Mark Suster is an American entrepreneur and venture capitalist. He is a managing partner at Upfront Ventures, the largest venture capital firm in Los Angeles and a prominent blogger in the startup venture capital world.
Explore the highlights and key takeaways below.
Insights for Startup Technology Investors
- Identifying future market value: Investors must have a strong understanding of where technology markets are heading and where value will be created and sustained.
- Market timing: Being too early or too late can lead to missed opportunities or backing an "also ran."
- Picking the right team: Even if the market and timing are perfect, investors can still miss out on successful startups if they don't choose the right team.
Portfolio Construction and Shots on Goal
At Upfront Ventures, Suster's firm, they focus on "shots on goal" as a way to approach portfolio construction. Some key aspects of their strategy include:
- Investing in 36-38 Series Seed/Series A companies per fund, with median first checks of $3.5 million.
- Diversifying across various sectors: cyber-security, FinTech, computer vision, marketplaces, video games & gaming infrastructure, marketing automation, applied biology & healthcare systems, sustainability, and eCommerce.
- Including a mix of "wild, ambitious plans" and emerging models in existing sectors.
The Unpredictability of Outcomes
Despite the best-laid plans, predicting which startups will drive fund returns can be challenging. Suster shares several examples where outcomes greatly differed from initial expectations, highlighting the importance of hard work, perseverance, and a bit of luck in startup success.
Diversified Portfolio for Different Investment Strategies
The number of deals in a portfolio depends on an investor's strategy. Seed funds with smaller ownership stakes and no board seats may have 50, 100, or even 200 investments. Later-stage funds with less upside but lower loss ratios might have only 8-12 investments. Angel investors should carefully consider their risk tolerance and plan their investments accordingly.
Upfront Ventures' "Shots on Goal" Strategy
Based on 25 years of experience, Upfront Ventures focuses on the following principles:
- Taking board seats and acting as company-builders rather than just stock pickers.
- Limiting the number of deals to maintain a concentrated portfolio and seek larger ownership stakes.
- Acknowledging that 6 or 7 deals typically drive 80+% of returns, while the remaining deals account for less than 20% of all returns.
Ultimately, having multiple "shots on goal" is crucial for finding the few deals that generate significant returns, which is why Upfront Ventures' strategy emphasizes diversification and a long-term perspective.
You can read the full article here: https://bothsidesofthetable.com/on-funding-shots-on-goal-ad2eb69e8ba3