Catching Up with Kepha’s Investors

I’ve been catching up with some of our Fund 1 and Fund 2 investors the past few weeks. I learn a lot on these calls, and, in particular, what’s going on in the VC world as a whole.

I think what’s very clear on these calls is this: there’s no free lunch.

Some funds are pursuing high-volume seeding strategies and don’t reserve for follow-on rounds, which makes them vulnerable to re-caps. Others, like Kepha, invest in a few a year and reserve for future rounds per company but have to live with “fewer shots on goal”. Some VCs are comfortable with pre-product risk, which can be significant. Others want to wait for traction, and are OK with paying high prices to get in.

I think multiple strategies can work in VC.

For Kepha, we have a concentrated portfolio, which means if we don’t pick the right entrepreneurs and markets, we’re hosed. But, it means that we get to witness a company’s development from the beginning to liquidity, which is emotionally satisfying. And, we’re significant owners in those companies, which means that our funds can do quite well with more modest M&A events, and will absolutely do very well with a home run in each.

So, I guess that’s life. It’s all about trade-offs and being aware of them.

There’s no free lunch.

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