The New Power Law & How I Built a $100B Portfolio! | E2007
12 Sep 2024 (7 days ago)
Jason joins Pejman Nozad and Jason Shuman at the Liquidity Summit 2024.
- Venture capitalists should prioritize sourcing the best founders early on.
- A third of the fund's investments are now incubated, allowing sector specialists to nurture companies with proven founders and operators.
- Pejman Nozad is being welcomed to speak about his success in venture capital over the past decade.
Pejman Nozad’s “How I Built a $100B Portfolio”
- Pejman Nozad is the co-founder and managing partner of Pear VC, a pre-seed and seed-stage venture capital firm.
- Nozad's journey in venture capital began after he immigrated to the United States from Iran and worked as a rug salesman, where he interacted with prominent venture capitalists and became interested in the industry.
- Nozad believes that success in venture capital requires patience, persistence, and the ability to identify and support promising companies and founders.
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- A program called Female Founder Circle selects 100 top female engineers in the country each year to participate in a free 15-week program that helps them start companies.
- A portfolio construction strategy involves investing in 20-30 pre-seed companies at 250,000 to 2 million dollars for 7-15% of the company and 10-15 companies at 1.5 to 5 million dollars for 10-20% ownership.
- Pro-rata, or the ability to invest more in a company as it grows, is important, and it's not always necessary to own 20% of a company at the beginning, especially as companies are going public with valuations in the billions of dollars.
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- An investment strategy should be related to the fund size. For example, while a 2.5% stake in a company valued at \$50 billion may be a good investment for a large fund, it is not a sound strategy for a fund of \$432 million to assume that every company it invests in will reach a \$50 billion valuation.
- Maintaining a consistent ownership percentage of 2-3% in companies is not a viable strategy, as not every company will achieve a \$50 million valuation. Even if a fund were to achieve the same return as DoorDash, it would not be sufficient to generate a significant multiple on the initial investment.
- Sequoia Capital, Benchmark, and Y Combinator are three different firms with distinct investment strategies that have all achieved exceptional performance. Sequoia focuses on companies from Series A funding to IPO and beyond, Benchmark manages a \$400 million fund and primarily invests in Series A rounds, and Y Combinator operates as a large-scale startup accelerator.
Jason joins Pejman for a fireside chat.
- It is believed that the next wave of companies that go public will take 5-7 years, rather than 10-15.
- The most important things for early-stage companies to focus on are team, product, and customer.
- The best founders are paranoid in a healthy way, understand the market better than anyone else, are able to attract talent, are focused, and are able to learn and adapt.
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Jason Shuman’s “The New Power Law: Good vs Great Funds”
- Jason Schuman, a general partner at Primary Venture Partners, discusses the power law in venture capital and the differences between good and great funds.
- Great funds achieve 10x or greater returns on investments more frequently than good funds, with a 14.1% success rate compared to a lower rate for good funds.
- Great funds concentrate capital in their most successful investments, allocating 38.7% of their capital to companies that return over 5x and 24% to companies that return over 10x.