The Little Book of Venture Capital Investing: Empowering Economic Growth and Investment Portfolios

Chapter Four

Prevailing Investment Climate

Your house is on fire, and you’re smoking in bed!

—Billy Tauzin, U.S. Representative, Louisiana Third District, 1985–2005

Like most asset classes, timing is everything. Sometimes, this is preordained by way of making the right decisions, and sometimes it’s just pure luck. Either way, I’ll take it. Coming out of the 2007–2008 recession and entering into the ensuing investment climate, which featured near 0 percent interest rates, higher taxes, and more regulation, our raison d’être at GCA is to control the destiny of our investments. In order to be sure we are able to pay the higher taxes imposed upon our invested capital, we strive to make outsized returns on invested capital. That is easier said than done.

As a result, we launched the latest in our vintage series of venture capital funds in late 2012. The GCA Catalyst Fund is in fact an inflection point fund, hence the name “catalyst,” which we reset or rebooted to achieve the near impossible. Catalyst seeks to back serially successful repeat entrepreneurs who can demonstrate business plans with milestone roadmaps that are capable of achieving a critical mass of operating, financing, and strategic value such that they are positioned to consider a possible liquidity event within 18 months. Yes, you heard right, I said within 18 months. Moreover, we are looking for minimum cash-on-cash returns of more than 10×!

This VC investment strategy obviously doesn’t work for every business plan—in ...