VC terms you need to know

When it comes to a full equity round using convertible preferred stock, the majority of U.S.-based venture capital funds historically have used a standard term sheet model developed over a number of years by all of their law firms working together under the coordination of the National Venture Capital Association. This term sheet, known as the NVCA

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But I thought a better way of thinking about how we manage our portfolios is to think about it as a funnel. If we do 36–40 deals in a Seed Fund, somewhere between 25–40% would likely see big up-rounds within the first 12–24 months. This translates to about 12–15 investments.

This blogpost explores venture portfolio construction and the various trade off implications a GP must consider and enables you to construct your own portfolio to understand how various assumptions impact returns to LPs and GPs.