Discussion

Putting together pro-rata or opportunity funds is common, as is doing specific special purpose vehicles to invest in growth opportunities.

Inviting LPs into the GP commitment is a known practice in alternatives, less so in venture. This is called a Co-GP investment, and investors into the GP side are offered preferred economics relative to LPs, direct economics, or the same economics as GPs (they make money on other LPs.)

Tips and Tricks

• Include a requirement to have direct database access in your term sheets. Then, if you’re technical, you can run your own analytics in real time. (Social Capital Partnership)

• Make it a point to aggregate and normalize data across industries and share it back to your companies. (Social Capital Partnership)

• Do a portfolio review on a consistent basis. (Capital Invent, Emergence, SV Health Investors)

• Have a handout that goes out to everyone in the partner meeting that forecasts portfolio events over the next three months: financings, cash out dates, executive searches, other key milestones. (SV Health Investors)

• In high-risk deals, tranche out the investment and price the additional tranches based on hitting or missing certain milestones. (SV Health Investors)

• Create a structure and discipline around not putting good money in after bad. (KEF Holdings)

Tools of the Trade

Visible.VC
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Cobalt

TotemVC
http://totemvc.com/

Case Studies

Monashees on Building Your Own Portfolio Tracking Platform

Highlights

Highlighting SV Health Investors on Portfolio Review

For SV, the biannual portfolio review is an opportunity for all sectors (biotech, medtech, and healthcare IT/services) to present and receive updates on every company within the portfolio. Typically conducted in March and September, each sector team is responsible for completing a portfolio review package, which includes a two-pager for each company in the sector. The information captured in the two-pager includes an overview of the business, basic info such as headcount, website, and deal team, an assessment of management, three upcoming milestones, three major risks, and changes in the market in the last year. There is also information regarding exit planning and the board and a financial snapshot of the business.

In addition to the portfolio review package, each sector team is also responsible for a presentation that describes their views on portfolio status and construction, including how current investments align with the strategies/themes that have been shared with LPs, near-term distribution/liquidity opportunities, and deal pipeline activity. The SV team will typically meet for two hours per sector to review and discuss that sector’s portfolio. It is not only a valuable exercise for each sector to discuss and review its portfolio, but also a regular and structured mechanism which enables everyone in the firm to become current on the SV portfolio across all three sectors.