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All Things VC - July 23' Edition
Summary
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‘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.
Tweets
Samir Kaji
Meghan Reynolds
Kima Ventures - opening up their VC performance
Talent dynamics is changing at the VC firms
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.
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
VC vs FoF: Unveiling difference in portfolio construction
Venture Capital Journal: Women LPs step up to narrow the funding gap for female GPs
Financial Times - European tech investors need to up their ambitions
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
A guide to size in venture funds
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
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!
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
James Heath - most investor friendly VC market in a decade
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
Fortune: On VC using illegal pricing practice
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
- European exits continue to slow down to decade lows
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 -
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
SiftedEU - Europe’s CVC wave dips as corporates feel the pinch
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
Crunchbase - The Big Slowdown: M&A Involving US-based Startups Weakest Since 2013
Reports
Juniper Square - The State of Venture Capital in 2023
PitchBook - Q2 report - VC finds its footing as headwinds weaken
Carta - State of Private Markets: Q2 2023
Late-stage deal counts are ticking up: For the first time since Q3 2021, the number of venture investments on Carta increased in Q2 at every stage from Series B onward. The downturn had hit these later stages particularly hard: Deal counts at Series B, C, D, and E+ had declined by at least 50% from recent highs.
The startup valuation reset is real. Nearly 19% of all primary fundings on Carta in Q2 were down rounds, marking the third straight quarter in which that rate has been above 15%. Those three quarters represent the three highest rates of down rounds since at least the start of 2018.
Jefferies H1 2023 secondary outlook
Venture / growth volume increased to 14% of total volume in H1 2023 from 8% in 2022, as venture GPs slowly lowered their marks from peak valuations and pricing improved as a result. There is copious pent-up venture supply, but volume remains constrained by the wide bid-ask spread among buyers and sellers, with no significant change expected in H2.
Venture: Despite a modest 400 basis point increase from H2 2022 to 69% of NAV – a rise outpaced by other strategies – venture pricing remains subdued. This restraint reflects ongoing buyer apprehension about overvaluation, particularly in light of peak financing activity and venture sentiment in 2020-2021.
Ilya Strebulaev - survival rate of Corporate VC units
In total, at least 30% of CVCs appear to have stopped being active in three years. In comparison, a very small fraction of comparable institutional VC firms stops being active over the same timeframe.
What can explain such a dramatic closure rate? Changes in parent’s direction is one obvious cause. Lack of CVC success in achieving financial or strategic objectives is another. More fundamentally, as my research shows, too many CVCs are designed suboptimally. As a result, we should not be excessively surprised by almost a third of CVCs disappearing over such a short period.
ESG Report - 2023 Research and Trends – Turning Intention into Action
Podcasts & Videos
- Venture Voices - Episode with Harlem Capital (NEW PODCAST)
Samir Kaji - Venture Unlocked Podcast with Sunil Nagaraj
Samir Kaji - Venture Unlocked Podcast with Oren Zeev
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