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A Startup Team with Experience

A Startup Team with Experience

By Heekyung Kim

My ex-boss in VC used to always say, "No matter how cheap the company is, never catch a falling knife," meaning don't invest in a company whose fundamental value drivers are broken (balance sheet problems, much easier to fix)... but what if that falling knife is me? Since I am composed of 100% me, I can't diversify myself, I can't short myself, I can't even ask for redemption / liquidation from myself. I wish I had more experience in turnaround, distressed, rescue finance to draw lessons to apply to life.

This is why, when selecting managers (especially for illiquid, risky assets like private equity), experience matters. You want to select managers who have performed through the cycles, who view risk management as important as getting the deals done. Howard Marks (founder of Oaktree) once said, "Good judgment comes from experience, and experience comes from the bad judgments from the past." Just as we estimate the entity value by summing the discounted values of future cash flows, I need to focus on making better decisions going forward with, unfortunately partly broken assets, because historical cash flows aren't part of the equation, but my experience and judgments are... (which would determine the assumptions behind the cash flow projections.^^)

Heekyung Kim works for Hanwha Life Insurance in its Alternative Investments division (they are an LP investing in funds). Previously, she worked for FirstMark Capital (Venture Capital firm in NYC) as an investment associate, and for Jefferies as an investment banking analyst.

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