Creating a new venture fund: formation, follow-on strategies & more with Acquired | E1258

Episode Summary

Executive Summary: In this crossover episode of This Week in Startups with the Acquired podcast, Jason Calacanis interviews Ben Gilbert and David Rosenthal about David's new micro fund, Kindergarten Ventures. They discuss venture capital strategies including syndicates, SPVs, pro rata rights, and the importance of ownership percentages. The conversation also features a debate on top VC firms historically, with Jason criticizing Andreessen Horowitz while praising Sequoia and Benchmark. The episode teases a future Mount Rushmore of VCs discussion.

Main Topics: David Rosenthal's Kindergarten Ventures Fund (Priority: 5/5): David announces his new micro fund, Kindergarten Ventures, with a $2-3 million target, no management fees, and plans for 20-40 investments of $100k each. The fund leverages his podcast network for deal flow. Venture Capital Strategies: Pro Rata, SPVs, and Syndicates (Priority: 5/5): Jason and David debate the importance of pro rata rights, follow-on investments, and using SPVs to scale. Jason shares his experience with AngelList syndicates and the Calm investment. Comparison of Top VC Firms (Priority: 4/5): The group compares Sequoia, Benchmark, Andreessen Horowitz, and Union Square Ventures. Jason criticizes Andreessen Horowitz for poor founder treatment and lower returns relative to Sequoia and Benchmark. The Role of Media and Podcasting in Venture Capital (Priority: 4/5): Jason explains how his podcast generates deal flow and provides leverage. He discusses using the podcast to feature portfolio companies and the importance of media for brand building. Ownership Percentage and Riding Winners (Priority: 4/5): Jason emphasizes the importance of owning 5-15% of winners and holding shares long-term. He cites Calm and Robinhood as examples of riding winners for outsized returns. Teaser for Mount Rushmore of VCs Episode (Priority: 3/5): The episode ends with a teaser for a future discussion on the Mount Rushmore of venture capitalists, with criteria including founder perspective, LP returns, and building a dream team.

Key Arguments: David argues that a no-fee micro fund is viable when combined with other income sources like a podcast, and that small checks can still generate significant returns through syndication. Jason argues that pro rata rights are critical for maintaining ownership in winners, and that syndicates and SPVs allow solo GPs to deploy capital at scale without institutional LP constraints. Jason criticizes Andreessen Horowitz for poor founder treatment and lower returns compared to Sequoia and Benchmark, citing their marketing-heavy approach as a distraction. The group agrees that Sequoia and Benchmark are the top firms historically, with Benchmark's fund 11 achieving 25x cash-on-cash, while Andreessen Horowitz's returns are more modest at 3-4x. Jason advocates for using information advantages from portfolio updates to make unsolicited follow-on offers, similar to Sequoia's approach with WhatsApp.

Data Points: Kindergarten Ventures fund size: $2-3 million - David's micro fund targets 20-40 investments of $100k each. Jason's syndicate members: 8,300 - Jason's AngelList syndicate has grown from 800 to 8,300 members. Calm investment return: $2 billion+ - Jason's $50k fund investment and $328k syndicate investment in Calm returned over $2 billion, the largest return in AngelList history. Benchmark fund 11 return: 25x cash-on-cash - Benchmark's fund 11 achieved 25x returns, making it one of the best venture funds ever. Andreessen Horowitz capital raised: $19 billion - Andreessen Horowitz has raised nearly $19 billion across multiple funds. Andreessen Horowitz estimated returns: $25 billion from $8 billion - From their first $8 billion raised, they have returned at least $25 billion, with potential for $10-20 billion more. Jason's first fund return: 100x - Jason's first fund deployed $650k and returned $110 million, a 100x multiple.

Pivotal Quotes: "The last two double-ups in this game are so material." — Jason Calacanis: Jason emphasizes the importance of holding winners long-term, citing the mistake of selling Apple early. "You cannot trade on insider information in public markets. And that's all we trade on in private markets." — Jason Calacanis: Jason explains the information advantage in private markets, using portfolio updates to make informed follow-on investments. "If you're going to come at the king, you best not miss." — Jason Calacanis: Jason references the line from The Wire to describe Andreessen Horowitz's attempt to challenge Sequoia, implying they missed.

Implications: The episode highlights the democratization of venture capital through syndicates and micro funds, enabling solo GPs to compete with traditional firms. It underscores the importance of ownership concentration and media leverage for deal flow. The debate on top VC firms suggests that performance and founder treatment matter more than marketing.