Scott Wolfgang

LP Tip #20 out of #50: To re-up or not to re-up A re-up refers to an LP making an additional investment in a fund where they previously invested. Before we dive in I want to share that there are reasons an LP may not to re-up which are not in your control. Here is a short list: ➡️ The LP may have evolved their strategy and needs to scale back the #️⃣ of funds they invested in.   ➡️ The LP was never set up to re-up in the first place. ➡️ The LP could be an individual that found themselves in a cash crunch and overly exposed to venture.  I'm assuming that when you got your investment that the LP explicitly told you they do re-ups. Please do not assume they do. My expectation is also that the LP dug in to properly underwrite the fund. 🏴 Re-ups are not automatic. An LP will have to re-underwrite each fund. The speed of the re-up also depends on how much work was done in the initial investment, who led the investment, level of confidence there existed when that investment was done, and current pipeline of funds. There are 4 flags that may cause an LP to walk away. 1️⃣ Partner Breakups/Changes and Team Turnover:  The biggest risk in Partnerships are whether the Partners will stay together. One LP gave me a framework on how to think through this issue that has stuck with me. Partnership is like a marriage. If one feels there is potential for a breakup, does one believe it will be an amicable breakup? Or, does one believe the spouses will never talk again? If it is an amicable split that is manageable. The Partners can find a way to support the fund. Then the question becomes whether the LP wants to back the Partner/s that remain.  If there is high team turnover. The LP will want to investigate because team stability is used as a proxy for firm sustainability and ability to scale. 2️⃣ Fund Does not Execute on what they Sold the LP:  The LP “bought” something specific and typically it is because they were missing this strategy or wanted exposure to a strategy for the portfolio they were constructing. An institutional LP will invest and write a detailed investment memo flagging all the things you said you were going to do and then go back and compare when you come back to ask for money. If for example you pitched a generalist seed stage fund and you show up asking for money sharing that you invested in deeptech at A that will cause alarm. The same can be said for the number of companies you promised to invest in or check sizes you wrote. If there are big differences LPs will want to know why. 3️⃣ Bad Actions  The fund manager/s does something that is unethical. This is a no go for an LP.  What if the situation is not clearcut? This is different for everyone and requires discussions b/w GP and LP, but most LPs don't want headline risk. 4️⃣ Continuous Underperformance  If it's early days an LP will look at some key indicators to see how you are progressing over time.

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Q3 is out and Q4 is in!  This is a great read about Base10's strategic switch showcasing how Carta is simplifying fund administration for emerging managers, which is especially important now rolling into the year-end busy season. 

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Forerunner Ventures just closed a $500M fund, doubling down on consumer tech at a time when many VCs have pulled back. With nearly $3B in historical AUM, FV recently led rounds into AI-driven startups like Daydream, Pie, and Mindtrip, Inc., building on their success with popular brands (and exited investments) such as Glossier, Inc. and Warby Parker and Dollar Shave Club. Kristen Green said it best: “Today’s consumers expect more—better quality, personalization, and smarter solutions." Are we on the verge of the next big wave in consumer tech? Let me know your thoughts. #Consumer #VentureCapital #AI #Startups #Innovation https://lnkd.in/g7Db7UhU

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"Small funds may have more incentive to produce higher returns The alignment of incentives between GP and LP varies drastically based on fund size. Managers of smaller funds who have invested substantial personal capital demonstrate an unwavering commitment to lucrative returns, while managers at the helm of colossal funds, buoyed by significant management fees, may exhibit a diminishing drive. This constitutes an almost incontrovertible structural benefit of managing a small VC fund. Furthermore, fund managers of established funds may, over time, raise larger subsequent funds and grow more risk averse. This can present a sub-optimal outcome for their LPs and, by virtue, manifests a bad omen for VC investing." https://lnkd.in/gHKgea4e

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Interesting data and good work from Carta in their inaugural VC fund performance report analyzing benchmarks for more than 1800 funds across six recent vintages - https://lnkd.in/e5R_dhXp Take a look at the pace of investments. As expected, capital deployment has slowed since the 2020 peak, with 2022 funds only using 43% of their capital after 24 months, down from 60% in 2020. This trend seems broadly consistent across private company and fund investing, with GPs and their LPs being more cautious and selective with capital allocation. Raising capital is tough today. Full stop. It's easy to focus on that, but I'd encourage us all to instead consider and focus on what is less talked about - that this cautious approach has created a large amount of available capital aka "dry powder," dedicated and ready to support special founders. The best founders are aware of private market dynamics, which impact the time needed to raise rounds and the milestones they must hit to successfully do that, but their primary focus is always the mission and the customers they serve. They are committed to building products to solve their customers' problems regardless of what us investors think. Building generational companies is never easy, but many have been and will continue to be built in tough markets. I try to take a similar approach in supporting founders. That doesn't mean ignoring market conditions, which can greatly impact my investment decisions and outcomes, but like focused founders, I know it makes more sense to dedicate my limited daily energy to what I can control. That means finding and supporting founders who are transforming or creating markets and doing everything I can to help them win, no matter what the market is doing. I hope to collaborate with many doing the same. Have a great week and see you out there! Note: These thoughts and opinions are solely mine and and mine alone. They do not reflect and are not associated with any company I am part of.

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The Information broke news that Insight Partners has just secured $10B in funding for their latest flagship fund. This is perfectly timed given their multiple $1B+ companies sold over the past week. This is a clear sight that #limitedpartners still have in their #privateallocations even during the current slow markets for #IPOs and #M&A. This would also appear to be good news for #AIfinancing and #SaaSFinancing. What do you think? #Management #VentureCapital #PrivateEquity #CapitalMarkets https://lnkd.in/gXu_s8Qj

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The largest acquisition in crypto history occurred just last month: Stripe's $1.1B deal for Bridge. This isn't just a headline—it's a signal of how payment rails are evolving at the intersection of crypto and traditional finance. This week at Lw3 in Dallas, I’ll be speaking on why this acquisition is more than a milestone—it's a glimpse of the future. Crypto-native payment rails are no longer a niche experiment; they’re becoming foundational to global commerce. At Reciprocal Ventures, we’ve been investing in the crypto payments ecosystem since the early days, partnering with pioneering companies like Coinflow Labs, Higlobe and True Markets. This space has been at the forefront of innovation, and we’ve seen firsthand how scalable, efficient, and transparent payment rails are reshaping the way value moves in a digital-first world. I’m excited to explore what this acquisition means for the growth of this ecosystem and why it's only the beginning of a broader wave of innovation and opportunity. If you’re at Lw3, come say hi. I'll be with Steven Feldman — we’d love to connect and share ideas.

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ŌURA closed a $200 Million Series D funding round, raising its valuation to $5.2 Billion. The round included participation from Fidelity Investments and Dexcom, which invested $75 million. Oura has sold over 2.5 million rings, with its member base and revenue doubling in the past year. In 2024, the company expanded to Amazon and Target and collaborated with the Naval Health Research Center, Air Force, and Defense Innovation Unit to deploy its smart rings for service members. Recent acquisitions include Sparta Science in October and Veri in September. For the latest secondary coverage and trading SaxonWeber | ShareWell #secondaries #saxonweber

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Regulatory Scrutiny in the Age of Neobanks: What You Need to Know About ILC Charters You’ve probably heard the buzz—Industrial Loan Company (ILC) charters are returning. And if you haven’t, it’s time to sit up and take notice. With the FDIC approving new ILC charters in 2024, this once-overlooked banking model is quickly becoming a hot topic. Everyone from fintechs to retail giants is eyeing the potential, but it’s not all smooth sailing. Why? Because regulators have their magnifying glasses out, and they’re watching closely. So, what’s the big deal with ILCs? Imagine you’re running a non-bank company but want to offer financial services without going all-in on a traditional banking license. That’s where the ILC comes in—it gives you the freedom to dip your toes in the banking world, minus the mountain of regulations. Sounds great, right? Well, it is… until the regulators step in. Here’s the reality: the FDIC’s approvals in 2024 are a game-changer, but with great opportunity comes even greater scrutiny. Regulators are laser-focused on bank-fintech partnerships, especially with neobanks shaking up the traditional finance space. They’re concerned about risks and how these partnerships might destabilize the financial system. And with more companies chasing an ILC charter, the pressure is on to get it right. Are you thinking about pursuing an ILC charter for your business? Here’s what you need to know before you dive in. First, it’s not an easy path. You must satisfy strict capital requirements, ensure solid governance, and put customer protection at the forefront. And regulators? They’ll be looking over your shoulder every step of the way. So, if you’re not ready to play by the rules, you could be in for some severe headaches—or worse, regulatory backlash. Bottom line: ILC charters offer massive potential for businesses wanting to offer financial services without becoming full-fledged banks. But don’t be fooled—it’s a delicate balance, and you’ll need to stay sharp on the regulatory front to avoid stumbling. Want to stay ahead of the curve and navigate these changes like a pro? Let’s talk about how to keep your business on track and in compliance. And if you’re ready to dive deeper into how banking licenses like these are reshaping the landscape, grab my book How Private Banking Licenses are Driving Exponential Growth for the full scoop on turning regulation into opportunity. Here is the link: https://lnkd.in/gnYYGTJD

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👏 It’s an exciting day for fintech! After more than a decade in the making, the CFPB published its final 1033 rule, which protects consumer financial data access. I spent years negotiating Plaid's first data access agreements with banks; limited regulatory guidance made this exceptionally challenging. Here is a quick recap on what happened, and - most importantly - what it means for fintech founders. ❓ What is 1033? 1033 is a section of Dodd Frank that states that a bank must make a consumer’s financial information (including txn detail) available to them in a portable format. Its critical to the functioning of fintechs and the millions of consumers they service. 🗞️ What happened today? The CFPB issued a FINAL Rulemaking for Dodd Frank Section 1033, which provides eagerly awaited details on exactly HOW banks, aggregators, and fintechs are expected to work together to make data available to consumers (data fields, format, fee structure, governance etc.). The timeline for compliance ranges from April 1, 2026, to April 1, 2030 depending on institution size​​. 👉 What does this mean for fintech founders?  👍 No additional bank fees - Several large banks have threatened to charge for data access - which would almost inevitably be passed on to the fintech customers of aggregators. The proposed rule prohibits this, which is a win for fintechs. (The downside of this is that aggregators still need to align incentives with banks in the absence of fees…) 👍 No technical standards - The rule is not prescriptive with regards to how the APIs are constructed, but does encourage standardization. This is good for fintechs because it allows the market to drive the solution and encourages more innovation on the aggregator side. We expect this to result in better data access for fintechs. Additionally, the emphasis on standardization will make it easier to retrieve and use consumer data across different financial institutions. 🚩 New Responsibilities - The proposed rule does impose some responsibilities on fintechs - notably, to disclose how the data is used, only use data for the consented use case, honor customer deletion requests, and to refrain from selling consumer data. Fintechs - even young ones - should start thinking now about how to comply and to consider these requirements in future product rollouts. Many of these terms are already included in aggregators' terms of use.  Additionally, all data access must be through APIs; screenscraping is prohibited. 👎 No protections for brokerage & payroll data access - While the rule explicitly covers bank accounts (deposit, credit, debit, prepaid), it’s silent on brokerage account & payroll data access, which is non-ideal for any fintechs accessing these categories of data today. Shameless VC plug: If you're an early stage fintech founder building something cool + world positive, let's chat at M2020! cc: Obvious Ventures

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Markets talk. We listen. We've from heard from capital allocators (#VC, #PrivateEquity, #FamilyOffices....even #VentureStudios, #Incubators and #Accelerators) that due diligence is a bottleneck to deal flow. It's time-consuming, expensive and often, subjective. We've launched #VentureIQ by the 9point8 Collective to directly address this problem. VentureIQ is an AI-enabled diligence solution that provides rapid scale diligence reports with exceptional fidelity and demonstrable cost efficiency - all within a single business day. We're in our soft launch, now. So, if you want to gain back valuable time and expose the long tail of deal flow diligence, shoot me a DM or visit VentureIQ.ai.

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Grim news from Forbes last week. #Point72 Ventures (run by famous billionaire, Steve Cohen) has laid off their fintech team in an attempt to #pivot away from crypto and shift into more of a focus investing in #AI and defense technology startups. Five #investors, and a few rumored partners of the company including are also rumored to separate from Point72 as well. The initial wave of fintech #startups were intended to disrupt the old school banking system and allow modern technology to thrive. Now that AI is an #industry wide trendsetter, Point72 are making a dire mistake of using it as a replacement for human input and perspective instead of a supplement. Hopefully this won’t set a precedent for future companies to get rid of their fintech experts and #investors who use their skills to great success.

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Honored to have moderated a panel on the “Future of TV: The Great Unbundling + Rebundling” at PrivTech Invest NYC, hosted by our firm, Grit Capital Partners! Joined by industry leaders Peter Naylor, Jonathan Carson (Antenna, the leading analytics provider), + Jason Cohen (MyBundle), we explored the rapidly changing streaming landscape. Key insights: Consumer Shift: Over 50M U.S. households have cut the cord, putting consumers in control, driving demand for simpler, more tailored streaming options. Retention & Churn: With churn rates averaging 37% annually, streaming platforms are focusing on personalization, ad tiers, + exclusive content to retain viewers. Broadband & Bundling: Broadband providers are moving from TV to fiber (Fiber adoption is up 10% YoY), creating new ways to bundle streaming + broadband services to reduce churn + simplify billing  AI & Personalization: 75% of streamers say AI-powered recommendations improve their viewing experience. Thank you to our panelists for joining us to discuss these trends + the opportunities ahead. New era for TV 🚀 #Streaming #Partnerships #Innovation #CustomerExperience #Customerfirst #bundling #ai

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I see a lot of people wishing or working to bring ICOs back. But Initial Coin Offerings, as we've known them in 2017 / 2018, when projects raised funds directly from retail using immediately liquid tokens (or quasi), are never coming back. The problem with ICOs is an incentive alignment problem. Let me explain 👇 A/ If tokens are tradeable from day 1, then nobody is aligned on long-term value creation: it's a get-rich-quick scheme, and you get thousands of scammers to launch ICOs to speculators. From the investor perspective, your token is nothing more than a memecoin. There is 0 incentive to build anything long-term in that scenario. Note also that this ICO model can only exist in the non-security world. The only projects that did ICOs and are still here today are only here because their founders were missionaries who needed no incentives: they were here to create something in the world they deeply believe in vs getting rich. Founders like that exist: Vitalik Buterin (Ethereum), Martin Koppelmann (Gnosis), Stani Kulechov (Lend / Aave), Kain Warwick (Synthetix), Luis Cuende (Aragon)... are the first ones that come to mind, but they are the exception, not the rule. B/ If tokens are not tradeable from day 1, then you have better alignment in future value creation, but now you need to find investors that believe in your project long-term and are willing to wait (wait = risk + opportunity cost). Naturally, those investors will also ask for some level of investor protection, given the risk they take. In that scenario, you'll find fewer investors and want fewer investors because you don't want to give governance rights to people you don't know. In summary: In the non-equity assets world, pump dot fun has created the ultimate ICO platform. It solves the ICO incentive alignment issue by treating everyone as a trader/speculator. If you're a founder, you can try to build something long-term with a token you launched on Pump Dot Fun... but you have little financial incentive. At best, you bought a ton of your tokens at launch, and you sold high enough to now self-fund your project, but you're now facing a choice with this newfound money: eat glass and stare at the abyss for the next 5 years or.... go enjoy your money and your micro CT influencer status from the beach. Tough... In the equity world, ICOs (as people know them, where retail can broadly participate to fund a project) will *never* come back. Don't get me started on scammy crowdfunding platforms (that's for another post). The only ICO model that works is called the IPO. We can (and should) make IPOs more accessible to more companies, that would be an excellent thing for the economy (and I would love to see it happen). But, as of now, IPOs are for $10B companies growing 30% YoY, so it will take a long time and lots of regulatory work & political will to make IPOs accessible to early-stage companies. 

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Congratulations to Abnormal Security on raising a $250M Series D financing at a $5.1B valuation, led by Wellington Management. We at Greylock are proud to be investing in Abnormal for the fifth time since Evan Reiser, Sanjay Jeyakumar and team started Abnormal in Greylock's offices. Abnormal's built the world's first AI-native cybersecurity platform that leverages AI to protect organizations most important vulnerability: humans and human behavior. Abnormal is also announcing today that they have crossed $200M ARR with 100% YoY revenue growth and is now used to secure nearly 20% of the Fortune 500. An important milestone as Abnormal advances its mission to protect humans using AI. CC: Asheem Chandna, Venky Ganesan, Stephen Ward, Rob Mazzoni https://lnkd.in/g4G4PRf9

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Juniper Square recently released their look back at the state of venture in Q2 2024, and the data is interesting. 👉 The liquidity drought continues to stifle fundraising, with $37.4B committed to 255 funds YTD. 👉 In the current climate, established managers are securing 77% of fund value YTD, the highest concentration in the last decade.  👉 Over 63% of capital raised in 2024 so far is in funds of $500M+, the second-highest percentage in the last decade. 👉 Q2 reflects an uptick in US venture deal momentum, with quarterly deal count climbing to the highest level since Q2 2022. 👉 Q2 data shows a third consecutive upward quarter in both exit value and the total number of exits.  👉 Q2 hit a 9-quarter high in total number of exits, and the total exit value recorded was the second-best quarter since Q1 2022. The data shows that the landscape is especially competitive for emerging managers. When it comes to generating returns though, a fresh perspective can help find the most interesting deals. I wrote a bit about this last week, if you’re curious to dig into stats on unicorns at the seed stage, and the funds they’re raising from. You can check out the full report from Juniper Square here: https://lnkd.in/eN6VnY-k #emergingmanagers #stateofvc

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IMBs had to be pleased with the Q3 profit increase of $701/in pre-tax profit per origination - a huge swing from the reported loss of $1,972 per loan in Q123. With the Mortgage Bankers Association predicting a 28% increase in production for 2025, my question is, are companies in position to manage the increase?   #actionableintelligence #growthmultiplier

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The “long-term hold” strategy is one that has received an increasing amount of attention within the #ETA ecosystem of late: Instead of selling a company within 5-7 years of acquiring it, why might you choose to hold it for a much longer period of time? Why not hold it indefinitely?   To unpack the long-term hold thesis, I could think of no guest more appropriate than Zac Carman: Zac acquired ConsumerAffairs.com in 2010, and has been its CEO for the past 14 years. In our discussion today, among many other things, we unpack Zac’s long-term-hold strategy and discuss the extent to which it was deliberate or emergent, how he has managed liquidity requirements for both himself and his investors, the commercial and personal reasons why a long-term hold strategy makes sense for him, and if he thinks it makes sense for an entrepreneur to target a long-term hold strategy before acquiring their first company.   Please enjoy! https://lnkd.in/gZujiyxD

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