On Funding — Shots on Goal

Aug 26, 2023

On Funding — Shots on Goal

Being great as a startup technology investor of course requires a lot of things to come together:

  1. You need to have strong insights into where technology markets are heading and where value in the future will be created and sustained
  2. You need be perfect with your market timing. Being too early is the same as being wrong. Being too late and you back an “also ran”
  3. You also need to be right about the team. If you know the right market and enter at this exact right time you can still miss WhatsApp, Instagram, Facebook, Stripe, etc.

I’ve definitely been wrong on market value. I’ve sometimes been right about the market value but too early. And I’ve been spot on with both but backed the 2nd, 3rd or 4th best player in a market.

In short: Access to great deals, ability to be invited to invest in these deals, ability to see where value in a market will be created and the luck to back the right team with the right market at the right time all matter.

When you first start your career as an investor (or when you first start writing angel checks) your main obsession is “getting into great deals.” You’re thinking about one bullet at a time. When you’ve been playing the game a bit longer or when you have responsibilities at the fund level you start thinking more about “portfolio construction.”

At Upfront we often talk about these as “shots on goal” (a fitting soccer analogy given the EURO 2020 tournament is on right now). What we discuss internally and what I discuss with my LPs is outlined as follows:

  • We back 36–38 Series Seed / Series A companies per fund (we have a separate Growth Fund)
  • Our median first check is $3.5 million, and we can write as little as $250k or as much as $15 million in our first check (we can follow on with $50 million + in follow-on rounds)
  • We build a portfolio that is diversified given the focus areas of our partners. We try to balance deals across (amongst other things): cyber-security, FinTech, computer vision, marketplaces, video games & gaming infrastructure, marketing automation, applied biology & healthcare systems, sustainability and eCommerce. We do other things, too. But these have been the major themes of our partners
  • We try to have a few “wild, ambitious plans” in every portfolio and a few more businesses that are a new model emerging in an existing sector (video-based online shopping, for example).

We tell our LPs the truth, which is that when we write the first check we think each one is going to be an amazing company but 10–15 years later it has been much hard to have predicted which would be the major fund drivers.


  • When GOAT started it was a restaurant reservation booking app called GrubWithUs … it’s now worth $3.7 billion
  • When Ring started, even the folks at Shark Tank wouldn’t fund it. It sold to Amazon for > $1 billion.
  • We’ve had two companies where we had to bridge finance them several times before they eventually IPO’d
  • We had a portfolio company turn-down a $350 million acquisition because they wanted at least $400 million. They sold 2 years later for $16 million
  • In the financial crisis of 2008 we had a company that had jointly hired lawyers to consider a bankruptcy and also pursued (and achieved!) the sale of the company for $1 billion. It was ~30 days from bankruptcy.

Almost every successful company is a mixture of very hard work by the founders mixed with a pinch of luck, good fortune and perseverance.

So if you truly want to be great at investing you need all the right skills and access AND a diversified portfolio. You need shots on goal as not every one will go in the back of the net.

The right number of deals will depend on your strategy. If you’re a seed fund that takes 5–10% ownership and doesn’t take board seats you might have 50, 100 or even 200 investments. If you’re a later-stage fund that comes in when there’s less upside but a lower “loss ratio” you might have only 8–12 investments in a fund.

If you’re an angel investor you should figure out how much money you can afford to lose and then figure out how to pace your money over a set period of time (say 2–3 years) and come up with how many companies you think is diversified for you and then back into how many $ to write / company. Hint: don’t do only 2–3 deals!! Many angels I know have signed over more than their comfort level in just 12 months and then feel stuck. It can be years before you start seeing returns.

At Upfront Ventures, we defined our “shots on goal” strategy based on 25 years of experience (we were founded in 1996):

  • We take board seats and consider ourselves company-builders > stock pickers. So we have to limit the number of deals we do
  • This drives us to have a more concentrated portfolio, which is why we seek larger ownership where we invest. It means we’re more aligned with the outcomes and successes of the more limited number of deals we do
  • Across many funds we have enough data to show that 6 or 7 deals will drive 80+% of the returns and a priori we never know which of the 36–38 will perform best.
  • The outcome of this is that each partner does about 2 new deals per year or 5.5 per fund. We know this going into a new fund.

So each fund we’re really looking for 1–2 deals that return $300 million+ on just one deal. That’s return, not exit price of the company. Since our funds are around $300 million each this returns 2–4x the fund if we do it right. Another 3–5 could return in aggregate $300–500 million. The remaining 31 deals will likely return less than 20% of all returns. Early-stage venture capital is about extreme winners. To find the right 2 deals you certainly need a lot of shots on goal.

We have been fortunate enough to have a few of these mega outcomes in every fund we’ve ever done.

In a follow-up post I’ll talk about how we define how many dollars to put into deals and how we know when it’s time to switch from one fund to the next. In venture this is called “reserve planning.”

** Photo credit: Chaos Soccer Gear on Unsplash

On Funding — Shots on Goal was originally published in Both Sides of the Table on Medium, where people are continuing the conversation by highlighting and responding to this story.

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