An Introduction to Yard Ventures

Frequently Asked Questions

FAQ

• Where is the transcript for this webinar?

  Speaker 1:
  Hello, everyone. On behalf of Yard Ventures, I’d like to welcome you to today’s introduction to our fund for Harvard alumni, friends, and community members. I’m Deborah Walden, the senior partner with the team. We’re excited to provide you with an overview of who we are, what we do, and how we do it.

  Next slide, please. Before we get started, let’s take care of disclosures and some housekeeping matters. We’re speaking today about venture investing and the Yard Ventures Fund and our views of the associated landscape. This presentation is for informational purposes only and is not an offer to buy or sell securities, which are only made pursuant to the formal offering documents for the fund.

  Next, please. Please review important disclosures in the materials we’ll provide following the webinar, which you can access at the link at the bottom of this slide: www.avg-funds.com/disclosures.

  And a reminder: you won’t be on camera and you will be muted throughout the entire presentation.

  We’re recording today’s webinar. Afterwards, we will be following up by email with the link to the slide deck and the recording of today’s presentation, as well as the link to the Yard Ventures Fund portal, where you can review additional fund materials and, when ready, begin the investment process. We’ll also post that link to our fund portal in the chat section later in the presentation.

  We will leave time for a Q&A session at the end. Please submit your questions anytime during the presentation using the questions section of your GoToWebinar control panel and click submit. We’ll do our best to answer all of your questions or follow up with you directly via email.

  Next slide, please. Let’s introduce you to the rest of the Yard Ventures team as I provide a quick overview of today’s agenda. If you click to the next slide, you’ll see we’re joined today by Michael Madden, founding managing partner of Yard Ventures and co-founder of Alumni Ventures. He’s a Harvard College and Stanford MBA alum with an extensive background in venture capital and private equity.

  Joining him in our Boston office is partner Ron Levin, an HBS alum who brings extensive experience both as an entrepreneur and investor to the team.

  New to the team is Grant, joining us in our New York office as senior associate. He’s also an HBS alum.

  Katherine Hooke Rhine is our investor relations manager who works closely with our investors during the closing and onboarding process and is a terrific resource.

  As I mentioned, I’m a senior partner, one of eight senior partners on our team. We are available to meet with any interested investors to answer any questions you may have about the fund. We all look forward to working with each of you to continue growing Yard Ventures.

  I’ll turn it over to Michael to share more about venture capital, the fund, and our unique network-powered approach to venture investing. Ron will then lead us through a Q&A session.

  Speaker 2:
  Thank you, and welcome, everyone, for coming. Usually once a year, around this time, we gather a couple of hundred people on a call like this—people who have let us know throughout the spring, summer, and fall that they’re interested in learning more about what we’re doing and about Yard Ventures and Alumni Ventures, and understanding how this all works.

  For efficiency, we usually do one of these webinars to introduce everything. We’ve got a couple of hundred people on the line. As Deb said, we’re all available—Ron, Katherine, Deb, myself—for follow-ups, one-on-ones, and information requests.

  To get started, just a couple of quick reminders: submit questions in the chat box; we’ll pause halfway through and again at the end. We’ll probably go for about 40 minutes. We know everyone’s busy and want to give you a concise primer.

  We’ll send a recording of this session and the materials either later tonight or early tomorrow morning to everyone here.

  To kick things off, I pulled up a slide we used to have buried in the back of the presentation showing Alumni Ventures and all of our different funds. I pulled it forward because it better tells the story.

  I’m a co-founder of Alumni Ventures. Back in 2014–2015, when we first started, it was a much smaller idea. The idea was that venture capital is really difficult to do by yourself. It’s an important asset class to have in your portfolio—for upside, diversification, and capturing gains while companies are still private—but it’s nearly impossible to do alone.

  As friends, classmates, and neighbors were getting together to invest, we thought: what if we could get a hundred Dartmouth alums and a hundred Harvard alums together? Could we all do better venture capital as a group than each one of us could individually?

  Could we pool the capital, network, connections, and value-add to help companies? Could we do it all better together than each of us alone?

  We built a prototype back then, and it’s been wildly successful. It’s grown to 18 alumni funds. Alumni Ventures is the parent company; we all work for Alumni Ventures. We’ve grown to about 150 employees, up from 5 in 2015.

  We’ve built venture capital portfolios and added them to personal wealth-building strategies for over 8,000–10,000 alumni.

  You can see the sample of schools here. We’ve got offices in Manchester, NH, Boston, Chicago, New York, soon-to-be two in the Bay Area, and Austin, TX.

  This smaller idea that started with a couple of schools has now been replicated. Each one we add strengthens all of us.

  We’ve grown to be the single most active venture capital firm in the entire country.

  Who do you have at your side?

  As you think about venture and your own personal situation, what we’ve built here is for individuals looking to add venture capital to their portfolios or build upon existing venture exposure.

  You’ve got a full-time team working on your behalf to screen hundreds of companies, lead 25–30 investments per year, monitor those companies, track progress, and increase ownership in the ones performing well using our reserves.

  In venture capital, it’s important to have a large portfolio—not to think you can pick winners at the early stage or put all your capital into one or two companies unless you’re actively involved.

  You need to think about a large venture portfolio: 30, 50, or 100 companies. How do you add that to an individual portfolio? That’s why we built what we did.

  Taking a step back: why did we build this? Why did we start Alumni Ventures?

  Our CEO, Mike Collins, often says: venture is a very important asset class. It drives much of the technology and innovation shaping the next 5–10 years.

  As an asset class, it has outperformed the S&P, real estate, and other classes across most cycles. Many people have public stocks, mutual funds, ETFs—but how do you access venture capital?

  We’ve tracked university endowments to see where they put their capital. You’ve probably seen headlines about Yale, Harvard, Stanford, and Penn endowments having unbelievable returns over the past 3–10 years.

  Looking at their capital allocation, public stocks have done well, but private investments make up the majority. Over time, the percentage allocated to venture has steadily increased for the past 15–20 years.

  We believe individuals should have the same access.

  We think it’s important to have a diversified portfolio. Many of us have friends or family who showed us one deal or access to a great early-stage team and product.

  Our approach, as you’ll hear when I lay out our portfolio, is to be across all sectors. Different sectors go through cycles and trends—we don’t try to pick what’s “hot” or getting attention in any particular year.

  We want exposure to software, artificial intelligence, big data, space technology, healthcare, quantum computing, consumer, B2B SaaS—across the board.

  Similarly, across stages: don’t picture this as a basket of 30 startups hoping one or two are wildly successful.

  We do a little bit at the seed stage. We do a lot of Series A, Series B, and some growth-stage investments—kind of a full spectrum of smaller, earlier, riskier bets with significant upside, as well as many investments in Series A and Series B companies. These are typically growing from $3 million to $10 million to $40 million in revenue, catching them on that accelerating revenue track where they have product-market fit and are really pouring gasoline on the fire.

  Because venture capital is a global practice, we want access to opportunities at different stages—some early, some growth, and some in-between. Similarly, in terms of geography, this is not a New England fund or a Silicon Valley fund. We really want to map the overall ecosystem and spread our portfolio across regions.

  Most of our investors have chosen to invest with us repeatedly over time. We don’t try to pick one specific year or vintage, or make bets based on whether we think things are undervalued or overvalued. Instead, we focus on building a portfolio over time. Many investors have been with us every single year since we started; they now own stakes in 125 companies and have already received proceeds from 12 or 13 exits. This creates a flywheel effect, where returns from prior vintages often help fund the next investment cycle.

  Part of our strategy—something I’ve kind of buried the lead on here—is summarized in the bottom right: Don’t invest by yourself, and don’t be the first check in. That’s not where we play. Our focus is on gaining access to really successful companies on strong growth trajectories that have already attracted institutional, established venture capital dollars.

  We are always a co-investor. We’re never the lead, never asking for a board seat. We follow top-tier lead investors who have significant track records over 20, 30, or 40 years. These firms write the largest checks, take board seats, and bring industry expertise. They’ve often done six to nine months of due diligence.

  Because of our relationships with founders and CEOs, we’re well-positioned to join rounds as co-investors. For example, if it’s a $20 million round, the lead might put in $15 million while we invest $500,000 or $1 million. Our goal is to be the most impactful, most helpful co-investor possible.

  We now have over 800 portfolio companies, making us the most active venture capital investor in the country. We’ve invested alongside many of the firms you’d recognize in the VC ecosystem.

   

  Here’s a quick snapshot of our portfolio. This isn’t every company—we’ve held back 12–15 that are still private and haven’t announced yet. But you can see our approach to venture is a volume game.

  This example shows 115 companies spanning early, growth, and later-stage investments. As I mentioned earlier, we think it’s important to have a large, diversified portfolio.

  People often ask me: How are things going? The answer is: it’s going really well.

  Here’s what our track record looks like from Fund I through Fund V.

  Another common question is: What should my expectations be? What is the lifecycle of my investment?

  Many people are used to checking their Fidelity or Schwab accounts and seeing 6% or 10% annual returns. Venture capital works differently.

  We invest in 25–30 companies per year. Ron, Grant, and I lead 15–18 of those investments, and we co-invest with sibling funds in another 12 or so deals. With 50–60 colleagues building relationships and sourcing deals, we collectively build a portfolio for you.

  When we invest, we record it at cost. For example, if we invest in a company this July at a $20 million valuation, we hold it at $20 million until the next financing round. If a year later they raise at $80 million, $150 million, or $400 million, we mark up the value accordingly.

  When one of our companies exits, we receive proceeds, divide them up, and send you a check. Over time, as companies grow, mature, and exit, we distribute returns to you.

  This chart shows what you can expect. Yard Fund V, which we’re currently building, is about 14–15 investments into what will ultimately be a 25–30 company portfolio. We’ll continue investing through Q4 and probably into Q1 to complete Fund V.

  The deadline for Yard Fund VI is Q1 2022. That’s when we need subscriptions and signatures to include you on the roster. Investments made this year in Fund V will be held at cost, just like investments from May and March. A year ago, we were building Fund IV; two years ago, Fund III; three years ago, Fund II.

  As you can see, the older the fund, the more activity there has been—more exits and more value creation.

  In Fund I, through good fortune, we had two $1 billion exits:

  • SimpliSafe, backed by Sequoia, started by an HBS husband-and-wife team in 2013, acquired by Hellman & Friedman for $1 billion.

  • Freshly, where we invested alongside Highland and Insight in an earlier round, acquired by Nestlé for $1.5 billion.

  As funds mature, you’ll see more exits and companies increasing in value. Of course, venture is a risky asset class—there will be failures. Out of 118 companies, we’ve had one complete write-off: Mic, a digital media company heavily reliant on Facebook and Google. When their strategies changed, Mic was impacted.

  One failure out of 118 is not bad, but there will certainly be more failures—and many more successes.

  We’re happy to send you the full roster of investments by vintage and year, along with overall returns for each fund across Yard Ventures and Alumni Ventures.

   

  Common Questions:

  • How does it work if I want to join for the first time?

  We’re currently closing Fund VI in Q1. Last month, we reached out to current investors who wanted to return. Previous investors have taken their seats in the next fund.

  We use October through December to introduce the fund to new investors, giving you time to research, perform due diligence, and speak with Deb or other colleagues before joining in Q1.

  Once you sign, we reserve your seat and spot in the fund. The capital can be transferred in November, December, or January, depending on what’s best for you.

  • Fee Structure:

  It’s a standard 2% annual management fee and an 80/20 profit split.

  For example, if you invest $100,000, we build a portfolio of 20–30 companies with $2,000–$4,000 allocated per position. Many investors put in $200,000–$400,000 for more meaningful exposure.

  As these companies grow, mature, and exit, we return 100% of proceeds until your full principal (e.g., $100,000) has been returned. After that, we split profits 80/20. If the fund returns 2x, 3x, or 4x, you receive your full capital first, then share in the profits.

  • Why not capital calls?

  When we started in 2014–2015, simplicity was important. With 9,000 investors worldwide, a single subscription agreement and one-time check is far simpler than quarterly capital calls and multiple checks over a year.

  • Investment vehicles:

  Many investors invest directly with cash. Others use LLCs, investment entities, or businesses they own. About 30–35% of investors use IRA retirement capital, which is a compelling method to participate in venture investing.

  It’s already set up for long-term wealth accumulation. It’s already designed for building strategies over five, ten, or fifteen years. Most people’s IRAs are heavily concentrated in the public markets. We work with a partner—you can work with any IRA provider that allows this. We have a couple of them, but one preferred partner we’ve worked with over the last three years.

  Happy to talk more about that—it’s a pretty simple and easy process. For most people, they see it as a diversification strategy. It’s taking capital already being put to work and moving it into a slightly different asset class for upside and diversification, instead of requiring new out-of-pocket capital. For us, it’s all the same—it just provides greater flexibility and options for our investors.

  As Deb said, here are the other seven colleagues who’ve joined. Deb, if you have any questions about this, if you want to better understand anything we do, I’m available. My eight colleagues here are available. Ron, Katherine—we’re all here at the end.

  Kevin, would you mind dropping the link to our investor portal into the chat? In the chat, you’ll find a link where you can review all the materials, prospectus, and offering documents. You can also start your investment process or reserve your spot while we discuss and share information.

  There’s functionality in there to book a call as well. You can grab half an hour or an hour with one of us to make sure we understand your goals and answer questions. When we started this back in 2014–2015, we realized one-on-one time is really important.

  We do these webinars once a year for efficiency, but it’s hard to replicate the experience of a personal conversation. We need to know you well enough to understand how we can help you if you’re interested in venture capital and to answer any top-of-mind questions. The one-to-many format here—where I can’t see or speak to you directly—is more challenging. So please, book a call with us anytime.

   

  One thing I want to mention: people often ask, Can I pick and choose my investments?

  What we’ve built here—the “main dish,” for lack of a better term—is the portfolio. If you want to be in venture or increase your venture exposure, joining Yard Ventures Fund VI is the place to start.

  Along the way, we share individual investment opportunities with you. We call them syndications. If one of our companies gives us an increased allocation—say we put in $800,000, but they give us $1.5 million—we take that extra allocation and send it out to you.

  It’s all managed on our investor portal. We notify you and give you a week or two to review. If it’s not for you, that’s fine—you’ll still have a small piece of that company in your portfolio.

  But if you really like it—maybe it’s an industry you know well, a stage you prefer, or a lead investor you trust—you can add an additional $10,000, $20,000, $50,000, or whatever amount you choose into that single company.

  With the base 25–30 company portfolio, this gives you the ability to size up certain opportunities. Many investors do this one, two, three, four, or five times a year.

  If you’re busy and just want the portfolio approach—great. We’ll keep building it for you. If you want to see 3–8 additional deals a year, you don’t have to do anything. We just send them out, and you can click yes or no—it’s purely optional.

  This came from our early days when investors said, “I love what you’re getting into. Next time you see a B2B SaaS company, AI company, or FinTech deal, I’d love to invest alongside you.”

  Doing that individually wasn’t scalable, so we built this program to share individual opportunities whenever possible.

  Here’s an example: Freshly, the $1.5 billion exit from Fund I, was also offered as a syndication. In Fund I, we had 19 companies in the portfolio, and Freshly was one of them. For those who also participated in the Freshly syndication, it returned the entire fund on its own.

  This is what we call the power law in venture: the top 1–5 investments in a fund typically drive 90% of the returns.

  An investor in Fund I who joined the Freshly syndication not only had their entire fund investment returned through distributions but also made 6–8x on the additional direct investment.

  People see this as a great benefit. It’s popular even for those who see 12 deals and say no to all of them.

  Let me pause for a minute. We have the link in the chat and are taking questions.

  I appreciate everyone’s time today. We’d love for you to join us. We’re actively building Fund V, excited to close Fund VI, and start building your portfolio in January.

  If you’d like to add or increase your venture capital exposure, we believe we’ve built a really attractive option.

  I’ll end with the same mantra we use internally: We’re all better together than any of us can be on our own.

  Thanks, everyone. Appreciate it. Have a good rest of your day and week.