You’ve heard me say before that VC is competitive.

Usually I’m talking about breaking into the industry.

But once you’re in?

That competition DOES NOT not let up.

Then it’s about competing to get your firm’s money into the best startups.

If you can do that …

… just maybe, you can keep your seat at the table.

How The Best Firms Compete (And Win)

We can take some cues on competition from one of the top firms in the world:

Bessemer Venture Partners

And specifically from the 19 investment memos they’ve published.

When I first started reading the memos, I wasn’t sure what to expect.

What I found? More often than not:

BVP needed to cajole, convince, and hustle to get the chance to invest in these breakout startups.

And I’m going to show you how.

But first, we should probably:

Look At The Numbers

Because AI isn’t that good just yet…

… I ended up manually creating a spreadsheet with data from the 19 memos.

And then I made this chart 👇

See, I wasn’t fibbing!

Over half the deals described in the memos had some kind of competitive dynamic involved.

What Does Competitive Actually Mean?

It’s important to understand how I categorized each deal as competitive or not.

Competitive Round == Memo mentions other venture firms having already offered term sheets, or interest from other venture firms is explicitly stated (including existing insiders wanting to lead)

Not Described As Competitive == The round may or may not have been competitive, but the memo didn’t hint either way.

I underlined “not described” because I wouldn’t be surprised if there were a memo or two:

Where there was some competition, but it was redacted for some reason.

That (if I’m right) would skew this data even more heavily towards “competitive”.

Now, I want to spend some time talking about:

The Enemy Within

When I was a wee post MBA VC:

I used to think inside rounds were done to keep weak startups afloat.

After all:

There must be something wrong with a startup …

… if they can’t get new investors to come into a round.

Wrongo.

As an operator, I’ve seen insiders across a couple of startups lead rounds.

Importantly:

Leading them out of greed … not fear.

Then cashing in big time at exit.

We see this inside round dynamic play out in Bessemer’s Velo3D Series A memo. (Click Here To Read The Full Velo3D Memo)

If you’re short on time, here’s the relevant blurb 👇🏻

(Make sure you ‘Load Images’ to view it)

Khosla. Lightspeed. Formation8.

All with seats at the table, from seed.

All with the best possible information.

All clamoring to write a big Series A check to a company that’s tracking up and to the right.

Yikes.

You almost have to laugh at any firm trying to get new money into a round like this one.

Well, any firm … except a firm like Bessemer.

They brought this one back home to Menlo Park, FTW.

In no small part due to some lobbying from a couple of BVP portfolio CEOs.

And an ex-Khosla, ex-Sequoia partner.

Now, Let’s Flip The Script:

The Velo3D Series A is a great example of how a VC firm sells itself.

Especially when they’re a tad late to the party.

But why be late … when you can be early?

That was the approach BVP seemed to have taken with their initial investment in Twilio.

(Click Here To Read The Twilio Memo)

BVP wasn’t quite ready to do a Series A in the company.

Unfortunately, another peer firm was circling and ready to lead the round.

So BVP convinced Twilio’s founder to re-open their seed round.

And for just $100k, bought a seat at the table.

So that they could be ready to offer a term sheet if Twilio hit some key milestones.

Did it actually work?

In the short term … maybe not.

You see:

USV ended up leading the Series A.

But if we look out further, that “maybe not” turns to:

Heck yeah.

You see:

BVP was able to invest in every single one of Twilio’s private funding rounds.

And that bought them close to a 30% stake by the time Twilio IPO’d.

~6 months after the Twilio IPO:

Twilio’s market cap was ~$2.5 billion.

Let’s see.

If BVP held and then dumped their entire position at that time:

You’re talking ~$750MM in returns for BVP and their LPs.

I know, I know.

It probably didn’t go down exactly that way in terms of when they sold.

But you catch my drift.

This turned out pretty well (understatement of the year) for them.

What else can we learn from the BVP memos?

As it turns out — a whole boatload.

And I’m excited to keep filling the boat up for you.

Stay tuned.

I’m going to keep digging in these memos for gems.