Skip to content
VC funds (typically with lower AuMs) can deliver returns, though choosing wisely makes sense (Startup exits remain elusive, and as a knock-off effect this has curbed the capital available for new funds (VC firms plan to raise capital this year, but most believe the process will be more difficult than before and outcomes can depend on the size of the fund (Governments and other sovereign-related bodies are stepping up with capital injection into the tech world - NATO innovation fund (There was a 16% increase in the startup formation in H1 23’ as compared with 22’ in Germany (
The US alumni fund model has been formalised since 2014 by Alumni Ventures, a network of 33 university-focused funds. Combined they are the most active venture firm in the US, according to Pitchbook, with more than 1,000 portfolio companies.There's still more work to be done. Many European alumni funds aren't yet working together, unlike the close collaboration that happens in the US.Ability to see deals in areas that might be overlooked by other VCsSchools can also use the alumni funds as training grounds for VC hopefuls.
Diversification is King: LPs are hungry for diversification in their portfolios, and funds-of-funds are serving up the perfect solution.Risk-Adjusted Returns: While funds-of-funds operate with a double-fee layer, LPs are finding that the risk-adjusted returns and the ability to navigate uncertain markets are well worth the investment.Selecting the Right Managers: Funds-of-funds are taking their role as gatekeepers seriously, carefully selecting the best managers to back. Attracting New LPs: It's not just seasoned LPs jumping on the funds-of-funds bandwagon; newcomers to the private equity space are also eager to get in on the action.New Approaches and Collaborations: Funds-of-funds are evolving and embracing new approaches to deliver even more value.
2021 was an absolute outlier year: Avg. 35% of the fund deployed in the first 12 months 🤯 (keep in mind most funds typically keep anywhere from 40 to 60% for reserves 💸)Massive slowdown in 2022: avg. <10% of fund deployed... (74% down from the 2021 peak and 25% down from 2019 📉)
why venture is different from other asset classes (you cannot “index” it): why many fund-of-funds aren’t worth the fees (they try to index it)why some fund-of-funds are (they concentrate where others don’t)
63% of VC firms plan to raise capital this year, but most believe the process will be more difficult than before. Just how difficult seemed to depend on the size of the fund;Respondents said the most pressing concern from their LPs is around exits. And without a steady liquidity source, LPs will likely be more cautious in backing new VC funds;40% said they wanted to invest in better LP reporting to facilitate the flow of information between them and their investors.
Insider rounds: They made up 9.43% of overall U.S. rounds in Q2, the highest proportion since 2013. It's not only a reminder of how challenging the startup fundraising environment remains, but also a sign that with all their dry powder, VCs are nevertheless doubling down on their most promising existing bets.Mega-rounds: Rounds of at least $100 million are back to pre-2018 levels — with 122 deals totaling $41.5 billion — suggesting that they were likely a temporary phenomenon created by the 2017 debut of SoftBank's Vision Fund, and the pandemic era's free-for-all environment.
More
Share
Explore
All Things VC - July 23' Edition
Summary
Valuations & Performance
). Fundraising, M&A & Exits:
).
). VC Sector:
), UK government to push Pension plans towards startup investing (
). EU focus:
).
‘All Things VC’ focuses on topics relevant to GPs & LPs in the venture capital world on a strategic level i.e. valuations, market dynamics, fundraising, D&I, portfolio construction & more.
Individual areas (ClimateTech, SaaS, HealthTech, etc.) and their dynamics are not covered.
Tweets
Samir Kaji
Why institutional investors back bigger VC funds
Issue with VC benchmarks
On what VC performance for vintage years 2016-21 could look like
VC industry being immature w.r.t PE industry
Meghan Reynolds
Entry price matters - VC strategy being built around buying cheap option bets w/ massive upside
Access to top GPs no longer an issue for LPs
Kima Ventures - opening up their VC performance
Talent dynamics is changing at the VC firms
Rick Zullo on exciting dynamic for emerging managers
The ability to bring premier talent into growing firms in a way that was not structurally possible the last couple of years. This would enable managers to bring in diverse perspectives and capabilities to build the iconic firms of tomorrow.
Jenny Fielding - on senior talent leaving because they are not being able to do deals
Jason Shuman - VC is a tough business
Frank Rotman - on misinformation on VC performance
Sar Haribhakti - Margot Robbie talking like a seed stage startup pitching VCs
News & Articles
Sifted EU - Rise of Alumni fund in EU
Top lines from the article:
EU Alumni funds include:
- , which backs alumni from the
- , which backs alumni of
- , which backs alumni of
- , which backs alumni or staff-founded companies from the incubator.
- , which backs alumni from , and
VC vs FoF: Unveiling difference in portfolio construction
Venture Capital Journal: Women LPs step up to narrow the funding gap for female GPs
The persistent funding gap for women in VCs continues to permeate throughout the industry and LPs are figuring out different ways to overcome the disparity.
Financial Times - European tech investors need to up their ambitions
Snippets from the article
In Europe there is a gradual understanding that the order of magnitude for everything is lacking a zero
When it comes to institutional investment, Europe remains mostly a region of risk-averse rentiers.
It is absurd that foreign investors are more active backers of Europe’s technological future than the region’s own fund managers.
Startup Verband - Increased startup formation in Germany
Compared to the 2nd half of 2022, startup founding activity in Germany increased by 16% in the first six months of 2023 to almost 1,300 new startups.
A guide to size in venture funds
Snippets from the blog
What’s simple? Funds with outlier performance are likelier to be small and early-stage funds of few GPs, and we often prefer to partner with such funds at Nomads.
What’s hard? In a power-law environment, there are no checklists, and there are always exceptions. And oftentimes, exceptions yield more than the rules. Hence, it’s crucial not to see the fund size as a magic number, but as the determinant of some key variables of the portfolio strategy, like the number of companies and entry valuation-ownership. And, it’s crucial to define what’s small afresh with every new opportunity.
PitchBook - Emerging managers' fundraising slump is a blow to smaller VC ecosystems
Snippets from the article
Emerging managers are also known to partner with larger, experienced firms to help scout out startups. Ultimately, if emerging managers' challenges continue, there is a risk the VC ecosystem will shrink, limiting innovation and dealmaking
Stephan Heller - Why Now is the Perfect Time to Invest in VC via a Fund-of-Funds!
Stephan lays out 5 key aspects where FoF strategy can deliver
NATO Innovation Fund
SiftedEU - UK government unveils plan to direct £75bn from pension funds to startups
Insight Partners: New FoF to back underrepresented VC managers
Insight Partners announced that they raised Insight Vision Capital II, L.P. (Fund II), their second 20/20 Vision Capital fund with $118M of capital commitments to invest with a focus on diverse-led, top-tier, early-stage funds.
James Heath - most investor friendly VC market in a decade
Snippet from the blog
Insider led rounds are the new norm at Series A+. This is a great time for LP co-investors. Companies aren't flirting with the market and the terms are most favourable.
Axios - Venture firms face new scrutiny from LPs
- Data analysis from 100+ early-stage focused sub-$200M funds
Snippets from the blog
Fortune: On VC using illegal pricing practice
Snippets from the article:
new research suggests that some of the biggest Silicon Valley darlings like Uber succeeded because of an illegal pricing strategy that is creating perverse incentives and stifling innovation.
By misallocating capital towards anticompetitive practices rather than socially-beneficial and productive products, venture capitalists—who often claim to help founders transform society through innovation—are actually stifling innovation.
- Indexing Venture and Other Fool's Errands
Snippets from the essay
- European exits continue to slow down to decade lows
Snippet from the post
Exit value reached (only) €900M in Q2 2023, its lowest since 2013. This represents a 65% decline from Q1 and a staggering 94% decline YoY.
Scotsman - Universities are sinking spinouts before they can swim -
Snippet from the post
In many countries, universities have been wanting 20-40 per cent of a spinout company without any cash investment. It leads to a perception that their pre-incorporation efforts justify saddling a newly minted spinout with 20-40% of dead equity.
- on VC performance and dispersion
VC performance has always been dispersed. Emerging managers (typically with lower AUMs) can deliver returns, though choosing wisely makes sense. Remember - past is not a predictor of future success.
Ertan Can &
SiftedEU - Europe’s CVC wave dips as corporates feel the pinch
Snippets from the post
the sluggish macroeconomic situation is one factor — but, she says, CVCs are always “fragile” because they’re at the whim of management. If a new CEO comes into a company and decides it's not a strategic priority, the venture arm’s future is in doubt.
With more CVCs looking to shed their assets, there are concerns that the number of VC firms willing to gobble up their portfolio stakes could be limited.
VC Fundraising - some VC Funds are raising successfully while others are cutting down
Fundraising WINS
Energize Ventures Raises $300 Million for New Climate Funds, Changes Name
Industry Ventures just raised $1.4 billion for one of the largest venture capital secondary funds ever
Fundraising LOSES
Sequoia Capital cuts crypto, ecosystem funds by over 50% as it continues to downsize
Tiger Global pulls back on raising new capital and focuses on returns, amid brutal fundraising environment
Crunchbase - The Big Slowdown: M&A Involving US-based Startups Weakest Since 2013
M&A trends might not persist as interest rates rise and money becomes more expensive. Last year, dealmaking slowed amid declining tech stocks and unrealistic startup valuations. However, recent changes include stabilized interest rates and rebounding tech shares, making stock deals more likely. Founders are realizing that high 2021 valuations are unattainable, accepting more modest terms. This understanding will likely apply to M&A deals, providing a fair alternative to the competitive funding market.
Reports
Juniper Square - The State of Venture Capital in 2023
Snippets from the post
PitchBook - Q2 report - VC finds its footing as headwinds weaken
Want to print your doc?
This is not the way.
This is not the way.
Try clicking the ··· in the right corner or using a keyboard shortcut (
CtrlP
) instead.