8 Questions LPs *SHOULD* Ask GPs (But Don’t)

8 Questions LPs *SHOULD* Ask GPs (But Don’t)

It’s that time of year: annual investor meetings for limited partners (LPs), the people who fund venture firms. At these meetings, they general partners (GPs) reveal confidential past results, test the waters on new funds, and mentor their investor base as to what is new and emerging.

I get to go to these now that I’m the most special VC. It’s weird to be a fly on the wall. It’s The meetings are extremely exclusive. And comprehensive. VCs drill down into the details of and their specific funds were vertical’s into. It’s information the public almost never sees. While I listened, it hit me that…VCs need to find a whopper of an IPO within every fund to meet IRR goals (internal rate of return) goals or we are fired

My parallel track think led me to think up a few questions LPs at these meetings should be asking their GPs—but do NOT seem to..

-1- What does playing Moneyball mean to your firm?

There is a right answer.

Your firm better be building a farm system of potential IPO talent. By IPO talent, I mean skilled technologists who are great at tech and selling. I’m from credit card lead generation. My prospect ranking system was P1-> P20. Prospect level one to prospect level 20. Moneyball means not only armchair quarterbacking analysis, but also talent scouting and the block-n-tackle development role of taking entrepreneur from prospect level P3 ~>P7. That is the early middle portion of doing Lead Generation for potential IPO founders

(see diagram) [[were you going to send a diagram?]]

-2- What matters more in how you recruit and develop staff: entrepreneur experience or operations experience?

The answer I’d be looking for is entrepreneur experience. You don’t have to have a staff roll-call of all founders like Founders Fund or True Ventures. But what have you entrepreneurially done experience do you GPs have as entrepreneurs, besides rope roping your one LP that launched Fund Uno?

-3- Have you done Lead Generation for CS, computer science, majors at Stanford? How would you?

Sure it’s a hit driven business, but what drives the hits are CS kids.

How do you charm a cs CS kid? Where do you take these CS kids on field trips to? You need a strategy to find the next Larry and Sergey.

You need to find the next Travis band Garrett

You need to fund and find the next Stanley Tang

You as LP’s need to find and fund the next Larry Chiang like Rudy Garza did

-4- Hiring hot associates was 1999, what are you doing now for startup deal flow?

There’s a post written that previewed the end of a trend. It’s was when an east coast VC sent hot associates to YC and were ignored.

I am saying that the main way to snag deal flow in the last bubble was to hire venture associates who had connections or accomplishments in the startup world BUT that’s not enough anymore

-5- Let’s say a startup has already been presented with a term sheet from Hummer and Polaris, w. What do you say to sell your firm?!

WHY, because no one has heard of 10-11 VCs who brag they’re in the top 20

There’s a lot of money chasing the best deals. You better be able as GP to be able to promote your firm and differentiate it.

How do you wedge our LP money into the deals?

This seems like a pretty basic question that every VC would need to have an answer to. I am sure this never comes up in LP meetings because it’s painful to know that 80-95 of the best deal flow just goes to Sequoia via Larry Chiang

-6- Do you ever eat at dorm cafeterias?

Eating at Stern dining Hall is demeaning so let’s at least see if you as the GP can have partners willing to crash the third shift’s lunch break. By Third shift, I mean the graveyard shift. The Silicon Valley equivalent to third shift lunch is 4th meal of the day at appx approximately 12:30 am.

I am saying GPs need to be stalking campuses for ideas and ambushing founders at the dormitory cafeteria.

-7- How are you adapting to $800k convertible note rounds with no board seat and no cap?!

Equity risk with commercial debt lending returns isn’t gonna help anyone’s TVPI (total value to paid in). TVPI is the ratio of distributed and undistributed portfolio value to original invested capital.

Yuri Milner and Ron Conway have an answer…, I would look them or me up

-8- number Eight is a whopper

You’re gonna have to pay for that one