What do you do if your Venture Capital investments are not yielding expected returns?

Assess first, act next. - Identify causes: external or internal? - Analyze market, competition, demand. - Review product development, team, strategy. - Honest diagnosis is key. - Opportunities and threats: a delicate balance. - Act with insight, not haste. Understand to pivot effectively.

If Venture Capital investments aren't meeting expectations, first, assess the underlying reasons: market shifts, management issues, or product challenges. Engage with portfolio companies to understand their challenges and offer support or guidance where possible. If necessary, consider restructuring, pivoting, or exiting investments to minimize losses. Communicate transparently with stakeholders about the situation and potential strategies. Learn from underperforming investments to refine investment criteria and due diligence processes for future opportunities. Diversifying the portfolio and seeking expert advice can mitigate risks and enhance returns in the long term.

Assessing the situation is pivotal to addressing underperformance effectively. Identify root causes, distinguishing between external factors like market conditions and internal factors such as product development or team dynamics. A candid evaluation of each portfolio company's strengths, weaknesses, opportunities, and threats is essential. This comprehensive understanding informs strategic decisions and enables tailored interventions to mitigate challenges and capitalize on opportunities, fostering growth and success in venture capital endeavors.

Assessing the situation is the FIRST step. It could be something within your control to try and influence and change (like talking with the founders or helping with business development) or it could be something outside of your control like time (It takes patience for returns in VC). So taking a deep dive that is clear, methodical and comprehensive is the first step to determing WHY you are not yielding returns and if there is anything you can do about it. Ya'll stay safe in these VC streets!

If your venture capital investments aren't meeting expectations, it's crucial to analyze the reasons for underperformance. Start by conducting a thorough assessment of the underlying business, market conditions, and the management team. If necessary, consider proactive involvement in the company's operations to drive positive change. Additionally, reassess the investment thesis and portfolio diversification strategy to mitigate risk. Communication with the company's leadership is key, opening up discussions to explore potential solutions. Ultimately, seeking guidance from experienced mentors or advisors can offer valuable insights for decision-making.

Two perspectives to consider in communicating with founders. One, it is the founders that have the hardest job, so VC's need to be empathic to the challenges they face. As much as the advice to founders is important, just as important is listening and empathizing. Second, some founders may ghost their investors, an ominous sign that things with the startup may not be going well. If you have done a good job on being empathic before, you are more likely to get more responsiveness from the founder. Be persistent but firm that while failure can be acceptable, not communicating with investors is not a recipe for long term success.

Talk with founders, key to success. - Share expectations, listen to their challenges. - Build mutual trust and support. - Favor constructive dialogue, avoid harsh criticism. - Encourage innovation, guide towards new opportunities. - Provide resources and mentorship for growth. Close collaboration leads to shared victories.

When communicating with founders and management teams, it's crucial to align on goals and expectations, ensuring that everyone is on the same page regarding the vision and direction of the portfolio companies. This dialogue should also focus on fostering innovation and growth, encouraging founders to think outside the box and explore new opportunities. By building strong relationships based on trust and mutual respect, you can create a supportive environment where founders feel empowered to take risks and pursue ambitious goals. Additionally, it's essential to provide founders with the resources and support they need to succeed, whether that's through mentorship, access to networks, or strategic guidance.

Are your words building bridges or walls? After assessing, the next crucial stride is engaging with the founders and management teams. This dialogue isn’t just about airing concerns but fostering a space of mutual respect, trust, and support. Share insights and expectations clearly, but also lend an ear to their visions, challenges, and ambitions. The goal? A partnership where feedback is a tool for growth, not a weapon of criticism. Avoid micromanagement; instead, champion a collaborative approach. Remember, the strongest ventures are built on the foundation of open, constructive communication. #divineintervention #gabenfreude

Having a strong connection with your founders and trusting their vision is essential. Just speaking to them and aligning interests and helping them reconsider the strategy or cash burn adds immense value. It can sometimes protect the founder from going down a path of uncertainty or sometimes you can throw in an idea that the founder is perfect to execute to unlock the next lever of growth!

Reassess milestones and metrics with agility: - Check their relevance and realism today. - Ensure alignment with long-term vision. - Adapt to current market dynamics. - Set new, adjusted goals and timelines. - Regular review to stay on track. Adaptation and flexibility: keys to success.

Consider not only their relevance and realism but also their adaptability to unforeseen circumstances. Flexibility is key in adjusting targets and timelines to reflect market dynamics and evolving customer needs. Additionally, ensure that these metrics are aligned with the company's long-term vision and mission, fostering a strategic approach to growth and development. Emphasize the importance of regular review and adjustment to maintain alignment with overarching goals, enabling agility and responsiveness in a rapidly changing business environment.

Is your roadmap set in stone or written in sand? After establishing open communication, turn to the milestones and metrics defined at the outset. These benchmarks are not just checkboxes but beacons guiding through the fog of market dynamics and consumer shifts. Question their relevance and realism in today’s context—do they mirror current market needs and the company's vision? Adaptability here is key; recalibrating these goals ensures they remain aligned with both immediate challenges and long-term aspirations. It’s about setting a course that’s both ambitious and attainable, ready to be redrawn as the landscape evolves. #divineintervention #gabenfreude

? Review milestones and metrics agreed upon during initial investment. ? Assess relevance and realism in current market and customer landscape. ? Determine alignment with company's long-term vision and mission. ? Revise milestones and metrics to adapt to evolving circumstances. ? Set new targets, key performance indicators (KPIs), and timelines. ? Involve founders in the review and revision process for buy-in. ? Ensure revised goals are specific, measurable, achievable, relevant, time-bound. ? Focus on outcomes over outputs where possible. ? Prioritize metrics tied to revenue generation and profitability. ? Track leading indicators of future performance and growth. ? Clearly communicate revised expectations and accountability measures.

Low VC returns? Explore, adjust, move forward. - Inject funds to overcome hurdles. - Bring in mentors or partners: fresh skills. - Consider mergers or acquisitions: boost value. - Renegotiate terms: more control or potential. - No success in sight? Strategic exit to minimize losses. Each action is an opportunity to pivot towards success.

Exploring options for enhancing VC investments necessitates a nuanced approach tailored to each portfolio company's unique circumstances. It involves assessing the feasibility and impact of various strategies, such as operational improvements, strategic partnerships, or geographic expansion, to unlock untapped value. Implementing innovative business models or technologies can also catalyze growth and differentiation, positioning the portfolio company as a market leader. Furthermore, nurturing a culture of innovation and agility within the portfolio company can foster a dynamic environment conducive to adapting to changing market conditions and customer demands.

Are you ready to pivot or double down? Once you've recalibrated goals, the next move is strategizing for improved performance. This might mean injecting more capital into promising ventures teetering on the edge of breakthrough or stagnation. Consider also the power of new alliances—introducing fresh minds, advisors, or strategic partners could spark transformative change. Don't overlook structural moves like mergers or acquisitions to bolster market standing or value. Sometimes, renegotiating terms can unlock hidden potential or a graceful exit. And in cases where the path forward dims, cutting ties might be the prudent course. Each option holds a key to unlocking potential; choose wisely. #divineintervention #gabenfreude

? Explore options to improve performance and returns on VC investments. ? Provide additional capital/resources to overcome setbacks or seize opportunities. ? Introduce new partners, advisors, or mentors for insights and connections. ? Consider mergers, acquisitions, or partnerships for synergies and growth. ? Renegotiate deal structures for increased stake, influence, or exit potential. ? Conduct due diligence on each option's feasibility and risk/reward. ? Involve portfolio company founders in evaluating and selecting options. ? Develop clear action plans with measurable goals and timelines. ? Secure commitments and align incentives for all stakeholders. ? Monitor progress and be prepared to pivot or exit if needed.

Monitor and evaluate: adjust your course. - Measure performance against revised goals. - Incorporate feedback from clients and partners. - Celebrate successes, learn from failures. - Adjust strategy based on insights. - Repeat: continuous evaluation for future success.

I would recommend a weekly touch point at a minimum with a set threshold for exiting this rhythm-based on KPI targets. If the company is in the red and a new direction has been adopted, it doesn't mean everything will be OK in a few months. A hands-on approach is required not to micro-manage, but to provide transparent feedback and further insights so that the leadership team can "SEE" the actual problem with a 360 degree view even as the solution is being implemented. Typically for best communication rhythms, there needs to be daily, weekly and monthly touch points at all levels of the company to ensure everyone is working on the right things in the right way.

? Monitor and evaluate progress/results of your VC investments regularly. ? Track performance against revised milestones and key metrics. ? Assess impact of implemented actions and strategies by founders. ? Review feedback from customers, employees, and stakeholders. ? Celebrate achievements and learn from failures objectively. ? Adjust strategies and tactics based on learnings and evolving needs. ? Leverage data analytics and reporting for informed decision-making. ? Conduct portfolio reviews involving founders and advisors. ? Identify early signals of success or potential risks. ? Maintain flexibility to pivot or double down on promising investments. ? Continuous monitoring promotes accountability and course correction.

Are your investments soaring or stalling? The capstone of navigating venture waters is relentless monitoring and evaluation. This isn't mere oversight—it's the art of measuring the pulse of your ventures against the rhythm of revised goals. Dive into the outcomes of your strategic choices, juxtaposing them with the benchmarks you've set. Broaden your lens to include feedback from customers, employees, and stakeholders, for their voices often chart the course to success or signal caution. Applaud the victories, dissect the setbacks, and recalibrate your compass. This continuous loop of evaluation and adaptation is your map to uncharted territories of opportunity. #divineintervention #gabenfreude

Keep in mind that the majority of your investments will fail and not yield any return. The fundamental principle of VC investments is the Power Law: a small number of investments will yield returns far greater than the rest, often exceeding them combined. Let’s say a VC invests in 20-25 companies. The reality is that a large number of them, around 13-16, will fail. Another 7-9 might do okay, bringing back a 2x-5x return. But that’s not enough to return a fund (and the expected profit). It is more important to find and invest in "fund returners” than having the majority failing: one or two of the portfolio companies that bring around 50-100x returns and cover the losses from the failed companies and the modest returns from the rest.

Risk Investments incredibly tend to take the 'Risky' part serioulsly. Do understand that IT IS part of the game, SO: TRANSPARENCY - Your investors/LPs must be 100% on the same page of yours. - Once you have the picture, share it. Never hold information. ASSESMENT - Assuming that the investment is falling into one of the unwanted scenarios, retake the steps that led the company there. - If the management executed 100% of the plan, initiate the contigency measures. - If not, then take the leash and prepare an ACTION PLAN - Re-asses the mistakes/missing items. - Are they doable? - If doable, will it put the company back on track? - How much will it cost? - Can the mngt handle? FINALLY - A stop loss is better than a deeper loss. Choose wisely.

Take in consideration the competitive advantage, this meaning to identify companies or projects with a sustainable competitive advantage is crucial to long-term success in capital investments. A competitive advantage could come from factors such as patented technology, unique intellectual property rights, or established brand recognition Investing in companies that possess a distinct advantage over competitors can lead to a substantial return on investment. Also, consider the risk Assessment: Assessing the risks associated with an investment opportunity is essential to making informed decisions. Investors should carefully evaluate factors such as market volatility, regulatory changes, and potential operational risks.

I would change the asset class and would invest later stage in the growth technology asset class (eg. @Cadence Growth Capital) where adjusted risk return is better than in VC.