Deep Dive
What is Deciens' investment philosophy and how does it differ from traditional venture capital?
Deciens focuses on concentrated, bold, and partnership-driven investments, primarily leading financing deals in early-stage fintech startups. Unlike traditional VCs, Deciens emphasizes deep involvement with each portfolio company, aiming to act as a 'third co-founder' to founders. The firm critiques average venture capital returns, which often fail to return capital, and advocates for non-orthodox strategies to achieve exceptional outcomes. Deciens prioritizes alignment with entrepreneurs and LPs, valuing long-term relationships over diversification.
Why does Dan Kimerling believe that courage is essential for venture capital success?
Dan Kimerling argues that achieving greatness in venture capital requires personal courage and boldness, not group consensus. He criticizes momentum investing, where VCs chase trendy deals for social validation, and instead advocates for investing in non-consensus deals with a robust framework. Courage allows VCs to defy orthodoxy, take risks, and support transformative entrepreneurs, which is crucial for generating exceptional returns and meaningful impact.
What is Deciens' approach to portfolio concentration and why does it matter?
Deciens maintains a highly concentrated portfolio, typically investing in 10-15 deals per fund. This approach allows the firm to deeply engage with each company, acting as a true partner to founders. By focusing on fewer deals, Deciens can allocate follow-on capital with precision, avoid principal-agent problems, and provide meaningful support to entrepreneurs. This contrasts with diversified portfolios, where VCs often lack the bandwidth to build strong relationships or gain deep insights into their investments.
How does Deciens align its incentives with entrepreneurs and LPs?
Deciens aligns its incentives by prioritizing long-term partnerships and emotional commitment over transactional interactions. The firm ensures that entrepreneurs and LPs feel deeply connected to its success. For example, all LPs have direct access to Dan Kimerling, fostering a sense of partnership and transparency. This alignment is reinforced by Deciens' concentrated portfolio, which ensures that each deal's success is critical to the firm's overall performance.
What is Dan Kimerling's perspective on the role of venture capitalists in supporting entrepreneurs?
Dan Kimerling believes that venture capitalists should act as genuine partners to entrepreneurs, providing more than just capital. He emphasizes the importance of emotional and relational support, as entrepreneurship is often a lonely journey. Deciens' approach involves being deeply involved in the companies it invests in, helping founders navigate challenges and avoid pitfalls. This partnership-driven model contrasts with transactional VC relationships, where investors are less engaged.
What is Deciens' strategy for avoiding existential funding risk in its portfolio companies?
Deciens encourages its portfolio companies to grow quickly without relying on subsequent funding rounds, thereby avoiding existential funding risk. The firm advises startups to optimize for self-sufficiency and avoid scenarios where they are forced to convince other VCs to invest. This approach reduces dependency on external validation and ensures that companies remain financeable even in unfavorable market conditions.
How does Deciens identify and invest in non-consensus deals?
Deciens uses a proprietary framework to assess the antecedents of greatness in startups, allowing it to invest in non-consensus deals without relying on social validation. The firm looks for founders and ideas that defy conventional wisdom but have the potential to create transformative impact. This approach enables Deciens to identify opportunities that other VCs overlook, positioning it to achieve outsized returns by being correct in its contrarian bets.
What is Dan Kimerling's view on the current state of venture capital incentives?
Dan Kimerling criticizes the current venture capital model, where fund managers are paid primarily through management fees rather than performance-based carry. He advocates for aligning incentives by introducing hurdle rates or budget-based compensation, ensuring that VCs are rewarded for delivering exceptional returns. This shift would create tighter alignment between entrepreneurs, LPs, and general partners, fostering a more value-driven approach to venture capital.
Why does Dan Kimerling believe that diversification reduces upside potential in venture capital?
Dan Kimerling argues that diversification, while minimizing downside risk, significantly reduces upside potential in venture capital. By spreading investments across many companies, VCs dilute their ability to deeply engage with and support each portfolio company. This lack of focus prevents them from identifying and nurturing truly transformative opportunities, ultimately limiting the potential for exceptional returns.
What role does community involvement play in Dan Kimerling's life?
Dan Kimerling and his wife are deeply involved in philanthropic efforts in Albuquerque, particularly through the Albuquerque Community Foundation. They support local nonprofit organizations and initiatives, reflecting their commitment to giving back to the community. Kimerling encourages others to engage with community foundations, which play a vital role in addressing local needs and fostering social impact.
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