Sid Tiwari

I’ve spoken to over 2 dozen MDs at PE firms I can confidently say that the arb of figuring out how to implement Vertical AI at portfolio companies is very real right now It will fundamentally change underwriting for those who can do it predictably and unlock generational returns. Most are aware they need to act. Very few have.

453

64 Comments

Most private equity firms hire operators post-acquisition and give them "equity." But it's usually not real equity. It's phantom equity, options with impossible vesting schedules, or profits interests that only pay out if the fund hits a certain IRR. The economic reality is that the operator is an employee with upside optionality, not an owner. That misalignment creates problems. When the operator doesn't have meaningful skin in the game, their incentives diverge from investors. They optimize for salary and bonus, not long-term value creation. And when the business hits challenges, they're more likely to leave than fight through it. Our model is different. The operator receives a percentage carry at close. Day one, before the business generates a dollar of profit. That's real ownership. If the business delivers a set net IRR, the operator earns an additional carry. At the top end, they own a healthy percentage of the total upside. This isn't a "nice job" bonus. It's generational wealth creation tied directly to investor returns. That alignment changes everything about how operators run the business. They're not thinking about their next job. They're thinking about how to drive EBITDA growth, improve margins, and position the company for a premium exit. When investors win, operators win in actual dollars that hit their bank account. Most PE firms talk about alignment. We've structured it into the cap table and waterfall mechanics in a way that makes it impossible to misalign. ✍️ If you are an accredited investor and actively investing in the lower-middle market... Every week, I breakdown what's actually happening in operator-led buyouts and lower-middle-market M&A. Subscribe to "Operator-Led" (link on my profile).

76

21 Comments

I started my venture career as an associate a long time ago. After observing many firms do this for nearly 20 years I can say with confidence that most venture firms have absolutely no idea how to hire associates. It's not just that they're bad at it — they fundamentally misunderstand what the role should be in the first place. My thoughts in my latest post. https://lnkd.in/gqbai6Bz

445

42 Comments

💡Emerging GP Fundraising Insight #8: Rolling Closes Keep You Moving Small funds can't always afford to sit still until the target is hit. Rolling closes let you start deploying earlier, build a track record, and show momentum to prospective LPs. One GP told me that for Fund I ($5M target), he took capital as it came, signed, wired, and got to work. It wasn't perfect, but it kept the lights on and the deals moving. Sometimes the "sign and wire as it comes" approach is the only way to get moving. Takeaway: Momentum is a fundraising asset and rolling closes can help you keep it. Has anyone here used rolling closes as a strategic advantage?

29

13 Comments

Following on from Packy McCormick's post on the growth in VC-backed exit values over the last 20 years, we did our own deep dive into the Pitchbook data. We looked at US VC-backed exits from 2005-2024 (with an exit value of at least $10k) and broke things down into five year periods. Some key takeaways: * Nobody is getting rich from the median exit. For the whole 20-year period, the median exit size was just $85m. It has been steadily growing - from $50m in 2005-09 to $113m in 2020-24 - but nobody is investing in VC for these sort of outcomes. * The value of a top 10% exit grew from $400m in 2005-09 to $1.6bn in 2020-24. This is a 59% compound growth rate over each of the four periods. * The value of the 99th percentile exit, the mythical top 1%, grew even faster - from $1.4bn in 2005-09 to $10.2bn in the most recent five-year period. This represents a 93% compound growth rate over each period. If this trend continues, then we should expect to see the top 1% exit increase to nearly $20bn over the next five years and nearly $40bn in 2030-34. We have always said that you should compare fund sizes today to the expected exit sizes in 10 years' time. If we do think the top 1% exit will be $40bn+ when today's funds are maturing (which doesn't strike me as crazy), then how does that impact the debate on what an appropriate fund size should be for a 2025 vintage fund?

136

15 Comments

🔔Announcing the 2025 Vertical SaaS 50!🔔 Today, Avid Ventures, Headline, and Bain Capital Ventures recognize 50 new emerging vertical SaaS companies. 🏭 This year, over a third of the honorees are solving problems in the physical world including Caspian, DocUnlock, and Revenue Vessel in logistics, Complement, DiploAI, and Forgepoint in manufacturing, Ichi in construction, and GridStrong, Lumora, and Strobe Power in electricity/utilities. 📝 As in prior years, several honorees are building in the broader professional service landscape including &AI, Crosby, and PointOne in legal, Mako AI in financial services, and Foundation, Novella, and Strala in insurance. 🩺 Most notably, we've seen an increase in healthcare companies like Charta Health, Ferry Health and RoVR as well as Zoomlogi in pharma, Corner Health and Duet in nurse practioner practices, ExaCare AI in senior care, Onos Health in behavioral health, Grove AI in clinical trials, and Lassie and Rondah AI in dental. If you are building a vertical SaaS company or have recommendations for our 2026 list please reach out - we'd love to hear from you!

424

52 Comments

The deal was nearly closed. A top-tier VC was ready to sign and wire. Then an early investor killed it... overnight. A founder recently emailed me and my colleague, Andrew Berg (shared with permission), which left me frustrated, sad, and angry. They raised pre-seed capital from a non-traditional investor (think hedge fund manager type) who ironically brands themselves to “partner with founders to build great companies.” The company’s multi-year journey ended, not because of market fit or founder execution, but because of misaligned capital. It’s a painful reminder- who you let on your cap table matters a lot. Get references before you take someone's check! Not all money is long-term aligned. And not all investors play the long game with your best interests in mind. #startups #venturecapital #founderlessons #evilinvestors

498

178 Comments

Pins and Needles: Venture Capital Landscape… The state of the capital markets is baffling with conflicting signals issued every day. Oh, and 1Q25 GDP growth was just revised downward from a -0.2% to -0.5%. At first glance last week’s unemployment data looked quite strong with 147k new jobs added overall, but disturbingly most of that increase was for state and local jobs as the private sector was particularly weak with only half of the number of jobs added in May. Perhaps in response to these developments, according to Pitchbook’s “First Look” report the venture capital investment activity in 2Q25 showed a marked slowdown in both dollars invested and number of deals with $69.9 billion and 3,038, respectively, when compared to 1Q25 activity of $92.9 billion and 3,622 deals. The Venture Growth stage had the largest decline from $53.2 billion invested in 1Q25 to $30.7 billion in 2Q25. In general, quarterly deal count has continued its descent since the highwater mark of mid-2021, while the capital invested has continued its climb back to mid-2021 levels, driven in large measure by “mega” AI financings. Other observations in the data... https://lnkd.in/ekb8A7Ej Flare Capital Partners #digitalhealth

38

10 Comments

SF VC Takeaway #2: Pricing expectations, performance bars, and what’s actually getting funded. One theme that came up repeatedly in SF was how far pricing expectations and performance bars have shifted, even compared to just a few years ago. A few things investors kept anchoring to: 1️⃣ Median Series A valuations are higher than their 2021 peaks, but fewer of them are getting done. 2️⃣ Capital is being concentrated into fewer and fewer companies (and lots of capital!) 3️⃣ “Good” progress is no longer enough and the bar for standout performance has moved in an AI-native world So what does “top performance” mean right now? One investor told me that top quartile seed companies in their portfolio are going from $0 to $2M in ARR in <12 months. Outside of pure traction numbers, a few other themes that came up to describe "top performance": 📈 Explosive early revenue ramps (or a very credible path to them) 📊 Strong velocity and momentum for 2 quarters in a row, even if the baseline is small. 🚀 Clear signals of category leadership, not just product-market fit. Sometimes shown by either domain expertise, speed of product optimization, or by lack of competition in the category. This creates a counterintuitive dynamic where it can be easier to fund a company with strong pedigrees in a hot space and no traction yet than a company that went from 0 to $1M ARR at what used to be considered a rapid pace. Pricing today is driven by trajectories, not moments in time. We used to say investors invest in lines not points; I think that's more true than ever now because crossing certain milestones doesn't carry as much influence as it once did. Finally, investors still say that valuation matters, but many of them are acting differently. Pace and belief in category-defining companies really sets the price; while slower growth gets scrutinized rather than discounted. One silver lining in the camp of durable growth: Series A rounds are happening so fast that many companies don’t yet have meaningful history of retention data. Large bets are being made on velocity before the durability is proven. Several investors told me the same thing: we may soon swing back to a market where retention, not growth, becomes the defining metric. Let's hope so. I'll share my third SF VC takeaway tomorrow!

59

7 Comments