The Very Greatest VCs Have Billion Greenback Positions. Not Simply Billion Greenback StartUps.

So we’ve posted loads on SaaStr on the yr on tips on how to perceive how VCs assume.  On how they should put money into unicorns not simply to generate income, however simply to outlive.

However what does it take to be a very elite VC?  And if you happen to meet with a very elite VC, what are they searching for?

Actually elite VCs have Billion Greenback Positions.

It is a a lot increased bar, and achievement, than merely a billion greenback sale, or a billion greenback IPO.  As a result of even in case you are an awesome seed investor and make investments early in an awesome one which 8 years later sells for a shocking $1,000,000,000 (!) … the fund gained’t make a billion.  In actual fact, a seed fund would possibly solely personal say 5% at that time — or “simply” $50m.  And the companions themselves usually hold 20% of that after paying again bills, so $10m.  Rather a lot.  However maybe not as a lot as you’d anticipate from a $1B+ acquisition.

No, the true elite gamers have made investments so nice that the startups themselves aren’t simply price billions, however the VCs’ personal stakes are.

Let’s take one instance, The Commerce Desk.  Right this moment it’s price a shocking $30 Billion.  And since it was so capital environment friendly, two small seed funds had been capable of present quite a lot of the capital it ever wanted.  IA Ventures owned 19.8% earlier than the IPO, and Founder Collective 14.1%.  Each wildly profitable, however fairly tiny funds.

Now each distributed out quite a lot of their inventory earlier than at this time.  However think about they’d held it.

• $30 Billion x 19% = $5b+ after IPO dilution for IA Ventures
• $30 Billion x 14% = $3B+ after IPO dilution for Founder Collective

Now they each didn’t maintain this lengthy, however it illustrates the purpose.  Billion Greenback Positions.

The very, best VCs have them.  Typically, a couple of.

And that’s why if you meet the actually elite VCs as a founder, they’ll be searching for very particular issues.  If their funding, if all goes extraordinarily effectively, simply is perhaps price one billion {dollars}.  Even at this time.

Revealed on April 22, 2023