Luis Rivera is the CFO of G Squared, a global venture capital firm that serves as a transitional growth capital provider for technology companies around the world. G Squared not only invests directly into the growth rounds of portfolio companies, but provides liquidity to early investors and employees via tenders, secondary transactions and other types of investment transactions. SVB recently sat down with Rivera to explore his role at the firm and discuss how VC firms can thrive in uncertain environments. Read the writeup below or watch the 7-minute video.
What strategies can a private funds CFO use to navigate market downturns?
First, look very closely at the current valuations of your companies. Many firms are hesitant to raise new rounds when public markets are facing volatility. They don’t like lower valuations and the headlines they create. But valuations in the private space are all over the place, so make sure you understand their value, and communicate that to LPs.
Second, work with your GPs and people structuring the deals to make sure that you have some downside protection in case of further market volatility. That way, you can continue your growth trajectory, but also protect your investments from market fluctuations.
Third, communicate with LPs frequently and transparently. We communicate with our LPs in a number of different ways. We do quarterly letters, webinars and conference calls with individual LPs. But during market downturns, we try to be extra transparent. We send out interim letters between quarters. We schedule a lot of one-on-one meetings. And we connect LPs directly to the management of portfolio companies. In all of our communications, we try to be very clear about our valuation methodologies and what to expect going forward in terms of capital calls and liquidity.
What role can CFOs of PE and VC firms play in fundraising and investing?
As a CFO for G Squared, I try to stay involved in all aspects of the firm, not only in accounting and reporting, which is what is usually expected from us. I like to be involved in investment decisions, and I like to get involved the fundraising aspect of our business. CFOs provide a very unique set of skills. We understand income statements and balance sheets and how decisions from portfolio companies affect the bottom line. So I like to speak up and be involved, and GPs find this very valuable.
I think CFOs have a very important role to play in LP relationships. LPs like to talk to CFOs because our perspective is different than that of other people in the organization. Because we are involved in the day-to-day activities of the fund, we can provide a high level of detail and transparency. So I not only get involved in the quarterly meetings, when we discuss the performance of the fund, but I also have individual conversations with LPs on a regular basis.
How can VC firms attract a more diverse team to drive their success?
At G Squared, we have LPs in 60 countries around the world and portfolio companies in every continent. That's why we have 38 professionals in six different offices in North America and Europe. We believe Miami is the new U.S. VC hub, and we recently opened an office there with five associates who have deep ties to Latin America. We communicate with our LPs in the same languages and time zones, and we also understand the cultural aspects of our companies. It's a big differentiator for us.
We have to make an effort to have diversity. It can be difficult in the venture capital space to find a good pool of diverse candidates. But as we continue to embrace a remote work environment, I think it's going to be easier going forward. Diversity has been one of the key drivers of success for us, and I think every firm can benefit from it.