don't normally lead.

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There's a number of reasons, and I'm going to run through these very quickly.

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The first is that you don't know what you don't know.

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There's an old saying that venture is an apprenticeship business and a venture fund that has led multiple rounds, has the knowledge of all of the things that they need to be on the lookout for.

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If you haven't led before, you don't know what to look for.

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The unknown unknowns could really get you.

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Second, it's a ton of work and for a small fund, especially for a sub$50 million fund, with limited resources and limited staff, doing the extra work to go deep down your due diligence checklist, it takes you off of the ball for the rest of the work that you have to do as a venture fund.

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And the work aside there's more to it than just that.

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One of the real risks is being stuck with legal bills if the round falls through.

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You probably already know this, but when a funding round comes together, the startup pays for the legal bills for both the venture fund and for themselves.

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However, if the round falls apart, each side pays for their own legal bills.

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For a small$25 million fund, like SpringTime Ventures, if this round didn't go through we would have been stuck with those legal bills and they literally would have come out of my pocket.

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Because we would not have had enough in the management budget to both pay the lawyers and to pay my salary.

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And so there was a very real risk of this impacting me personally.

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So when you add in the unknown unknowns, And the potential of being stuck with legal bills in the absolute worst case scenario, that's a lot of risk for a small fund to take on.

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And finally there's a reputational risk.

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You run the risk of looking like a fool.

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I talk about FOLS, fear of looking stupid.

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That risk is strong.

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You're putting your name and your reputation, both personally and for your fund, out there on a limb.

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And man I'll tell you it was hard.

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There were times when we, as a fund pitching this to other funds would just get rejection after rejection.

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There were some times when I felt pretty stupid.

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Of the nearly 150 venture funds that said no to this round, which is pretty typical for an early seed round, most of those"no's" came from our team's relationships.

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I was right down there in the trenches with Moxey's CEO, Charlie, helping him pitch, and feeling those rejections on a very personal level.

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And I feel for you founders, as you go out and face down those 150 plus no's, just to get to a few key yeses to get it across the line.

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Before we wrap up, let's delve into what sets AVL Growth Partners apart.

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AVL's team brings significant years of finance and accounting expertise.

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They ensure your path to success is crystal clear.

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AVL starts with a comprehensive business evaluation, uncovering opportunities and mapping actions to both your short and longterm goals.

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Their evaluations are crafted from over a decade of experience pivoting companies from growth to scale.

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If you want to take your company to the next level and need the experience required to make it happen.

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Visit AVL growth.com right now.

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Time is our most precious asset and thank you for spending some of it with us today.

206. Lessons Leading: Why Most Venture Funds Don't Lead

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