Billions of dollars. Millions of startups. Thousands of funding round. A venture capitalist is a true financial beast. Here's how a VC thinks.
Venture Capitalists can be considered as miners of gold, always on the lookout for the next big unicorn (a private company with a valuation of more than a billion USD). The idiosyncrasies that come up with such a mammoth task are hard to quantify & explain. After all, one never knows whether a company will go boom or bust. Nonetheless, let's take a look at how great VCs function & discover the next big startup by dissecting investment strategies of the top Venture Capital firms in the world:
MARKETS MATTER: SEQUOIA CAPITAL
The founding philosophy of Sequoia Capital has been to focus on markets rather than on founders. They believe in exploiting markets early rather than being the disruptor & creating markets. They rely on o "Sequential Market Identification" which means that they try to chart the evolution of a specific market and invest in companies that work in the same direction. For example, Sequoia sensed the rising tide of social media after being an early investor in YouTube and also very rightly invested in young startups like WhatsApp & Instagram which as well all know are decacorns today! Sequoia looks for startups that identify problems in an existing market and use unconventional thinking to provide new solutions that change the behaviour within those markets. For example, Sequoia India backed Groww (a startup aiming to digitize retail investors in India) & Meesho (a pioneer of social e-commerce). Both of these were parts of a growing fintech & e-commerce market in India (which again adheres to their core policy). The list of successful Sequoia startups is so long that it warrants an individual article itself! One sentence is enough to summarize their lofty heights of success: "The combined current public market value for companies in which Sequoia invested is over $1.4 trillion, equivalent to 22 per cent of Nasdaq!" Another mind-boggling fact is that these numbers do not include the 100+ companies which have still not gone public in the USA, China & India!
NURTURING MINDS & STARTUPS: ACCEL PARTNERS
Imagine a seasoned gardener who chooses his seeds wisely & is a master cultivator, hurting his plants patiently with the utmost care. Accel Partners are the eminent startup cultivator of the VC world, polishing raw founders to be the visionaries of tomorrow. They work with startups in the seed (inception), early & growth stage investments. The founding partners believed in a disciplined & informed way of investing. They have successfully nurtured renowned companies like Slack, Facebook, Dropbox, Flipkart, Vox Media & Spotify.
THE BIG BUCKS THEORY: SOFTBANK CAPITAL
Asia's prime holding company, Softbank is the brainchild of Japanese self-made billionaire Masayoshi Son. Softbank is a multinational conglomerate but the focus today shall be on Vision Fund 2 which has a 100 Billion dollar war chest for investment. Masayoshi has been known to be a futurist, always a step ahead, capitalising on the next big wave in tech. His gung ho approach of sealing deals in minutes and backing his startups with billions (a prime example being WeWork & Uber) has enthralled as well as baffled many. His financial engineering & deal-making skills are other well-known facets of his. It remains to be seen whether Masa Son emerges with killing returns or with a killed investment nous. Some of his most famous investments were Alibaba, Yahoo, Japan Telecom & ARM (semiconductor giant).
EGALITARIAN ELITE: BENCHMARK PARTNERS
Benchmark includes the creme de la creme of Silicon Valley. It invests a lot in repeat founders & referrals (60% of their total investment). benchmark differs a lot from other traditional VC firms through its structure. It has no leading figurehead like a CEO or a chairman as well as hierarchical titles like senior-junior partners. Admittedly, this has stopped their international expansion which needs a leader for better coordination. Still, each partner brings a certain niche & expertise and this small knit equal partnership has been wildly successful in North America. All partners have an equal share in the returns. Some of their well-known bets are Snapchat, Uber, Twitter, GrubHub & Confluent.
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