Growth Strategy VC firm

Question

I am wondering how would you structure this following case:
Your client is a small Venture Capital (VC) firm which invests primarily on start-ups tech and engineering firms with particular focus on B2B business.The firm currently holds 5 mid-sized start-ups (~$1-2M valuation) and is actively managing their operations. The scale of each of the business is global (from Asia to Europe to US). The client asks you to provide a growth strategy for our VC, not in the form of improving operation of existing portfolio.

Thank you very much guys and your inputs are most appreciated.

Answer 1

Q: The client asks you to provide a growth strategy for our VC, not in the form of improving the operation of existing portfolio.

There are two main activities for VC or any investment body:

Get fund from investor (gov, pension fund, insurance company etc)
Invest in business

To grow the business means at least we should focus on these two things.

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But how I'd like to approach comprehensively by looking at external factor and internal factor:

External: (To assess the posibility/ knowing how hard growing the VC given the industry growth)

How is the market performance?
- Size?
- Growth?
How is Competitor performance?
- Value prop?
- Share?
- Growth?
Regulation?
- New regulation affecting investment activity?

Internal:

Is it possible to acquire another VC?
Increase funding
- Current source
  - Can we increase the fund amount?
- New Source
  - Actively searching for new fund from a new investing body
Increase investing
- Current portfolio
  - Can we increase the investment?
- New portfolio
  - Actively seeking a new company to invest

Simply, we can start from here.

Answer 2

Growing a VC firm is different from growing a company. VC firms grow by:

1. maximising upside of invested capital
2. minimizing downside risk

For #1:

- Invest in high-margin, low CAPEX businesses that have high scalability and sustainable growth. Essentially these are software focused, product focused, and firms with large TAMs. This is similar to optimizing "product mix" at a product firm.
- Invest in high growth geos and high growth ideas -- e.g. china/india vs brazil and more cloud computing, less telecom.
- Invest later vs super early - you do limit upside this way but you decrease chances of failure.

For #2:

- Invest later vs super early. Lowers risk.
- Hedge - don't invest everything into one area, e.g. AI or blockchain
- Avoid unknowns you cannot control - less regulated industries, less geo-political risk, etc.