You're considering co-investing with a Venture Capital firm. How do you choose the right one?

I'd ask if you can privatly participate in a few of their deals over a period of a year or two. You'll get to witness the kinds of opportunities they like, how they negotiate and transact, how they treat their founders, and above all how much value they bring their portfolio after the deal closes.

Pick the Investors that share a common value set, have demonstrated previous results and risk taking ability, and have a great reputation with Founders. Find investors that have been Operators before, as it means that they can understand and properly help Founders succeed.

When considering co-investment with a Venture Capital firm, especially in the context of emerging markets, it's critical to assess their track record in supporting portfolio companies through to later funding stages. Underfunding at late stages can be a significant risk, hence the importance of partnering with early-stage VC firms that have demonstrated the ability to attract late-stage funds and support subsequent investment rounds.

I think this is a great topic and something I've seen failing multiple times. When you are a startup in growth mode, you want to close your next round and sometimes you just look for the money. Big mistake. I know it's easy to say this than done. However, be very careful with who you are bringing to your project and many times to your Board. I have personally suffered some of those decisions in the past. Make sure there is not only an alignment with the strategy but also chemistry and understanding of the business. I'm a firm believer that the VC industry is in a renaissance but you may still find people that are in ONLY for the money and will distract you for building the right company.

A big part of the alignment piece with co-investors is to ensure they have a similar exit horizon and returns target to you. If one fund is seeking liquidity in 3 years and a 5x return would be great for them then they’re unlikely to be good company for another fund seeking 50x but being happy to wait 10 years.

Focus on the VC team's track record and cohesion. Prioritize those with direct experience in your target sectors, e.g., successful exits in AI or renewable energy. Assess their decision-making efficiency, communication clarity, and problem-solving approach. Look for a demonstrated ability to forge strong, supportive relationships with portfolio companies. Opt for teams that blend diverse expertise with a shared commitment to innovation and proactive conflict resolution, ensuring alignment with your investment philosophy.

Choosing the right VC firm for co-investing goes beyond financial metrics; it's fundamentally about the team's dynamics and ethos. Assessing the partners' and associates' backgrounds for diversity in expertise and a proven track record is crucial. The way they foster relationships with startups, manage conflicts, and support ventures during ups and downs reflects on their operational philosophy. A firm that values transparency, promotes mutual growth and maintains a supportive network with all stakeholders offers a collaborative advantage. This environment not only aligns with your investment goals but also enhances the collective success and learning throughout the investment journey.

The investment team is a critical factor in the success of a VC firm. Assess the team's experience, expertise, and track record in sourcing, evaluating, and nurturing high-potential startups. Look for a diverse team with a blend of operational, technical, and financial skills, as well as industry connections that can provide strategic guidance to portfolio companies. A strong and cohesive team enhances deal flow, due diligence capabilities, and portfolio management effectiveness, increasing the likelihood of successful investments.

Once their portfolio and track records fits your expectations, do a very strict DD with the teams..its not just about knowledge but a lot about their consistency, mindset, how they run the firm and support the companies in their portfolio. I admit to be strict however a firm that don't fit my own criteria (even on the HR/TA side) is a no go...this because I always applied for myself what I expect from others. I remember applying for a position once within a VC firm...had the traditional rubbish rejection to...3 months later being approached to fund their 2n fund...the irony. Co-investing is a long journey, make sure you are fully aligned with the firm. Better lose a good deal than do a bad one.

Probably, the first check you may do. Background, previous returns, or strategy is important but the reputation closing deals based in win win scenarios is key.

Reputation is paramount in the venture capital industry. Conduct thorough due diligence on the firm's reputation within the entrepreneurial community, among co-investors, and within the broader industry. Investigate past investments, exits, and the firm's involvement in supporting portfolio companies. Positive testimonials, referrals, and a track record of successful outcomes signal trustworthiness, reliability, and integrity, which are essential qualities for a successful co-investment partnership.

Before diving in, it's crucial to scope out a VC firm's street cred. What's the buzz among founders, fellow investors, and the grapevine? Check their track record: are they hitting homeruns or striking out? See how they play with others—are they competitive or collaborative? And let's not forget their impact—how do they give back? Bottom line: aim for a VC with a solid rep that boosts your own street cred.

Yes, reputation is everything and outside the social media, you tend to often know what's behind the curtains. Sadly a lot of VC firm, founders and co-founders, neglect what is happening below or carry terrible assumptions gradually harming their reputation..it's not just about ROI but ethical investment especially as a LP or potentially also a co-investor.

Analyze the terms of the co-investment partnership to ensure they align with your expectations and interests. Scrutinize factors such as management fees, carried interest structure, governance rights, and exit strategies. Seek transparency and fairness in the terms to avoid potential conflicts and ensure alignment of incentives between you and the VC firm. Comparing terms across multiple potential partners allows you to make informed decisions and negotiate terms that maximize value and mitigate risks.

As a GP, the reasonable management fee and the target return for the venture capital’s portfolio are the most convincing fundraising terms for each fund formation for their LP as well as the combine the appropriate startups for the fund formations. Conventional management fee level has been commonly set as 2% to 3% because the prime rate in the US had shown almost zero points for the last decade. However, the skyrocketed interest rate has changed investors' expectations so the startup investment return should be higher than the Nasdaq and the fee should be reset to the midpoints of the rate of deposit and loan considering a reasonable inflation rate. #vc #startup #fundformation #fundrasing #managementfee #expectedreturn #startupinvestment

Focus on fees, profit splits, and rights. Avoid high management fees and seek favorable carry percentages. Ensure clear terms for decision-making and data access. Negotiate for no extra co-investment fees. Example: prefer terms with <2% management fee and <20% carry, plus full transparency and investor involvement rights. These criteria streamline choices to VCs that boost your returns and control.

When co-investing with a VC firm, it's like entering a partnership dance. You're agreeing to terms that can sway the rhythm of your investment journey. From fees and profit shares to restrictions and perks, it's a mixed bag. Your level of involvement and info access also varies. It's crucial to compare these terms across firms and negotiate for what feels right for you – fair, transparent, and favorable. After all, it's your money and your future on the line.

Building a strong relationship with the Venture Capital firm is crucial for a successful co-investment partnership. Foster open communication, trust, and mutual respect from the outset. Regularly engage with the firm's team, attend networking events, and participate in co-investment opportunities to deepen the relationship. A strong rapport enables collaborative decision-making, problem-solving, and alignment of expectations throughout the investment lifecycle, leading to better outcomes for both parties.

Building a strong relationship with a VC firm isn't just about a single deal—it's a journey. It's like tending a garden; you gotta nurture it. Stay proactive, share your thoughts, and support each other. Be upfront about stuff, good or bad, and tackle problems together. Look for a VC firm that sees you as a partner, not just a wallet. Co-investing is thrilling, but it's also serious business. Do your homework, negotiate smartly, and find the VC that's right for you. It's about growing together and reaching those investment dreams while having a blast!

Establishing a fruitful relationship with a VC firm isn't just about pitching companies; it's more like nurturing a friendship. It involves mutual elevation — how can they uplift you, and how can you do the same for them? By adopting this mindset, you can streamline your search for the right VC partner. Start by assessing what you and the VC firm can collectively bring to the table. Once you've identified a VC whose thesis and impact goals align with yours, it's time to initiate meaningful connections. Aim for regular interactions, perhaps on a quarterly basis, to maintain momentum and strengthen the bond. Once trust is established, deal flow follows and true meaningful relationship are forged.

The devil is in the details. Based on my experience, investing alongside a prominent venture fund often leads to misalignment of interests. These firms typically have fund durations of 7 to 10 years, and as the fund nears its end, they may pressure founders to sell or refinance quickly to extract equity, potentially harming the company’s long-term prospects. Venture funds must meet their own investors' expectations and exit commitments. Additionally, they often hold superior rights over non-institutional investors, such as angel groups. In contrast, sophisticated investors and family offices take a more patient, long-term approach, allowing companies to grow sustainably.

First, when you're co-investing with anyone, you're backing the business, not the co-investor. So do your diligence and make up your own mind about the startup's merits and risks. Second, most VC firms reserve co-investment opportunities for their LPs. So if you want the best access, become an LP in the VC firm you're excited about to benefit from their deal flow.

We recommend to our LPs who participate in our co-invest opportunities that they spread out their allocation and diversify across multiple opportunities. We would not recommend a deal if we didn’t believe in it, but there are so many factors out of our control that diversification is strongly advised.

Investing in startups is a high risk/high reward investment that requires expertise. Co-investing along a VC can be a good way to learn from the best practices. This is however if there is close scrutiny of the process and the investment. In other words, if you really want to learn don't just comnit the money, involve yourself in the DD and meet several times with the VC to understand their rational and the deal structure. Doing this will allow you to see a deal from the copilot seat. Otherwise, you will remain ignorant to the motivations behind the investment in the first place and the rational behind each of the deal clauses. If you do not do this, you are likely better off investing in a few funds as an LP and taking a passive role.

As a venture investor, I believe that partnering with the right firm can significantly enhance growth and value. I look for shared values and complementary strengths, such as expanding networks, adding expertise, or increasing funding capacity.