At the 500 startups LP meeting and dinner last night, I had a chance to meet with Jeff Clavier. He is one of the first Micro VC funds (before they were a thing in valley). Their latest fund (Softech IV) is a $85 million fund. Jeff and I have known each other for years now, since 2005, when I first met him at a TIE conference and he’s still the same very approachable, friendly and simple guy – surprising given that he’s French – (sorry, Jeff, could not resist taking a dig).
A Micro VC fund has a much smaller team, is the first thing you notice. While larger funds like A16Z have over 100 people and even a a large fund such as Menlo might have over 20-30 people, a $50-$100 million fund, cannot afford more than 5-7 folks. Typically there might be 2-3 partners, and 2-3 associates or Vice presidents.
Which means you are pressed for time. Jeff, mentioned that he’d ideally like his time spent in thirds.
1/3rd of his time spent on sourcing new deals and working to build a pipeline of opportunities, by meeting new entrepreneurs and trying to help them even if he wont invest.
1/3rd of his time portfolio management, which includes spending time helping them with execution and operations, thinking about fund raising and helping make key connections and finally helping open doors to potential hires or prospective customers.
Finally a third of his time is spent managing the team, investor communications and networking with other investors at events, judging startup hackathons, and learning about new areas to invest in.
Each of the 3 partners at Softech VC does 5 deals a year, so they do 15 deals in the 3 years of investing in the fund. To do 5 deals a year, they end up meeting about 250-300 entrepreneurs he said, and roughly 2 times that many introductions are made to him from others.
Digging deeper, the first 1/3 of the time sourcing new deals begins largely by getting warm introductions, which were built by the years of working with other investors, and helping other entrepreneurs who have been the best source of his deals.
The 2nd third of his time is disproportionately taken up by warm email introductions and strategy discussions with his existing portfolio on fund raising. Typically Jeff stays on the board for 2 years, ensures that they company has a very good series A investor and then hands the board seat to them, keeping in touch with the entrepreneurs if they need his help. Which, according to him makes it all the more important to ensure that you think about later stage investors
Finally, the last third of time time is for “everything else” – which includes fund communication, meeting with new potential Limited partners, attending startup events, connecting with other entrepreneurs, discussions with potential M&A targets for teams and mentoring his own team, to discuss opportunities.
The first thing that strikes you is that this is a full time job. Many who claim that the the life of a General partner is mostly golfing, 2 hour lunches, 3 hour dinners, attending events, spouting knowledge about unknown markets and “networking”, dont appreciate the amount of time that it takes to source, manage and attract high quality partners who can help you connect with great entrepreneurs.
Second, unless you spend time (and lots of it) building good relationships with good potential downstream (assume that a series A investor is downstream from a seed investor) Venture capitalists, then you will have a hard time helping your companies raise more money and feel confident that your invested dollars are in safe hands with folks looking for the best interests of the company.
Tomorrow, I will touch on a topic that he and I talked about – how many “warm introductions” to potential investors, does it take to get a funding round done for an early stage startup.