Category
- Opinions on the bass
Written by
Karl Shin (CEO)
Date
Empty
A question I hear a lot these days is, "Are you still actively investing?" In fact, many VC investment firms are concerned about what kind of investment strategy and direction they should have in times like these, and we are also concerned about this. The clearest answer to this question is the content of the email we sent to our fund's LP investors in June 2022. I am sharing this because I think it will answer the question, "Why is Bass investing more actively in early-stage companies in times like these?" more than any other explanation.
Hello, this is Shin Yun-ho from BASS Ventures.
In addition to the information on individual investment cases that we have provided each month, we would like to explain our view on the recent market situation and future fund management plans that investors may be curious about.
[Recent Market View]
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We also strongly agree that a recession has begun or is well underway, as is already evident in various real and financial markets.
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Of course, our funds and portfolios will also face such situations for the time being, and I think it could come with even greater amplitude, especially in the Financial Market.
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The key to the recent market that we are looking at is the length of the recession period / and where we are in the cycle now . This is because it is directly related to the profitability of the fund or the success or failure of the portfolio companies in the fund. (We are not assuming that it is a continuous downward convergence, not a cycle.)
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However, I don't think we are good at "predicting" this. I think this period could be shorter than expected, or unfortunately, it could be very long. That's why, rather than "predicting" or "catching the timing," we are thinking more deeply about "how to utilize" this market .
[What these market conditions mean to “early investors”]
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In essence, early-stage investors like ours are simply buying equity assets that will prove their value in 5-6 years . Based on this premise, we believe that the key is not in the current market, but in the market at least 35 years from now.
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From this perspective, the maxim of “early investing in good teams” has not changed much. Rather, it is likely that discovering and investing in very early teams at this point in time will be easier or more advantageous in terms of performance.
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For example, a team that is actively considering starting a business right now is likely to be a “good team” with a strong passion for starting a business and a mission to solve problems, rather than a market situation for startups.
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Also, in terms of being able to bet on assets that will be around 5-6 years from now, I think that the initial investment now could actually be what is commonly called a good fund vintage.
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In conclusion, I would like to tell you that there will be no change in the original direction of the initial investment company that Base has. Nevertheless, while keeping a close eye on the market, we plan to focus on providing a structure and guidance that will enable the company to survive in the long term after the investment.
[BASS Ventures House-level investment direction]
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If I were to explain our company's investment direction in more detail, we fundamentally aim to invest in early-stage companies at the Seed/Pre A stage. (The first FI partner for startups)
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If I were to explain this as a decision-making criterion, our basic judgment criterion is whether we can expect at least 10X for each individual deal. This is our identity as an early-stage investor, as mentioned earlier, and a strategic direction that is not greatly affected by market conditions.
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Due to the nature of the initial fund, the key is not to worry about the downside or to defend, but to see how much more the upside can be raised. Accordingly, at least for individual deals, we pursue High Multiple & IRR / High Risk. This basic strategic direction has not changed much since the initial investment proposal.
Finally, although it may be a bit of a footnote, I would like to add an article translated by one of our company's reviewers. (It was published in a webzine run by our reviewer.)
This is an article written by Paul Graham, better known as Y-Combinator, in 2008, when the subprime crisis was at its peak. Although it is an article written 10 years ago, I am sharing it because it is worth reading and because it is related to the thoughts we have as early-stage investors.
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