Lawrence

Did VC FoF | Now building something to help private markets liquidity

[Lawrence @Lawrence_Ou]

Seeing a lot of good takes about VC and also a lot of bad ones too, particularly when it comes to all things LPs. So I've decided to write about it.

If interested, the newsletter is at https://t.co/bCdzIeLiX0 where I cover the basics of venture all the way to things I'm seeing in the market. I'm open to feedback and comments.

Below you'll find threads that I've written over time.
Tracker below to help with quick finds:
https://t.co/AepNmjspWG

[Lawrence @Lawrence_Ou]

@breckyunits @andrewparker Markups on Safes vs priced rounds. Write down on an underperforming asset vs keeping it flat. Latter gets interesting when fees are based on NIC.

[Lawrence @Lawrence_Ou]

@pavelprata Those are some weird definitions.

EMs are those that raise without a track record. You stop being an EM when LPs can underwrite the track record vs the story. So you're an EM until you raise fund 4+

[Lawrence @Lawrence_Ou]

@Melt_Dem Probably seeing it more because it’s a non-issue as most funds won’t ever hit that. The idea is that if it works as an incentive, then it doesn’t hurt to have it. Don’t hit it, lose nothing.

[Lawrence @Lawrence_Ou]

@jukan05 Isn't Tensorwave that?

[Lawrence @Lawrence_Ou]

Funny watching the comments about investors talking up the one they backed. What else are they supposed to say?

"We screwed up and backed the wrong one."?

[Lawrence @Lawrence_Ou]

All the stuff we're seeing in private credit is because these vehicles are horribly designed. The product is the investors and the winners is the asset managers milking the 3%+ fees on undeployed cash and on the overvalued NAV. Ditto for all the other private market vehicles.

[Lawrence @Lawrence_Ou]

Getting into private market/ illiquid assets and expecting some sort of regular liquidity is dumb. The cost of liquidity is half your cash setting in money market at 1%+ management fee. So pay illiquidity premium, have cash sit in MMF and wonder why returns are bad.

[Lawrence @Lawrence_Ou]

The Angelist incentive is to funnel retail cash to Angelist GPs/funds. More cash to more GPs means more funds on Angelist. So the incentive isn't really to generate the best returns (no carry explains that). It's to fund funds so Angelist can monetize other aspects of their biz.

[Lawrence @Lawrence_Ou]

Not a fan of the Robinhood one. Not a fan of this one either.

[AngelList @AngelList]

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[Lawrence @Lawrence_Ou]

1/ No carry is framed as a positive. But what's the incentive then? The incentive isn't to back the best funds/companies. It's not really to stack fees either (even if 1% management fee for a FoF can be framed as a lot).

[Lawrence @Lawrence_Ou]

There's a price point where companies turn to human employees for things again. Probably happens when increased productivity vs cost doesn't make sense anymore. For a while anyway until we figure out how to make costs reasonable for each unit of intelligence. Interesting times.

[Marc Andreessen 🇺🇸 @pmarca]

Magical OpenClaw experiences that use frontier models cost $300-1,000/day today, heading to $10,000/day and more. The future shape of the entire technology industry will be how to drive that to $20/month.

[Lawrence @Lawrence_Ou]

@pavelprata Disagree on point 3. As an LP if you have the choice, it’s better to come in late but not because of who else commits. It’s more so you can see how the portfolio looks. At worst you pay late fees. At best, you dodge a portfolio with not great looking companies.

[Lawrence @Lawrence_Ou]

@pavelprata @SpaceX Appreciate the shoutout!

[Lawrence @Lawrence_Ou]

Passing on EMs is easy. Don’t make it even easier for LPs.

[Mike Annunziata @nunzi46]

One of the tougher things to do as an emerging manager is avoid marking your book to SAFE caps

Fundraising is hard, and you want to show LPs portfolio progress

It goes something like this:

2 months into raising, a company you seeded raises $5, $50, even $500M(!)

Maybe it’s an institutional lead, maybe it’s SPV capital

Press announces the cap as the “Valuation”…good air cover!

But the fact is, the dollars came in on a SAFE with a cap

What do you do?

Do you take the mark? Do you footnote it? Ignore it completely? Do you tweet about it and take a victory lap, but keep the mark flat?

Hard question!

[Lawrence @Lawrence_Ou]

Wonder what the commit will be. Can't imagine anything less than 25% being interesting for LPs doing their job properly.

[The Wall Street Journal @WSJ]

Breaking: Jeff Bezos is in talks to raise $100 billion for a new fund that would buy manufacturing companies and use AI to automate them https://t.co/bBjxEelixr

[Lawrence @Lawrence_Ou]

Does this count as the biggest M&A deal ever?

[SpaceX @SpaceX]

SpaceX has acquired xAI, forming one of the most ambitious, vertically integrated innovation engines on (and off) Earth → https://t.co/3ODfcYnqfg

[Lawrence @Lawrence_Ou]

@edsuh No. Any LP worth anything will discount fund A’s marks on the SAFE. And will then question all the other marks.

[Lawrence @Lawrence_Ou]

Invest in OpenAI at $830B+? Or in Anthropic at $350B+? Seems like such a no-brainer to do the latter instead of the former

[Lawrence @Lawrence_Ou]

If so, they're doing themselves a big disservice. Annoying is annoying.

[weisser @julianweisser]

Once you realize most annoying VC tweets are meant to appeal to LPs, not founders, it all makes sense.