Most investors who focus on more mature companies have simply begun making direct investments in younger companies.
The universe of VC-focused FoFs is small, but the strategy has a strong track record. Over the past decade, vehicles that invested in VC across all other private market strategies, according to PitchBook data.
Series A investors are still taking longer to do due diligence, are more focused on the metrics, and are looking to participate in rounds at reasonable valuations.
The muted late-stage funding and exit environments have left investors with few data points and examples of how to price companies — and that now affects the Series A stage, too.
For one thing, it’s harder now for founders to start planning a fundraise because it isn’t as clear who is even actively investing or adding new portfolio companies
“Discounts are still high, but there is a collection of companies, a block of them, that are trading at premiums which aren’t really covered in the averages because a lot of them are written down from their averages,” he said.
Recent steep decline of (45%) in capital calls have significant implications for both LPs and VC funds.
LPs may benefit from increased flexibility in managing their committed capital, while VC funds may face challenges in maintaining investment momentum and meeting their performance goals.
Cash-strapped founders, employees and investors are under pressure to sell their stakes amid a wave of tech job cuts, a tepid IPO market and rising interest rates. That has helped to drive down prices. As of May 31, shares of startups were trading at a median discount of 61% compared to valuations at their latest funding rounds, according to a by
In just Q1 of this year, there were 185k global redundancies (6% in Europe) compared to 165k in 2022.
AI accounts for around 12% of venture funding in Europe, but a staggering 35% was invested in Generative AI to date in May 2023 vs 5% in 2022.
Meanwhile, over the past couple of years, Rocket has slashed staff at its venture funds, closed one of its investment units, abandoned plans to raise a new start-up fund, and urged certain nascent tech companies it has invested in to adopt more conservative spending plans.
Some high-profile venture capital and private equity firms are slashing the valuation of their holdings, causing billions in apparent profits to evaporate as the economic downturn undermines the sustained growth of the last 13 years.
The real story for me is not the VCs, it’s the HBCUs and it’s the endowment gap — and the gap’s been growing in part because of the success of venture firms
For most of my venture career, it felt like small funds and larger funds were part of the same ecosystem, where winning looked the same for most folks regardless of fund size. As the scale of the largest venture funds continues to increase, it feels like the shared incentives and winning that bound smaller and larger firms together no longer applies to the degree that it once did. I wrote up some of my thoughts on this change and what it means in terms of competition in our industry.