LFP171 – The Past, Present and Future of Venture Capital w/Josh Bell Dawn Capital

Venture Capital is nigh-on essential for many ambitious, big-build, fast-scaling Fintechs and Techs in general. Fund raising is essential. Thus how the VC market is evolving is of the utmost importance to ambitious firms and founders.

In this episode Josh Bell one of the founding partners of leading London-based European-wide VCs Dawn Capital who have raised over a billion to invest in growing businesses joins us to look back, look around now and look into the future. How can you best raise funds? Plenty of learn…

Topics discussed include:

  • sitting in an office :-O
  • Airbnb’s flotation and sudden rise to being worth over $100bn
  • Y combinator’s 100,000x return on a ten year investment :-O
  • discussing major turning points in history from railways to tech – what are the characteristics of such
  • how long will mega-opportunities continue?
  • “software today is a trillion dollar opportunity”
  • tech companies are “hoovering-up” what was previously done offline
  • Josh’s career journey
  • founding Dawn with two partners in 2007
  • the importance of specialising in VCdom to become a good VC
  • experience leads to better ability to spot the patterns inherent in what works
  • when Dawn were founded 13yrs ago there was 1/30th of the amount of capital going thru VCs in Europe as there is today…
  • US firms now coming to Europe looking for opportunities and co-investing – again a very different world from just over a decade ago
  • the importance of pattern matching in FS/business in general
  • the most important VC in the world is the Welsh-by-origin Sir Michael Moritz Chairman of Sequoia – a huge portfolio of investing in and being on major firm’s Boards
  • VC evolution in the 20thC – Bessemer the first VC fund over a century ago
  • the importance of the silicon and then dot com boom in accelerating growth of Venture Capital
  • the importance of money rolling over from one success to be re-invested in the industry
  • the 21stC evolution of European VC making huge strides to follow-along the US trajectory from a decade or two earlier
  • VCs connecting supply and demand for a particular type of capital
  • Dawn has to cap the size of the funds they raise – a nice problem to have but one essential to do in order to be able to find enough excellent investment opportunities in order to keep returns high
  • the industry as a whole performs poorly – the power law in performance and potential shakeout
  • within VCs the power-law applies – a few investments deliver most of the returns; ditto in the industry a few companies lead to most of the industry’s returns
  • the virtuous circle and vicious circle within VC and how the survival of the fittest works
  • the best proof of Dawn’s added-value above and beyond the capital provided is by referring to founders who have worked with Dawn in the past
  • topology of the VC market – three dimensions
    • cheque size of investments eg seed cheque $1,2,3,4m all the way to big growth cheques $50,60,70-100+m (Dawn starts at around $10m and goes up to $100m)
    • y-axis – degree of specialisation – eg generalist at C stage to specialist funds (Dawn – enterprise software
    • geographical coverage (Dawn across Europe)
  • best way to get traction with a VC firm? “Try and find the warm intro – the cold email rarely works”
  • match your need with the VC forms in that space in the 3D map
  • the future of VC and major trends
    • speciation of funds
    • keeping firms in the stable longer even after IPO
    • platform support – case study of Dawn’s Director of Talent who works with portfolio companies to help them build their C-suite
    • “flywheel of talent” – co-investment by successful founders spinning round again co-invest themselves where their prior firm was a great success
  • Dawnw’s specialised focus within FS/Fintech area of enterprise software for large corporates

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