Homebrew’s Second Annual LP Meeting: Why We Do Them

Last week Homebrew held its second annual LP meeting, coinciding with our second anniversary as a fund. The agenda was very similar to 2014’s, which I discussed last year inthis post. Now that we’re another 365 days in, thought I’d add (a) what’s different about a Year Two annual mtg vs Year One and (b) why we think annual meetings are valuable to Homebrew.

What’s Different in Year Two

  • Follow-On Decisions Become Part of Agenda: Since a fund in Year Two is still in value creation, not harvest, mode, the trajectories of Year One investments is often more illuminating than recently funded ventures. We’ve had two second seeds, 5+ Series A and one Series B from the investments we made during the fund’s first 12 mths. Given round sizes and our average ownership of ~10%, we can very quickly end up with several million dollars invested into a single company. Satya and I discussed how we help companies fundraise and our thinking in maintaining ownership vs buying up vs taking dilution.
  • Bringing New LPs Up to Speed: Since we raised our second fund earlier this year, you can think of this as our first board meeting with our new investors. They all became quite familiar with Homebrew during their diligence process but post-close is when we actually start to work together and bring them into our community. After spending the time with them last week, we’re even more thrilled by the expanded group.
  • Comparing Notes About Market Trends: Although Homebrew is still young we’ve definitely seen some changes in the seed stage ecosystem since we started in early 2013. We ran through five “headlines” about the state of venture capital and articulated which we thought impacted our strategy. The in smaller discussion of our advisory board, got their feedback about what we were overemphasizing or underestimating as impacting our model. Homebrew has a 20 year roadmap to be the type of venture fund Satya and I would have wanted to take money from. That means we raise what we need to fund our strategy, not more than that.

Why We Have Annual Meetings

Annual Meetings or similar events are pretty common in the VC industry. Amongst seed funds they’re slightly more rare — sometimes VCs will do small dinners with their investor — but we’ve always thought a somewhat traditional structure was worthwhile, with a few of our own touches. Why?

1) Gets All Three Sides of Our Triangle Together: It’s our chance to bring our LPs, advisors and founders together with us. We invite several of the founder teams to present at the LP meeting discussion and all of our founders and advisors to a dinner. Chance to build our culture and give all of the people we depend upon, a look into our community. It also gives us another annual milestone to take stock, given that fund cycles themselves are generally long.

2) Makes Us Smarter: We learn from the questions and conversations with our LPs. Satya and I have always raised for Homebrew as if we were raising for a company: who are the people we want around the table to give us help, advice and enthusiasm. Yes, it’s a business relationship at start, one where we need to live up to our end of expectations, but we hope to have many years getting to know these institutions.

3) Founders Should See How VC Works: If you ever take money from venture capitalists to fund your company, you should know how VC works. To know how VC works, you should know about the capital behind your venture capitalists. Firstly because it will give insight into how your VC backers work. Second because increasingly these institutional LPs are interesting in going direct in startups later rounds. We’re happy to invite our founders behind the VC curtain so they can understand every part of our operations.

While it takes meaningful time to prepare for an Annual Meeting (and about 12 hours of sleep once done), they’re worth it for Homebrew.

Written by

You’ll find me @homebrew , Seed Stage Venture Fund w @satyap . Previously made products at YouTube, Google & SecondLife. Married to @cbarlerin .

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