Mastering Fund Cycles: How VCs Raise, Invest & Exit

Win $2,000 in credits with the Day One Network — take our 2-minute audience survey before 30 June: dayone.fm/surveyEpisode Summary:In this episode of First Cheque, hosts Cheryl and Maxine dive deep into the complexities of fund cycles, providing invaluable insights for emerging fund managers and entrepreneurs alike. They discuss the key aspects of raising and deploying funds, including the significance of understanding the timing and structure of fund cycles. Cheryl emphasises the importance of recognising that announcements of fundraising often indicate the beginning of the fundraising process rather than immediate capital deployment.Maxine elaborates on the differences in fund management strategies, particularly in Australia, where choices about fund structures, like ESVCLP (Early Stage Venture Capital Limited Partnership), can influence tax benefits and administrative requirements. The hosts also touch on the challenges faced by fund managers, such as the necessity to maintain liquidity and the common practice of deploying smaller checks to riskier companies at the start of a fund’s lifecycle, while gradually shifting to larger, safer investments as the fund matures.Throughout the conversation, they highlight the importance of planning for exits, the dynamics of raising subsequent funds, and the need for flexibility, especially within micro funds. They conclude by encouraging fund managers to be diligent in their planning to ensure success and sustainability in their investment journeys. This episode serves as a comprehensive guide for anyone looking to navigate the intricate world of venture capital and fund management.Time Stamps:00:00 – Introduction: Why fund cycles matter for investors & founders01:21 – Who this episode is for: Emerging fund managers & startup founders03:23 – Understanding fund cycles: Raising, deploying, and exiting05:48 – The reality of raising a fund: Why it takes 12-24 months to close09:35 – Deployment periods: How VCs decide when and where to invest12:34 – The risk of running out of money—how fund managers avoid this mistake16:57 – Fund sizes & check sizes: Why $50M is a magic number in VC21:09 – Micro VCs vs. bigger funds: How different strategies impact returns25:14 – Opportunity funds: When fund managers double down on winners30:08 – The importance of liquidity planning and secondaries in VC37:17 – Exits: How and when fund managers start planning for returns43:59 – Final thoughts: The key takeaways from this episodeResources Mentioned- Angel Academy – The most comprehensive angel investing course for Australia & NZ: www.venture.academy- Aussie Angels – Cheryl’s platform for angel investing https://www.aussieangels.com/- Co-Ventures – Maxine’s venture capital firm https://www.coventures.vc/- ESVCLP (Early Stage Venture Capital Limited Partnership) – How tax benefits impact Australian VC funds- AFR & Startup Daily – Understanding VC funding announcements in the media- Adverb Ventures (April Underwood) – Case study on fast fund cycles- Australian Super Funds & VC – Why institutional capital is hard to secure- Venture Fund Deployment Data (US vs. Australia) – Insights on how quickly funds deploy capital- Fund Liquidity & Secondaries – How fund managers plan exits when IPOs & M&A slow downSponsors:First Cheque is supported by our wonderful sponsors:Deel: Founders scale faster on Deel. Set up payroll for any country in minutes, hire anyone anywhere, and get visas handled fast, so you stay focused on scaling. Deel takes care of onboarding, HR, IT, EOR, benefits, and compliance, so your team can grow without borders.It’s why more than 40,000 fast-growing companies trust Deel to move fast.Visit https://www.deel.com/dayone___Pear Tree: Pear Tree helps Australian and New Zealand founders build high-performing offshore teams without the agency middleman.As local hiring becomes more expensive and harder to fill, many operators are turning to offshore talent across engineering, development, marketing, accounting and operations at a fraction of local salary costs.The offshore horror stories you hear usually aren’t a talent problem. They’re the result of outsourcing agencies that overcharge clients while underpaying staff. Pear Tree takes a different approach through a direct, transparent model where your team is paid fairly, fully compliant, and focused entirely on your business.As part of the Day One community, you’ll receive a free team audit to identify where offshore talent could move the needle in your business, plus 20% off your first hire. Learn more at http://dayone.fm/peartreeFirst Cheque is part of Day One.Day One helps founders and startup operators make better business decisions more often. To learn more, join our newsletter to be notified of new First Cheque episodes and upcoming shows.Mentioned in this episode:Deel x PX_Script 1This podcast uses the following third-party services for analysis: Podtrac - https://analytics.podtrac.com/privacy-policy-gdrpSpotify Ad Analytics - https://www.spotify.com/us/legal/ad-analytics-privacy-policy/