Kate Mitchell Co-Founder & Partner, Scale Venture Partners

1. How To Get Started In VC
(On & Off Sand Hill Road)
Kate Mitchell, Scale Venture Partners, @KateDMitchell
PreMoney SF 2015 Investment Conference

2. 2Kate Mitchell @KateDMitchell
Why Are We Talking About This?
• Venture Returns Not Entirely Persistent
• LP Interested In “Next Generation” Managers
Q: How Reduce Risk Of Investing In New Managers?
A: Get Educated On How To Reduce That Risk

3. 3
Are You Ready To
Invest in Venture Capital?

4. 4Kate Mitchell @KateDMitchell
Are You Right For It?
Do You Have Relevant Skills
From The Venture Ecosystem?
?

5. 5Kate Mitchell @KateDMitchell
What Are The Relevant Skills?

6. 6Kate Mitchell @KateDMitchell
What Are The Relevant Skills?
Journalism…?
An Exceptional Exception

7. 7Kate Mitchell @KateDMitchell
Technical/Startup Skills
More Common…
& More Predicative
of VC Success

8. 8Kate Mitchell @KateDMitchell
Why Skills Matters to LPs
Relevant Experience Provides
Context …
Improving Probability of SuccessA:

9. 9Kate Mitchell @KateDMitchell
Is It Right For You?
• Player vs. Coach?
Entrepreneurs Are “In the Game”

10. 10Kate Mitchell @KateDMitchell
Is It Right For You?
• Are You A Player or A Coach?
• VCs Role is “NIFO” (Nose In/Fingers Out)

11. 11Kate Mitchell @KateDMitchell
Is The Model Right For You?
Invest Personal Savings & Sweat Up Front
Co-Invest Alongside LP Partners

12. 12Kate Mitchell @KateDMitchell
Is The Model Right For You?
Repay All Called Capital First (Including Fees)
Before the “Equity” or Carry Benefit Begins

13. 13
Investing in Venture Capital -
What Is It?

14. 14Kate Mitchell @KateDMitchell
Venture Invests In New, Unproven Ideas

15. 15Kate Mitchell @KateDMitchell
This Is The Alchemy…
Ideas + Capital = Growth

16. 16Kate Mitchell @KateDMitchell
VC Serves Entrepreneurs & Investors
CEO  Venture  Investor

17. 17Kate Mitchell @KateDMitchell
VC Serves Entrepreneurs & Investors
CEO  Conduit  Investor

18. 18
How Does Your Fund Fit Into An
Investor’s Portfolio?

19. 19Kate Mitchell @KateDMitchell
Understand Your Customer
• Mission
• Appetite
• Investing “Map”

20. 20Kate Mitchell @KateDMitchell
Source: Hewitt EnnisKnupp, An Aon Company Global Invested Capital Market June 2014,
Public Equity
36%
Fixed Income
43%
Cash & Other
6%
Alternatives
15%
• Concentration In
Liquid Assets
• Alternatives For
Return
$101.1 Trillion INVESTED CAPITAL
Alternatives Are Small Part Of Portfolios

21. 21Kate Mitchell @KateDMitchell
Source: Hewitt EnnisKnupp, An Aon Company Global Invested Capital Market June 2014,
Private RE
Debt
38%
Private RE
Equity
30%
Hedge Funds
16%
Private Equity
15%
• PE is 2% of Total
Invested Capital
• Endowment
Model Is 7%
$15 Trillion INVESTED CAPITAL IN ALTERNATIVE ASSETS
PE Is Small Part Of Alternatives

22. 22Kate Mitchell @KateDMitchell
Source: Hewitt EnnisKnupp, An Aon Company Global Invested Capital Market June 2014,
Buyouts
53%
Growth,
Mezzanine &
Distressed
22%
Other
10%
Venture
15%
• VC Is 0.3% of
Invested Capital
• Illiquid, Long Term
• Providing Needed
Return
$2.5 Trillion INVESTED CAPITAL IN PRIVATE EQUITY
Venture Is Small Part Of Private Equity

23. 23Kate Mitchell @KateDMitchell
Cambridge Venture Return vs. Russell 2000 Return
Source: Cambridge Associates, U.S. Venture Capital Index, September 30, 2014
As of September 30, 2014
1 Year 5 Year 10 Year 20 Year
Cambridge
Venture
Russell 2000
24.5%
14.9%
10.0%
34.1%
3.9%
14.3%
8.2% 9.0%
Venture Cyclical But Outperforms Over Time

24. 24Kate Mitchell @KateDMitchell
Fear of Reentry At Wrong Time In Cycle
-20%
0%
20%
40%
60%
80%
100%
120%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1985 1990 1995 2000 2005 2010
US Venture % of GDP Vintage Year Pooled Return
Venture Returns & Capital as % of GDP
Source: Thomson Reuters/National Venture Capital Association/Cambridge Associates

25. 25Kate Mitchell @KateDMitchell
Returns Are Widely Disbursed In Venture
Pitchbook, 2Q 2015 VC PE Report
Top Quartile
Second Quartile
Third Quartile
Bottom Quartile

26. 26
How To Get Started In Venture:
Define Your Strategy

27. 27Kate Mitchell @KateDMitchell
Know What Venture “Product” You Are Selling?
• Develop Tech
• Product/market fit
• Sales & marketing execution
• Management team build out
• Financial risk
• Market Conditions
LATE: VALUATION
RISK
MID: SCALING RISKEARLY BINARY RISK
Understand
• Risk Profile
• Return Expectations
(Multiple & IRR)
• Expected Liquidity
• Passive vs. Active
Role

28. 28Kate Mitchell @KateDMitchell
Be Willing To Stand Out From The Crowd
Why? LPs Want Portfolio Diversification

29. 29Kate Mitchell @KateDMitchell
Are You Doing What You Do Best?
• Avoid Being A Lemming
• Follow What You Know

30. 30Kate Mitchell @KateDMitchell
Know What Makes Your Fund Unique
• Deal Flow
• Geography
• Sector Focus
• Partner Expertise
• Team
Composition

31. 31
How To Get Started In Venture:
Execution Matters

32. 32Kate Mitchell @KateDMitchell
It Is All About The People
• Individual & Team Experience
– Individual Skills
– Complementary Skills
• Relationship
– Experience As A Team
– Individual vs. Team Sport

33. 33Kate Mitchell @KateDMitchell
Take The Limited Out Of The Term “LP”
LPs Invest In 10+ year Blind Pool
• Based on Trust In You
• & Your Honest Relationship With Them

34. 34Kate Mitchell @KateDMitchell
Do Your Fundraising Homework
• Get The Best Advisors
• Get Tough Feedback/Market Test
• Invest In Materials/Data
• Governance Matters
• Do Homework on LPs

35. 35Kate Mitchell @KateDMitchell
On & Off Sand Hill Road
You Can Get Started
In Venture Capital

36. How To Get Started In VC
(On & Off Sand Hill Road)
Kate Mitchell, Scale Venture Partners, @KateDMitchell
PreMoney SF 2015 Investment Conference