How you can become a Venture Capitalist … without ANY money! 🤯
I sat down with Alex Pattis, the King of SPVs and the General Partner of Riverside Ventures, to break down a unique way to invest in your favorite private companies. A normal VC firm pools capital together to create a fund and invests out of that fund. The syndicate system invests in startups on a deal by deal basis! If any of that is confusing to you, and you want to start VC investing without any of your own money, make sure you listen to Ep 019 of “New to Venture”!
Key Takeaways:
- Provide value first. Try your best to be helpful! Don’t just say it, find ways to do it. Many VCs are ridiculed for saying “Let me know how I can be helpful” but never actually being helpful. Try to not be that person.
- VC funds follow a 2 and 20 structure, meaning that 2% of the fund is given to the firm every year to manage the money and after the firm returns the fund they get to keep 20% of the profits. An SPV structure is similar, but there are 2 main differences. For early stage investments, usually the management fees are nonexistent, a one time fee, or lower than 2%. Second, SPVs don’t have to return an entire fund's worth of capital before they see a dollar of profit, just the initial investment amount.
- Signaling plays a huge role in the world of syndicates. Since a syndicate lead has to raise money from LPs on every deal, good signaling (strong co-investors) garner more interest.
- When you’re young, you tend to be aggressive about helping with everything. Ultimately, that's a trap, be realistic with what you can actually provide and over deliver on that thing. Under promise and over deliver.
- Staying top of mind is difficult. Some best practices include grabbing in-person coffee, quarterly calls, and posting content. Building an online presence is an underutilized method to staying top of mind!
Timestamps:
(00:00) - Introductions!
(02:06) - Go Arizona Wildcats
(04:38) - Sending Cold Emails and Getting Started
(06:46) - Providing Value to VCs as a young VC
(07:56) - Which VCs to reach out to
(10:43) - Building a deal flow engine
(15:01) - Origins of Riverside Ventures
(17:09) - Institutional VC vs. Syndicate Lead
(20:05) - Alex’s Newsletter - Last Money In
(22:37) - Syndicate Structure
(27:32) - Signaling in SPVs
(32:52) - Chasing a Hot Deal
(37:20) - Staying Top of Mind
(40:27) - Most Helpful Investors by Category
(44:06) - Ceremonial Final Qs
