Investing Notes From The Upfront Summit (2016)

At the start of 2015, I was lucky to head down to LA for The Upfront Summit. It was a blast, so I was excited for this year’s event, and 2016 was even better. I just got back to The Valley last night after two days in Hollywood, and I wanted to share my big, key takeaways from the event from an investing POV (note, there’s tons of stuff which happened which won’t be listed here — also, as the videos of these interviews get posted, I’ll update them here):

The LP Mood
One of the things which makes Upfront Summit unique is the community of institutional LPs who come to LA for the event. There are a bunch I already know, and then always a chance to meet new ones. They’re all very nice and likely much more open in this setting, and of course, hounded by GPs eager to update or pitch. While I cannot reveal any specifics some of the LPs mentioned on stage at the event (those sessions were off-the-record), I will try to synthesize the larger themes from all of these discussions:

1/ LPs seem to remain very committed to VC category
2/ LPs are currently active in re-upping in existing funds and finding new fund opportunities, though many have remarked to me they want to see Q1 unfold to get a better sense of how the year may look
3/ LPs view microVC (sub $100m) as a morass and many expect consolidation (firms buying firms, or withering)
4/ LPs concerned about generational transition at the established funds

So, while VCs may slow down (and that’s probably a good thing), the folks who back VCs are playing a longer game and see opportunity in the market and with new funds.

The Troy Carter Interview

I have read many pieces on Carter and certainly heard a lot about him and his career (he’s a legend), but I’ve never seen him interviewed 1:1 and talking about his career and how he broke into investing. It was personally the highlight for me. I can’t wait to watch the interview again. He’s a fantastic storyteller and is so clear and forceful when he speaks. It’s really a story of how he was able to identify, align with, coach, and promote talent, and along the way, it turns out he’s pretty damn talented himself. No wasted words. No wavering. No ego. (Perhaps I’ll update this more once the video is up, my write-up won’t do it justice but also it’s also best enjoyed as a primary source.)

UPDATE: I just listened to the video again and would highlight one thing about what Troy said — he and his firm are focused as investors (consumer products, networks, technologies) and thematically view the world as a place which is undergoing massive demographic shifts, which can be seen in shifts in political ideologies around the world and which can manifest themselves in new behaviors and products, whether from the U.S. or from overseas. Often when I hear an investor talking about a theme, he or she can only go so deep — when you hear Carter talk about this theme, you can almost sense he feels it in a way that most people simply won’t be able to until it’s too late.

The Fred Wilson Interview

As a venture nerd and someone who reads both Dan Primack’s Term Sheet and Fred Wilson’s AVC blog every single day, this interview was the highlight for me. Dan is simply the single best person to interview a pro VC. And, I’ve probably watched or read every single interview Fred has given over the last eight years. I have never seen one like this. You have to watch the interview (when it’s up), and there were many things covered, but what was unusual about this interview is Fred said some things that VCs often say privately amongst each other but never in public, and that’s what makes it so good. Here are my big takeaways:

1/ On Dearth Of IPOs: Many VCs have been public about wanting CEOs to go for IPO sooner and not clog up private markets. Fred came right out shouting “Man up! Woman up!” You don’t often hear this kind of candor as for years many VCs have been cautious about been seen as pushy. The last few years has felt like VC is a helicopter parent for portfolios, swooping in to rescue teams in times of duress but never willing to publicly shine a light when things have gone too far out of control.

2/ On VCs Taking Money Off The Table: If a VC has a chance to take money off the table (and many do), it’s not often reported because the larger VC doesn’t want to disrupt the vibe at the company and among other investors. Fred just readily admitted that being creative about liquidity opportunities is part of USV’s philosophy. He also cited the reality that despite what LPs or the public thinks, VCs have very little control over when liquidity opportunities come their way — so when they do, they should be taken seriously.

3/ On Generational Change At VC Firms: Fred admitted USV is thinking about this issue, and remarked on other firms he felt did a good job of this and some he didn’t. The main message he sent was that many of the larger funds should make sure the older guard steps back from the carry a bit to attract new investing blood. That’s one of many strong reasons why so many people are spinning out, raising separate funds, or not going down traditional VC path at all. For firms that get generational change right, the networks and brand can persist and create opportunity for new types of GPs to get added to the fold.

4/ On Founder Responsibility: This is the part where Fred jumped out of his seat. Primack asked a question about something, and Fred turned to him yelling “If you take money from me, you have a responsibility to return that money. You can’t just say ‘Fuck you.'” Whoa. OK. The issue here is that there’s been so much money in venture and such a hype cycle, many VCs are afraid to have more confrontational debates like this with their founders because they’d be concerned their reputation and deal flow would get hit. (I’ve written about that particular interplay between governance and deal flow, see here.) Fred may have been involved in a situation where a company he’s backed doesn’t want to exit. That’s happening more and more, and after a while, some people aren’t going to like it.

Haystack is written by Semil Shah, and is published under a Creative Commons BY-NC-SA license. Copyright © 2016 Semil Shah.

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