Slow things down

Harry Stebbings interviewed Mike Maples of Floodgate on 20VC.

Discussion covers some learnings for startups from the SVB debacle.

One discussion topic towards the end of the program is around deployment speed for a venture fund. I find this interesting as it is, as Mike says, one of few things a venture firm can fully control that lowers risk.

A venture fund normally has an investment period of up to five years (often between three and five years in practice) where the fund makes new investments. Then it has another five years (which can be extended) to make follow-on investments, exit its investments and send the money to the investors in the fund.

One thing that happened in technology fundraising during 2020 and 2021, in addition to high valuations and startups fundraising quickly, was that more venture funds than usual ended the investment period very quickly (in 1.5-2 years) and raised new funds. This means that they only invested at the top of a cycle, as they invested too quickly to get the time diversification a longer investment period gives.

Author: Henrik Torstensson

Partner at Alliance VC. Investing in Nordic early-stage tech startups.

Leave a Reply