Event Structure and Timeframe

One hour, split into 4 - 15 mins discussions.

1: What is venture capital??

Kind of like…a poker game (Vatsalya himself actually won the poker competition at Chicago Tech Week!)

Most of your bets don’t hit, and usually one or two of your bets return all of your other bets
In venture, we call this the “Power Law”. It’s a statistical observation that illustrates a single investment yields returns larger than all other investments combined, often by orders of magnitude.
It’s important to distinguish here that this power law only really applies to early stage (pre-seed, seed, Series A) due to lower cost-basis, much higher IRR potential; at the growth stage (series C,D+) return looks a lot more like log normal.

Think about opportunity cost

Invest and company fails - lose 1x your money; not invest and company becomes a unicorn - lose >10, 20, 30x your money.

But you can’t invest in every single company… how do you pick and choose?

Business/idea itself is often pivoted. So do you look at talent? Technological moat? Unique connections?

What’s special about investing in seed stage compared to later-stage venture?

Notoriously hard to pick because no concrete signal of what the final form of the company is going to be; hard to project 3 years from now, let alone 10-15 years.
Average graduation rates for Seed→Series A: 20-30%, A→B: 60%, B→C : 60%, C→D: 60%, then become unicorn in either D, E, or F.
- Let’s do some math: you invest in 100 companies, and 30% of them raise a series A (30), then 60% of them raise a B (18), and so on. In the end, you may have 2-3 bets that actually become unicorns (2-3% rate). But if you can dramatically raise that Seed→A rate, then you have much better chances of achieving better IRR (80-90% gave NY’s Primary Venture Partners a 3X return ).
Seed gives you much lower cost-basis (later rounds can go up 3, 5, 7X in price); some bigger growth stage funds have started to invest in seed-stage that are essentially optionality bets, but they don’t usually work out because they don’t care about the seed→A stage graduation rate.

Soma’s strategy

Be founders’ Chief of Staff: bringing the most impact for founders at the earliest stage to focus on seed to A graduation rate.
Get founders unique connections across industries, hustle for what founders need.