Sachin Piplani

#TheTenYearFixedTerm. It drives the entire startup ecosystem. Here’s how. Week 4 of “Venture Capital” at the Santa Clara University School of Law. LPs don’t want to be trapped in an illiquid venture capital fund forever, paying annual management fees. How can they get out? There is a secondary market for those interests, but it’s primarily opportunistic, and targets desperate sellers. So without a structural endpoint, they could be trapped forever. And there is: the 10 year fixed term. On that anniversary, subject to possible but limited extensions, the fund must terminate and wind-up, distributing its final assets to its investors. Seems benign, but the impact is massive! 1️⃣ Our #VC and #startup culture is defined by SPEED. Startup-to-growth-to-liquidity, as quickly as possible. Market dynamics are most certainly relevant, and prevalent. But there’s a structural driver as well: yes, the 10 year fixed term. If you are going to fully harvest your fund in 10 years, you need to front-load your investment activity (to ensure that your portfolio companies have at least some time to grow and ripen). So VCs race to deploy their capital within the first 5 years. But that’s not all - they then apply pressure on founders to drive toward exit. Which in virtually all cases, is M&A (sale of the company). The need for LP liquidity within 10 years drives the need for startup speed. 2️⃣ #AgencyCosts refer to the inevitable conflicts-of-interest that arise when one party (the agent) is tasked with acting on behalf of another party (the principal). In the #VC context, the ultimate principal is the #LimitedPartner, and their agent is the #VentureCapitalist. Limited partners want big returns, and liquidity. But what’s to stop the VC from diverting focus (and capital) toward an unending lifestyle instead? In other words, people have their own agendas and motivations. Always. So how does this principal, here, ensure that incentives are aligned and agency costs minimized? Yep. The 10 year fixed term. By dramatically limiting the space for self-dealing by creating a brief window of active existence, the VC is forced to focus on getting to liquidity. They simply do not have the opportunity to selfishly create an endless, self-perpetuating empire underwritten by the limited partners. Bracketed with their carried interest, the VCs are incented to focus on big returns in a concentrated period of time. Exactly what the LPs want! I was on the road this week, and so I recorded the lecture for the students. I normally can’t provide access to my lecture recordings, because they live behind university firewalls, but this week I bootlegged it and uploaded them to my YouTube channel. If you are interested, this lecture (broken into 3 segments) is available there for free - no agency costs in sight! #DWProf

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Prior to the Super Bowl I stopped by Levis Stadium and chatted with Costa Kladianos from the San Francisco 49ers about the partnership with Cisco. For the full interview, which also includes a discussion with Matt Swartz and Rob Neumann from Cisco. https://lnkd.in/gPPctj_t

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My colleague has a very insightful post, and we have a wonderful translation into Korean as well from Hyungsuk Jin at #KITA ! https://lnkd.in/eFkPw36Q

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While Quantum computing may still be years away from achieving true commercial scale, established companies like Honeywell, JPMorganChase, and now NVentures (Nvidia's venture capital arm) which made its first-ever investment in Honeywell's quantum computing unit, Quantinuum, are now starting to act. This move was part of a $600 million funding round that values the business at $10 billion. https://lnkd.in/eh3W6Q7n

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Good discussion with Steve Rosenbush at The Wall Street Journal during a recent trip to NYC. We covered a lot of the usual topics -- AI, supply chain, etc. -- but he also asked me to share one piece of leadership advice. My response: "I would say when I talk to CEOs, what are the three or four business processes that are most important to you and your business future? And then how are you enabling radical innovation on those business processes that you are personally guaranteeing don't get killed?" Some other highlights from our discussion at the link in the comments. Always good to talk with you, Steve!

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Evaluating AI Models in 2026 https://bit.ly/4apFd3u @aarondelp and @bgracely review some of the latest AI model releases and discuss how they would evaluate them through the lens of an Enterprise AI Architect.

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I agree with Lee McCabe here - operating partners are underused and, like many things (I see you, AI) are often more window dressing than value additive. To get the most out of these roles, I advise emerging managers: 1️⃣ Be clear on the FUNCTIONS of non-investment team members Are these individuals sounding boards, or specific-issue operators for portfolio companies? Do they sit on your IC, or only get pulled into portfolio companies as needed? Are they exclusive, or do you share their time? 2️⃣ Be clear on WHO those non-investment team members are providing value to If they provide value to you as the GP, consider making the function more of an "advisory council" where you're convening the group periodically to discuss origination, portfolio construction, firm evolution, political or industry interconnectivity. If they provide value to portfolio companies, make it clear how they are engaged, when, and for how long; these are often true operating partners. 3️⃣ Decide how those roles are remunerated, and whether they will commit to the fund or not Are they paid for by the fund, through a share of carry, or by portfolio companies? Are there common agreements, or each negotiated separately? Also - how much of the GP commitment do they represent, if at all? This is important as it relates to alignment. 4️⃣ Put a structure and process in place to properly integrate them Don't let someone discover the last time you spoke to X politician who serves as your operating partner was eight months ago. Put in place a plan to periodically consult with them on their specific areas, or have specific parts of your diligence process involve them. The best firms get this right and create structure around this.

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