ACQ2 by Acquired VC Fundamentals Part 4: Portfolio Construction & Management (with Jaclyn Hester & Lindel Eakman of Foundry Group)
Nov 30, 2020
Jaclyn Hester, a Partner at Foundry Group, and Lindel Eakman, also from Foundry, dive into the intricacies of venture capital portfolio construction and management. They discuss the importance of diversification versus concentrated investments, emphasizing the significance of risk mitigation and strategic decision-making. Key metrics like IRR and cash-on-cash multiples are explored, shedding light on what constitutes ‘good’ fund performance. The conversation also highlights the dynamics between VCs and founders, stressing the need for strong partnerships and open communication.
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Follow-on Investment Strategy for Early-Stage Funds
- When considering follow-on investments, compare the increased ownership against the additional cost.
- Evaluate if that capital could fund a new opportunity, especially for early-stage funds.
Defensive Reserves Strategy
- Small funds primarily play "defense" with reserves, protecting ownership rather than aggressively increasing it.
- This aligns them with founders, as both get diluted by subsequent rounds unless they can significantly reinvest.
Doubling Down Early
- "Double down" before a larger round with an outside lead, especially if you see early product-market fit.
- This helps increase ownership without competing with later-stage investors at higher valuations.