Navigating Year-End ⛵️
Shut your eyes, and imagine - you’ve closed your books, sent out year-end reports, filed taxes, and passed along K-1s. Now, open your eyes and breathe out. Congratulations 👏 you just made it through the annual ritual of balancing both your books and your sanity.
April showers have brought us a chance to reflect on what we’ve learned as we grow and continuously institutionalize. Here are the five things we will take with us next time around:
🥞 1: Prioritize
There is a ton to do at year-end. Here’s a great resource from Doug Dyer on all of the things you should be thinking about. However, for smaller teams primarily composed of investment professionals, the sheer volume of tasks can be overwhelming.
We found it helpful to schedule dedicated time to discuss each major area of responsibility, breaking it down into manageable chunks.
For example, setting up specific time blocks to chat valuations, budget, AGM, EoY Comms, and tax work. By doing so, we were able to tackle each task without feeling like we were constantly playing catch-up.
It's crucial to grasp the process and team duties, but also let each member focus on tasks matching their expertise. For instance, not everyone needs to prepare company updates or work with the fund admin. Clear roles help everyone play to their strengths.
📝 2: Plan your Comms
When it comes to LP Comms, we find it valuable to package updates together to make sure that our most valued partners are receiving as much as possible, but in a way that is actually consumable.
For us, this leads to the following structure:
🤝 3: Your Service Providers are Make or Break
While you might not fail due to a poor service provider, choosing the right one can significantly ease your life. For us, crucial year-end providers are our Fund Admin, Tax providers, and potentially an Audit provider for larger funds.
This was our first year using Carta, and we had a great year-end process with our team. Important caveat: we’ve heard varying feedback based on the team that you have, but can speak highly of ours. Some learnings:
- Let Fund Admin liaise with tax providers to avoid being the middleman.
- Maintain organized docs and data all year for a smooth year-end process, saving headaches during tax season.
- A detail-oriented Fund Admin helps tax providers work efficiently, speeding up tax prep. Our tax team is focused on meeting the March 15th K-1 deadline, so Carta made their lives easier.
- Different providers have varying fee structures. This seems obvious, but being an “emerging manager”, you will likely have lots of questions. Try to negotiate agreements that don’t charge per question.
💔 4: You will probably make mistakes
This newsletter is about being open and honest, so here goes.
We've certainly had our share of slip-ups, but we've embraced them as chances to learn and evolve. Thankfully, none of these missteps affected our LPs or portfolio companies; they just slowed us down a bit.
To help you avoid similar pitfalls, here's what we've gleaned from our experiences:
- Get familiar with your entity structure and tax setup. It may seem dull, but don't rely solely on tax advisors or lawyers for your firm's specifics. They're excellent guides, but it's ultimately your responsibility to ensure everything's accounted for.
- Touch base with vendors to confirm receipt and payment of all fiscal year invoices. No one cares more about your budget than you!
- Plan ahead by preparing portfolio company updates (excluding year-end financials), AGM slides, and end-of-year communications as early as possible. Aim to wrap up as much as possible before the holidays, allowing everyone to enjoy their well-deserved break and family time.
🧐 5: Evaluate and Look Ahead
With the work behind you, it's time to reflect on areas for improvement and potential enhancements. I put together a list of a few of the things we’ve thought about, but this will be different for everyone:
- How can we streamline reporting and data management to minimize errors?
- Are there tools to boost efficiency in processes like valuations, budgeting, or expenses?
- Is our communication cadence on point? Do we need more or less?
- Does our team / and vendor stack match the firm's trajectory, or are there areas to level up?
- Are we striking the right balance between short-term and long-term priorities?
A few of these are great topics to discuss at an Offsite (link to our post on the topic), but the point is to not move on to the next thing right away without reflecting and making tangible improvements.
Share in the comments what I missed or what you learned this season. If this resonated and/or you want to talk shop on how you are thinking about all of the above, shoot us a note ✉️.
🏗️ Firm Building Reads
Useful nuggets on firm building / VC we came across.
1. Lessons Learned from Building a Venture Firm
Reading Time: ~5mins
Eric Tarczynski, founder at Contrary, writes an honest thread on what he’s learned since 2017, including his thoughts on logo hunting, building a reputation, and the money behind it all.
2. How to Sell Your Startup
Reading Time: ~25mins
A playbook from First round on running an M&A process, that covers pricing, relationship building, and analyzing buyers can be read here.
3. Keeping Current with Generative AI
Reading Time: ~1min
As an early-stage firm builder, not only are you (likely) seeing 10+ Generative AI pitches a week, but you are also thinking about ways to implement the tools into your own processes. Here are a few resources that we found helpful in keeping us up-to-date:
Have other good resources? Share in the comments 🙏
🪴 For Your Founders
Useful resources we shared with our founders this month.
1. How to Announce Your Seed Funding
Reading Time: ~20mins
A thorough and well put together guide for announcing your early-stage funding written by some experts at Underscore, Upfront, Primary Ventures, NFX and Headline.
2. What Newsletters Should I Subscribe To?
Reading Time: ~2mins
Until next time 🧱,
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