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‘Is this startup Venture Capital ‘backable’?’ The most important question I ask myself each time is. I’ve reviewed over 3000 African startup pitch decks in the last 4 years. The main book that keeps getting recommended is Brad Fields - Venture Deal which I'm busy making my way through!

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Seth Levine: How to Get a Job in Venture CapitalĮarnest Sweat – Don't Break into VC But Wait for the Best Opportunity for You Jerry Neumann on Power Laws in Venture Portfolio Construction Venture Capital Careers - A comprehensive introduction and overview of venture capital Various Roles Within a VC Firm - Job descriptions and expectations Talk Like a VC Insider - A Gif Glossary of niche VC sayings Here's what I have so far broken up by category:ĬB Insights Venture Capital Terms - Dictionary of VC and Start-Up terminology

If you know of any other good books that are worth reading please let me know below too! 📚 I've also started putting together a reading list that I'm going to start making my way through. Hello LinkedIn community, I've recently made a career switch to the world of VC and I'm looking to follow some insightful and active LinkedIn Members! Could you please tag any below that are worth following?👇🏾 Thank you to the BCSL () Team for creating this polished diagram off my rough sketch – certainly a lot more visually appealing! If you found value, please share this post for visibility 🚀 In other words, we are more alike than most give us credit for. In this sense, just like Founders pitch and are eventually accountable to their VC investors, we – as VCs – also pitch and are accountable to our investors. VCs typically take anywhere from 1% to 15% equity in a startup. The hope for VCs is that this equity will return an attractive multiple on their investment at a liquidity event such as a secondary (equity) sale, acquisition, or IPO. (3) Finally, startups provide equity to VCs.

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Large Round Sizes → many VCs are just too small to be filling the full round in every deal they enter, hence they need co-investors to help ‘fill’ them up.Additionally, they feel better knowing they won’t be the only ‘wallet’ around the table come subsequent rounds or ‘tough times’. Social Proof / Derisking → VCs feel more comfortable entering deals they know are diligenced and supported by other VCs they respect.Deal Flow → having multiple distinct investors sourcing deals creates a far larger ‘web’ than just one fund would ever have.A typical VC deal can have anywhere between 2 and 6 investors involved. (2) In the middle, VC funds collaborate closely with co-investors like other VCs, accelerators, and venture builders to invest capital (and time) in startups. Evidently the LPs take (aim to) back their initial capital + the hurdle + the remaining 80% of the profits thereafter.Hurdle rates are typically around 7 to 8% per annum.

Hurdle Rate → is an internal annual rate of return the VC firm must deliver to LPs before starting to receive any ‘carry’.

And the 20% is the percentage of the upside known as ‘carry’ (think profit) that the fund managers take (after an initial ‘hurdle’). The 2% (charged on total capital committed) is the annual fee that the fund charges investors to manage the fund.

‘2 and 20’ → is the standard fee structure for venture capital firms to charge their investors.

LPs and VCs agreement typically run on what is known as the ‘2 and 20’ model: (1) Right on top, Limited Partners (LPs) provide capital for VC funds to invest in return for equity in the Fund and ultimately capital returns. One of the biggest fallacies I've encountered in my VC career is the notion that the industry occurs solely between VC Funds and Startups.Īs I’ve outlined in the diagram below, the Venture Capital Ecosystem is actually a multistakeholder one – let me explain: