No one has done more to shed light on the VC game than Fred Wilson He has written over 1000 posts in the last 20 years on his blog avc.com. Any question about VC, whether it’s the math, chemistry, or psychology, has been answered there. These posts are so comprehensive that they could form several volumes of a VC bible. ‘AVC for Kids’ consists of answers from avc.com, tailored for a young person’s questions

1. mtrajan.com
By Thiyagarajan M (Rajan), Upekkha

2. AVC
for kids?
Voyage for riches, glory & impact
Resources
VC
Founder
mtrajan.com

3. My nephew one day walked up to me and said
he would like to become a VC. As kids grow up,
they start conversations about careers, and
one such conversation with his friends
probably triggered this. He thinks it's an easy
way to make money and therefore a good
career choice. This led to a long conversation
about what a VC does.
Upekkha, the accelerator that I run, has an
equity business model (‘VC business model,')
however it uses a different approach from
the typical early-stage VC commonly referred
to as VC. I began explaining one question after
another.
Everything I know about VC, I learned from AVC.com,
which I have been reading since 2003. Although I have
never met Fred Wilson, the VC who writes this blog, he
has been an invaluable mentor from afar. Fred is
arguably one of the best VCs of our generation; his
returns speak for themselves.
There is more than one path to success in VC, and
Fred himself would not prescribe his approach to
everyone. Understanding how Fred has walked this
path, which is meticulously captured in his blog, will
help anyone looking to get into VC.
I combined my notes from avc.com and my
conversations with my nephew into 'AVC for Kids'.
I hope it's as fun for you as it was for me making it!
@mtrajan
mtrajan.com

4. The VC Game
To win in this
Wooing world-class founders
Key choices you must make
Qualities of a good VC
Mistakes to avoid
What keeps VCs up at night
Myths that don’t matter
Dilemmas you fight
Index
1
2
3
4
5
6
7
8
9
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5. The VC Game
It is only a dark
side for those who
don’t understand it
1
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6. VC looks easy but is actually tough
Many think that being a VC
is the easiest way to
make money while feeling
important.
Involves more luck than many other
careers.
9 of 10 going into it lose
mtrajan.com

7. Yikes! VC is a ’get rich slow’ business
It takes at least 12 years. By year 4
you know your stride. In year 7, you
get your first report card.
12 year 4 year
1st confidence
1st report card
Rich or not?
12 year 7 year 4 year
mtrajan.com

8. VC aka GP LP
4 year
7
year
12
year
GP keeps 2% fees
for operation
across 12 years
1 founder makes
crazy profits
Founder Makes VC rich
LP
Keeps 20%
Gets 80%
founder
founder
The Colorful, Gritty Journey of
making money in VC involves a lot
of time, people, and money, laced
with surprises, thrills & anguish
VC aka GP
mtrajan.com

9. who can multiply money by
spotting a diamond in the coal
before anyone else can
VC is like a wizard in plain
clothes
mtrajan.com

10. VC is a ‘hits driven’ business like music, movies and
celebrities. One makes it like a bandit
The Winner has the lion share of the
profits.
In Hollywood, every year 100s try, yet
there’s only one Tom Cruise.
Maths folks call this as the power law
mtrajan.com

11. Output
Inputs, outputs and outcomes are loosely related but it’s a
foolish thought to look for a reverse path formula
Input - Crayon
Winning Painting - Outcome
Input - Canvas
Output - Painting
founder
VC
mtrajan.com

12. VC is like a gardener With giant patience
VC is like a gardener who finds lots
of little seeds, i.e., small companies.
They use their money like water
and sunshine to help the seeds
grow. Some seeds might quickly
become beautiful flowers, while
others may take a long time to grow
into big sequoia trees.
Sequoia Tree
sequoia
tree
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13. Trend
Spotting
P
e
o
p
l
e
S
k
i
l
l
s
Conviction Leadership
Intellectual
HOnesty
Adaptability
Contrary to
popular belief,
Instead, you need to
build muscle in
You don’t need
business operator
experience.
mtrajan.com

14. VC is an experienced person’s game.
best learned through apprenticeship
You have to pay the ‘life tuition’,
no scholarship possible here.
Work under an VC with at least
a decade of experience, find
someone who is four years
ahead to be a mentor
GURU
mtrajan.com

15. Good business
investment
means getting
back 5 times or
more
VC is like a baseball game with 3 type of strikes
Somes
businesses can
last a long time
but grow slowly.
Most businesses runs
out of money and
has to either sell
everything they have
or close down.
It's tough but important for VCs to care about all their investments.
1 out of 3 1 out of 10 > 1 out of 2
mtrajan.com

16. VC is a grand
slam business,
anything lesser is
waste
Grand slam is a baseball term. In the world
of cricket, this equates to not just hitting a
boundary but scoring six sixes in an over.
mtrajan.com

17. VC is like a poker
game(1/5)
First 18 months of investing in a
new business, it's like getting to
see your playing cards; you
learn a lot about your team, the
market, and your competition
mtrajan.com

18. VC is like a poker
game(2/5)
Then, you decide if you want to
keep playing (invest more
money) for another year or so,
which usually costs more.
This is where Pro Rata helps.
mtrajan.com

19. VC is like a poker
game(3/5)
If you don't like how things are
looking, such as with your team
or how you're doing against
competitors, you might stop and
save your money for another
business.
mtrajan.com
mtrajan.com

20. VC is like a poker
game(4/5)
Quitting isn't easy in this
business; sometimes, you can
sell the business, but other
times you have to shut it down
completely.
mtrajan.com

21. VC is like a poker
game(5/5)
If things are going well and your
'hand' is getting stronger, you
might choose to invest more
money
mtrajan.com

22. To win in this game
Attract Greatest
founders
Win the deal to work
with them
Support Founders (Build
Reputation)
Pick the best
2
mtrajan.com

23. In VC, stage is
the strategy
Pick one stage and
stick with it.
Pre Seed Seed Series A Series B Series C
Leads to specialization and
improves the odds of success
mtrajan.com

24. Build your brand; it is the secret ingredient
prescribed in ancient VC success scrolls
1) How are you remembered ?
2)Trust, why others should believe you?
When you have a point of view aka ‘thesis’ and say
it repeatedly you get remembered by that. Your
words and consistency of action determine how
others trust you.
Building a brand is like becoming a
superhero. It has two parts.
mtrajan.com

25. Nothing great ever happens without crashes
Learn about how tech goes through cycles to time your investments
Degree of diffusion
Of technology potential
Magic Crash & Recovery
Big Craze Real Big Craze
Turning
Point
Disruption
Magic
Frenzy
Maturity
Aunt Carlota
Perez explains
tech cycles.
Study it
Time
mtrajan.com

26. Rising tides lift
all boats
When making an investment ask
‘what is the tide you are riding ?’
Being too early or too late is no
different from being wrong
mtrajan.com

27. Three things you must have in your investment
1st is Liquidation Preference
Investment means Money
Given
Right to liquidation
preference.
The one who has
liquidation preference
gets their money first
when the investment is
returned
Always negotiate the
right to it.
Liquidation means Money
Returned
Liq Pref No Liq Pref
First
$6
Proportion
Split
Proportion
Split only
Proportion Split
Also
mtrajan.com

28. Have the right to do pro-rata
investment. The term is from
latin, it means in proportion of.
Right to invest to maintain
same proportion as before
Three things you must have in
your investment
2nd is Pro Rata
mtrajan.com

29. Always negotiate a board seat
(or be a board observer or
have information rights)
Three things you must have in your
investment
3rd is Board Seat
mtrajan.com

30. Care for the
founder like a parent.
mtrajan.com

31. Wooing world-
class founders
3
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32. Build a personal
connection.
Good chemistry is
important.
mtrajan.com

33. Money alone is
not enough to win
Remember, not
having a
brand hurts
mtrajan.com

34. Roll sleeves, help
founders with their hiring
and strategy
Use their product
and share inputs
Only then your existing founders will refer
mtrajan.com

35. Give them a list of founders
to talk to, not just reference
Ask them to get
feedback on you
Make offer in person,
not in a term sheet
When making an
offer, make it
special
mtrajan.com

36. Key choices
you must
make
4
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37. Keep the size of fund small, no more than $150m
mtrajan.com

38. Investment Pacing
Don’t over commit or
under commit
Under committing
Over committing
You will miss too much or have
an imbalance
mtrajan.com

39. Keep portfolio size
7-10 per year
For effective service & support to
founders
mtrajan.com

40. Double Dip
Sell a portion of your
ownership when possible
Do follow-on in subsequent next rounds
Have your cake
and eat it too
mtrajan.com

41. Qualities of a good
VC
5
mtrajan.com

42. Promise less than what you can deliver,
deliver more than what you promise
Promise less than
you can deliver
Deliver more than
you can promise
mtrajan.com

43. It is better to have conviction and be
wrong than to have doubts and be right
Conviction is courage of walking alone
mtrajan.com

44. Be a passionate cheerleader
for your companies
Wear them on your
sleeves
mtrajan.com

45. Mistakes
to avoid
6
mtrajan.com

46. Don’t take credit for
building the business,
founder built it
Take credit for finding
them
mtrajan.com

47. Don’t invest in
competing business
It is like putting kids
against each other for love
status
mtrajan.com

48. Don’t treat the struggling
investments as noise
Love your unwell startups. Don’t
orphan them. Work hard to get them
an outcome.
x No
Yes
mtrajan.com

49. Never back a
team without a
CEO
No cricket team can win
without a captain
Yes
No
mtrajan.com

50. Never do a deal without pro-rata
x x
No Yes
NO pro rata is the best way to lose in VC
mtrajan.com

51. Don’t think of your
investments as a play
It makes you forget that
your founders are your
customers
mtrajan.com

52. Don’t pump
money in to
hot sector
Even if you find a winner,
too much competition
erodes profits
mtrajan.com

53. Don’t do me too
investing
Lemming like behavior has
killed many investors
mtrajan.com

54. Size is the
enemy of returns.
Don’t become
very large
sized fund
x
Large fund
x
Optimal fund
mtrajan.com

55. Don’t worry about sunk costs
You lose only 1x of your
investments
mtrajan.com

56. Don’t be transactional, this is a
relationship business
It is a long game, trust is key to winning
mtrajan.com

57. Price matters but don’t optimize for it
Other terms matter as much as price
mtrajan.com

58. Stay away from
Government VC or
Corporate VC
partners
Misaligned Incentives -
They want different things, not
returns
mtrajan.com

59. What keeps VCs up
at night
7

60. Money frozen for very
long in an investment
is bad for business
mtrajan.com

61. Too much money in VC ecosystem creates competition
Turns the game negative sum
mtrajan.com

62. Fear of missing out the next Google, Facebook
One wrong miss could mean death for the VC firm
mtrajan.com

63. Myths that don’t matter
In Out
Not worth
the effort
8
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64. Age of a founder when deciding to back
Young and old have built great businesses
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65. School the founder attended when
deciding to back them
Yale
Oxford
Cambridge
Princeton
Harvard
Grit and growth mindset is far more important
mtrajan.com

66. Moneyball
VC is not about data
You are investing in
people and idea market
and then refining your
views based on
experience
mtrajan.com

67. Social Proof does not
help. Ignore What other
VCs think
Look for your thesis match
instead of ‘who else is in’
mtrajan.com

68. Dilemmas
9
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69. Have strong conviction but also have adaptability
Strong opinions, weakly held
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70. Be transparent to establish trust
Use information asymmetry to advantage
For reputation and for leverage
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71. It is not a conflict of interest.
Rather, it's a case of 'no conflict, no interest’
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72. Failed investments
produce no financial
returns but builds almost
all the reputation
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73. Thank you
mtrajan.com