A lot of folks who are new to the venture capital business and are building their own firms and funds will email or message me about reserves and recycling. I am happy to engage with them on these very "inside VC" topics because I believe they matter a lot when managing venture capital fund and firm.
For those of you who are not VCs, you may find this irrelevant. Or you may find it interesting. For those who are in venture capital, I think you should understand these topics so I hope you find this valuable.
Early stage venture investing is like poker. You make a small initial investment, which is like the ante in poker, and you get a seat at the table. Then you watch the founder and team execute until they need more money. That is like the first set of cards you get. Then you get the chance to invest more money. That is like putting more chips on the table. This repeats a few more times and eventually the company succeeds or fails. That's like the river and the reveal.
In order to play the hand correctly, you need to have reserves. You can't invest all of your money in the ante. You need to have more chips so you can keep seeing more cards. A lot of investors, particularly newbies, don't understand this and run out of money too early in a deal and don't get to keep investing in their best companies. That's like not being able to play your best hands in poker. That's a disaster since you only get a few of those.
So at USV, we make sure we always have sufficient reserves for each and every portfolio company. We do this by building a sophisticated model of each fund and the fund's portfolio of investments and the expected capital needs of each and every business over a long period of time along with probabilities associated with each and every round and we run simulations to predict what the fund will need to reserve to support each company and we raise a new fund when our simulations tell us we need to do so.
A lot of folks who are new to the venture capital business and are building their own firms and funds will email or message me about reserves and recycling. I am happy to engage with them on these very "inside VC" topics because I believe they matter a lot when managing venture capital fund and firm.
For those of you who are not VCs, you may find this irrelevant. Or you may find it interesting. For those who are in venture capital, I think you should understand these topics so I hope you find this valuable.
Early stage venture investing is like poker. You make a small initial investment, which is like the ante in poker, and you get a seat at the table. Then you watch the founder and team execute until they need more money. That is like the first set of cards you get. Then you get the chance to invest more money. That is like putting more chips on the table. This repeats a few more times and eventually the company succeeds or fails. That's like the river and the reveal.
In order to play the hand correctly, you need to have reserves. You can't invest all of your money in the ante. You need to have more chips so you can keep seeing more cards. A lot of investors, particularly newbies, don't understand this and run out of money too early in a deal and don't get to keep investing in their best companies. That's like not being able to play your best hands in poker. That's a disaster since you only get a few of those.
So at USV, we make sure we always have sufficient reserves for each and every portfolio company. We do this by building a sophisticated model of each fund and the fund's portfolio of investments and the expected capital needs of each and every business over a long period of time along with probabilities associated with each and every round and we run simulations to predict what the fund will need to reserve to support each company and we raise a new fund when our simulations tell us we need to do so.
In this way, we always have enough reserves for each portfolio company so we don't get tapped out.
We also recycle capital at USV. This means that for any given fund, we will keep the returns we get on early smaller exits and put them back into the fund. This increases our reserves capacity but it also means that we invest more money in our portfolios than we raised, including the management fee load. If a $200mm fund can actually invest $250mm and gets a 3x on that $250mm, it generates a 3.75x on the $200mm that was invested by limited partners. That has a hugely positive impact on returns.
Reserves and recycling are two techniques that can significantly enhance the returns on a venture capital fund. We use both of these techniques at USV. They are built into our culture, our DNA, and our processes.
You cannot produce a top decile fund with just reserves and recycling. You need to be working with great founders and teams who are building breakout companies. Just like a poker player needs to get dealt some great hands. But how you play those hands when you are dealt them is also critically important. I have seen early stage VCs make way too little on their best companies because they ran out of money and could not keep on participating or they had to sell too soon or some other reason that was effectively poor portfolio and fund management.
Reserves, recycling, and returns go hand in hand. So build them into your firm's culture and processes. They make a difference over the long run.
I have long been interested in displaying digital art on the walls in my home and office. I wrote this back in 2017 and this when we opened our new USV office in 2022.
I have digital art running on off the shelf displays in many places that I live and work and it brings me endless joy. I also run view.art on the second screen on my desktop when I don't need it for zooms and the like.
Here is some digital art on the TV in our family room:
But there are issues with the tech needed to make all of this work and I've been eager for something simpler that would be easy for everyone to use.
Today the Bright Moments community is opening view.art to the public and anyone can use it. USV has been an investor in the Bright Moments DAO for the last three years and I've watched them evolve the technology they use to put digital art on screens and make it better and simpler. View.art means that the technology that Bright Moments has used to run some of the most important digital art shows all over the world is now available to everyone.
View.art allows anyone to run a digital art collection in a browser and showcase it on any screen that can be connected to a browser. The digital art needs to be "onchain" (aka NFTs). That makes the art publicly accessible because all onchain assets are.
The first one is a channel I made using view.art. The second one is the vault where I keep my favorite NFTs.
If you have an old laptop or mac mini, you can connect that to a screen, fire up a browser, and show off your art.
If you don't have a spare computer to use, you might try a yodeck, which is a tiny raspberry pi computer we use at USV for our NFT screens, and put the view.art URLs into the yodeck dashboard and get them onto your screen that way.
Many smart TVs have browsers in them and if you have one of those, you most likely can just put the view.art URLs directly into them.
Of course, you can showcase art you don't own as long as you know where to access it. View.art has already curated a bunch of collections on their home page.
So if you want to showcase your digital art or someone else's digital art on a screen in your home or office, I encourage you to try view.art. I think you will like it.
I took the last two and a half weeks off from work and blogging (and a lot more) and attended the 2024 Paris Olympics with much of our family. It was a fantastic experience and a great vacation too.
Although I've watched the Olympics with excitement since I was a kid (and so has the Gotham Gal), neither of us had ever been to an Olympics. So a few years ago, we decided to take two weeks off mid-summer in 2024 and go to Paris and attend the Olympic Games. It was a great decision.
We saw eleven events over eighteen days and also took a vacation within a vacation and rode the train to the beach for a few days in the middle of the first week. We timed that getaway perfectly as we avoided the two warmest days in Paris of the entire two weeks.
We were concerned about the heat in Paris in August when we planned the trip last year. Much of Paris is not air conditioned and many Parisians head out of town for August to go to the beach or the countryside. But we got lucky. It was sunny and warm for most of the two and half weeks we were there but not hot and steamy.
Paris did an incredible job hosting the Olympics. The metro ran perfectly the entire time we were there and it was very well marked where to transfer and get off to get to the various venues. The events and venues were well-staffed and there was always someone you could ask (in English) where to go.
Place de la Concorde, a huge open plaza right in the center of Paris, was turned into the center of the Olympics and they held a bunch of "urban sports" (break dancing, 3x3 basketball, skateboarding, etc) there.
this is a view of Place de la Concorde from the break dancing venue and you can see a few other venues and the Luxor Obelisk which is at the center of the plaza
There were venues all around Paris and even out in the suburbs (like Equestrian at Versailles). We only went to venues we could take the Metro to although we got to see parts of the suburbs of Paris that we had not visited before like La Defense and Saint-Denis. We came away from this two weeks with an even better feel for a city where we have visited many times and have owned two apartments in over the last twenty years. That was a big win for us.
Paris was pretty quiet which is typical of August and it was clear that many Parisians had left town. But about half of the places we like to go out to eat, drink, have coffee at, etc remained open and it was pretty easy to get into anywhere we wanted to get into.
The events were full. Even though many of the locals had left town, the tourists filled the seats. We saw people from all over the world, particularly China and Japan, and European countries like Netherlands, Germany, and Italy were also noticeable.
But of course, we were there for the events and they were great. We saw beach volleyball, track and field, swimming, diving, table tennis, regular tennis, gymnastics, break dancing, and a lot of basketball.
It was great to see the Olympic athletes, including former Olympic athletes, at all of the events. They come to compete but they also come to support the rest of their team. Many are there for the entire two weeks and they are out and about. That is really great to see.
We learned a lot about how to do an Olympics right. Some events are great in person. Others not so much. If you don't know a lot about an event, it really helps to have the commentator telling you what's going on. That is particularly true of events that are judged.
We saw a lot of gold medal matches/finals/etc and the corresponding medal ceremony. That's a great thing to see and I'd encourage anyone going to the Olympics in the future to make sure to see some of that.
I'd also say that you don't need the full two weeks to experience the magic. We had friends who came for the first week and loved it. And we also know people who came for the second week to see some of the finals and that was great too.
I am so glad we took the Olympics plunge. We are veterans now and are seriously considering going to LA in four years. If you live in LA, I would encourage you to stay in town and go to some of the events. It is a really special experience.
In this way, we always have enough reserves for each portfolio company so we don't get tapped out.
We also recycle capital at USV. This means that for any given fund, we will keep the returns we get on early smaller exits and put them back into the fund. This increases our reserves capacity but it also means that we invest more money in our portfolios than we raised, including the management fee load. If a $200mm fund can actually invest $250mm and gets a 3x on that $250mm, it generates a 3.75x on the $200mm that was invested by limited partners. That has a hugely positive impact on returns.
Reserves and recycling are two techniques that can significantly enhance the returns on a venture capital fund. We use both of these techniques at USV. They are built into our culture, our DNA, and our processes.
You cannot produce a top decile fund with just reserves and recycling. You need to be working with great founders and teams who are building breakout companies. Just like a poker player needs to get dealt some great hands. But how you play those hands when you are dealt them is also critically important. I have seen early stage VCs make way too little on their best companies because they ran out of money and could not keep on participating or they had to sell too soon or some other reason that was effectively poor portfolio and fund management.
Reserves, recycling, and returns go hand in hand. So build them into your firm's culture and processes. They make a difference over the long run.
I have long been interested in displaying digital art on the walls in my home and office. I wrote this back in 2017 and this when we opened our new USV office in 2022.
I have digital art running on off the shelf displays in many places that I live and work and it brings me endless joy. I also run view.art on the second screen on my desktop when I don't need it for zooms and the like.
Here is some digital art on the TV in our family room:
But there are issues with the tech needed to make all of this work and I've been eager for something simpler that would be easy for everyone to use.
Today the Bright Moments community is opening view.art to the public and anyone can use it. USV has been an investor in the Bright Moments DAO for the last three years and I've watched them evolve the technology they use to put digital art on screens and make it better and simpler. View.art means that the technology that Bright Moments has used to run some of the most important digital art shows all over the world is now available to everyone.
View.art allows anyone to run a digital art collection in a browser and showcase it on any screen that can be connected to a browser. The digital art needs to be "onchain" (aka NFTs). That makes the art publicly accessible because all onchain assets are.
The first one is a channel I made using view.art. The second one is the vault where I keep my favorite NFTs.
If you have an old laptop or mac mini, you can connect that to a screen, fire up a browser, and show off your art.
If you don't have a spare computer to use, you might try a yodeck, which is a tiny raspberry pi computer we use at USV for our NFT screens, and put the view.art URLs into the yodeck dashboard and get them onto your screen that way.
Many smart TVs have browsers in them and if you have one of those, you most likely can just put the view.art URLs directly into them.
Of course, you can showcase art you don't own as long as you know where to access it. View.art has already curated a bunch of collections on their home page.
So if you want to showcase your digital art or someone else's digital art on a screen in your home or office, I encourage you to try view.art. I think you will like it.
I took the last two and a half weeks off from work and blogging (and a lot more) and attended the 2024 Paris Olympics with much of our family. It was a fantastic experience and a great vacation too.
Although I've watched the Olympics with excitement since I was a kid (and so has the Gotham Gal), neither of us had ever been to an Olympics. So a few years ago, we decided to take two weeks off mid-summer in 2024 and go to Paris and attend the Olympic Games. It was a great decision.
We saw eleven events over eighteen days and also took a vacation within a vacation and rode the train to the beach for a few days in the middle of the first week. We timed that getaway perfectly as we avoided the two warmest days in Paris of the entire two weeks.
We were concerned about the heat in Paris in August when we planned the trip last year. Much of Paris is not air conditioned and many Parisians head out of town for August to go to the beach or the countryside. But we got lucky. It was sunny and warm for most of the two and half weeks we were there but not hot and steamy.
Paris did an incredible job hosting the Olympics. The metro ran perfectly the entire time we were there and it was very well marked where to transfer and get off to get to the various venues. The events and venues were well-staffed and there was always someone you could ask (in English) where to go.
Place de la Concorde, a huge open plaza right in the center of Paris, was turned into the center of the Olympics and they held a bunch of "urban sports" (break dancing, 3x3 basketball, skateboarding, etc) there.
this is a view of Place de la Concorde from the break dancing venue and you can see a few other venues and the Luxor Obelisk which is at the center of the plaza
There were venues all around Paris and even out in the suburbs (like Equestrian at Versailles). We only went to venues we could take the Metro to although we got to see parts of the suburbs of Paris that we had not visited before like La Defense and Saint-Denis. We came away from this two weeks with an even better feel for a city where we have visited many times and have owned two apartments in over the last twenty years. That was a big win for us.
Paris was pretty quiet which is typical of August and it was clear that many Parisians had left town. But about half of the places we like to go out to eat, drink, have coffee at, etc remained open and it was pretty easy to get into anywhere we wanted to get into.
The events were full. Even though many of the locals had left town, the tourists filled the seats. We saw people from all over the world, particularly China and Japan, and European countries like Netherlands, Germany, and Italy were also noticeable.
But of course, we were there for the events and they were great. We saw beach volleyball, track and field, swimming, diving, table tennis, regular tennis, gymnastics, break dancing, and a lot of basketball.
It was great to see the Olympic athletes, including former Olympic athletes, at all of the events. They come to compete but they also come to support the rest of their team. Many are there for the entire two weeks and they are out and about. That is really great to see.
We learned a lot about how to do an Olympics right. Some events are great in person. Others not so much. If you don't know a lot about an event, it really helps to have the commentator telling you what's going on. That is particularly true of events that are judged.
We saw a lot of gold medal matches/finals/etc and the corresponding medal ceremony. That's a great thing to see and I'd encourage anyone going to the Olympics in the future to make sure to see some of that.
I'd also say that you don't need the full two weeks to experience the magic. We had friends who came for the first week and loved it. And we also know people who came for the second week to see some of the finals and that was great too.
I am so glad we took the Olympics plunge. We are veterans now and are seriously considering going to LA in four years. If you live in LA, I would encourage you to stay in town and go to some of the events. It is a really special experience.
