In this episode of Bell Curve, Mike, Jason, Vance, and Michael discuss how VC funds are managed, what separates the best funds from the pack, why fund size is so important and more!
Read our notes below to learn more.
Breaking Down Powell's Comments
The recent FED announcement was a 25 basis point increase in interest rates.
The markets were expecting this increase, but the verbiage used by Powell in his press conference was more dovish than expected.
The word "disinflation" was used multiple times during the press conference, which is starting to enter into the narrative of the FED.
The markets are now pricing in a 50 basis point increase for the rest of the year.
Macro strategist Tom Lee has said he was bullish last year but was often criticized in interviews.
Tom Lee is usually right, but just early in his predictions.
It feels like we are on the other side of the rate peak and Powell is acknowledging the disinflation.
One Of Lagarde's Worst ECB Press Conferences
There is still some pain for companies as they work through valuation resets and some companies are burning a lot of cash and may have trouble raising capital.
Some companies only have six to eight months of runway and there is a need for entrepreneurs to have a "come to Jesus" moment in order to secure successful fundraising.
It may be difficult for Venture funds to raise funds in 2023 and there were notable Venture firms that were unable to raise funds in 2019.
It is important for crypto companies to adjust their product, service, and user base in order to survive and reach their fundraising goals.
Actionable Trade Ideas
A venture firm has two main jobs - being a good investor and being a good fund manager.
Being a good investor involves putting the money to work and having a venture thesis for investments. Being a good fund manager involves raising money, communicating the strategy to Limited Partners (LPs), and running the fund operationally.
In crypto, the strategy and portfolio construction can change quickly based on market conditions, but LPs still expect the firm to make venture investments.
Capital calls have traditionally been the model for running a fund because it allows for the juice of the internal rate of return (IRR).
The LP side can be complex as they have multiple areas of investment, but they need to manage their obligations to other managers and endowments/foundations.
The ultimate measure of success for a venture firm is its DPI (Dollars Distributed per Invested Dollar).
Private Equity firms can add a percent or two to their total IRR by calling capital only when they make an investment.
Having regular meetings with portfolio companies is important, but the traditional model may not be effective in the crypto space.
Instead, crypto startups require different expertise, such as governance, data analysis, and founder therapy.
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To support growth and engagement, having technical services such as running nodes and validators is important.
Additionally, having an in-house HR and recruiting person can be time-saving and efficient.
Having all the necessary resources in-house is crucial for startups in the crypto space.
While some believe that Bitcoin should be used as a store of value or a means of transferring wealth, others think that it has much greater potential as a platform for building decentralized applications.
However, the recent controversy surrounding certain apps on the blockchain and the increasing fees have caused a lot of concern among the community.
This is making it difficult for some users to use the network and is slowing down the adoption of Bitcoin.
Moreover, the future of Bitcoin mining is also a topic of concern, especially with the current state of the industry.
Many of the largest North American miners are facing bankruptcy due to the high cost of hardware and the competition in the market.
It's a tough business that requires a lot of capital, technical know-how, and energy.
To move forward, it is important that the community comes together to agree on the future of Bitcoin and what it should be used for.
This will help in creating a more stable and sustainable ecosystem and attract more users to the network.
Ultimately, the future of Bitcoin is in the hands of the users and is confident that we will find a way to make it work for everyone.
Check Out These Important Links
TODAY’S EDITION IS BROUGHT TO YOU BY LEDGER HARDWARE WALLET
We are all having trust issues with centralised exchanges so we have partnered with the Ledger, who is the industry leader and most trusted vendor in the hardware wallet space.
Using a hardware wallet is the smartest way to secure your assets.
Act now, click the link below and secure your crypto.