Let The Good Deals Flow
Chasing (& Climbing) Waterfalls
At Signia, I realize that we’re on some A lists and some B lists for certain folks when it comes time to introduce investment opportunities. For example, it doesn’t take long before realizing that somebody is only sending you their shitty deals and somebody’s name becomes relegated to adverse selection. How do we find out where we stack on somebody’s priority referral/intro list? And if we’re low ranking, how do we move up the waterfall?
Regarding moving up in the ladder, there’s no quick and easy answer here — it involves building a meaningful relationship over time, sharing deals, talent, and whatever else to build a tighter bond and, more importantly, trust with these referral sources.
Do your part: Be responsive when they send you stuff. Add value to them over time. Help educate your friends on what you’re looking for, and you’ll be more likely to get it. If somebody tells me, “Sunny, just send us the good deals” — what the fuck does that mean exactly, dude? Don’t be a dumbass … HELP ME, HELP YOU!
Investor-to-investor portfolio company intros: Timing makes a difference
Timing of an intro between investors is an important consideration, as it sheds some light on how investors interact with one another. It’s rare for a portfolio company to be solely funded by one VC throughout its entire lifetime. Usually, investors invite other investors to co-invest at the same time or, as per the point here, as follow on investors for their existing portfolio companies.
In the latter case, from our experience, so called “seed extension/seed+” rounds are difficult for us at Signia. There’s a case of asymmetric information here. Why aren’t existing investors providing the full funding bridge if the company isn’t where it needs to be in order to validate a full Series A fundraise? Existing investors know much more about the team, history of execution, etc. than I do, so introductions to join these “seed+” rounds can sometimes look like existing investors are looking to pass the baton of responsibility and seek external lifelines of capital rather than shoulder responsibility themselves with their own check book.
That said, sometimes a company pivots in a new direction and our fund’s sector expertise may be increasingly relevant to that new strategy. However, in that case, I don’t want to be paying up on the last round’s valuation (even if it’s only a slight bump on the original seed round) just to bail out existing shareholders.
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Just a couple of thoughts around sharing deals in the VC ecosystem as I’m a big believer that sharing is caring. :)
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