Category: VC
April 29, 2024 Pitchbook : PitchBook Analyst Note: Establishing a Case for Emerging Managers
“It is reasonable to expect a higher proportion of the top-performing funds to come from the emerging manager cohort, primarily due to their smaller fund size and earlier-stage focus.” “Specialists outperform their generalist peers. Specialists often have an advantage from a sourcing perspective, as founders operating in a highly specialized space likely prefer working with a sector-dedicated fund.” (read more…)
March 4, 2024 Business Insider : ‘2024 will be the year of the zombie VC reckoning.’
PitchBook says the number of VCs in US deals peaked at 18,504 in 2021 and fell to 9,966 last year. The term "zombie VC" first came into vogue after the Great Recession when a wave of firms slowly met their demise. But the destruction happening now will likely be much uglier considering the abundance of new VC funds started during the height of the tech boom from 2018 to 2022 — more than 1,100, according to PitchBook data. (read more…)
August 24, 2023 Pitchbook : Q3 2023 Allocator Solutions: Evaluating Persistence in Fund Performance
Overall, we found that strong performance in a family's prior funds was correlated with strong performance in successor funds to some degree, but that's when looking at the most recent available returns data. To be useful for the allocator's decision to invest, persistency must be predictive at the time a new commitment can be made. The issue―which we and others have found―is that early IRRs are notoriously unreliable indicators of where a fund's performance eventually ends up. At the time the next sequence in the family is fundraising, the predecessor fund is on average only 3.5 years old, leading to a high degree of drift from that time to its final IRR. We find that, after controlling for information on prior fund family returns that was available at the time a successor was fundraising, the predictive power of a GP's track record is near zero. (read more…)
CATEGORY: capital, leadership, VC
August 16, 2023 Superfluid : Why Mega Funds Exist
In 2013, the top decile threshold is 3.58x, meaning for every $1 invested, the best 2013 vintage funds, returned at least $3.58 back, if not more. As you can see, the disparity in TVPI between the top decile and the median is quite substantial between 2013 - 2016. (read more…)
CATEGORY: VC, winner take all
August 12, 2023 Pitchbook : Down rounds at a high for US VC since 2017
Dealmaking and valuation figures have stagnated or declined across nearly all VC stages, perpetuated by a lifeless IPO market that continues to trap value. About 15% of all funding rounds completed during the second quarter of the year have been down rounds, the highest quarterly figure since Q4 2017. (read more…)
July 26, 2023 RAISE : The Hunt for Unicorn Managers
Is a 10x fund as rare as a unicorn? And what does the data say a savvy investor should look out for when seeking this elusive 10x TVPI fund? We collected a deep trove of information about fund performance from 656 funds: out of these selected funds, a mere five are presently marked at Total Value to Paid In capital (TVPI) of 10x or more, with the highest fund tipping the scale at a robust 33x. Of the 656 funds analyzed, just twelve currently surpass a 7x Net TVPI, a slim 1.8% of all applicants for the RAISE Global Summit. If an investor wants to find a unicorn, they should probably focus on Fund I. Of the twelve in our dataset, nine sprouted from a Fund I, with only three coming from a Fund II. It's notable that unicorns generally are very small funds. Out of the twelve unicorns, only two funds exceeded $20M. The majority of these unicorns raised less $10M, indicating that these are starter funds. (read more…)
CATEGORY: VC, winner take all
June 9, 2023 Docsend : The Funding Divide 2023: Tracking Bias in Early-Stage Fundraising
All-female teams raised 36% less than all-male teams. All female teams with minority members averaged 33% fewer investor meetings and raised the least amount of funding. Diverse teams raised 33% less than all-white teams. All-female teams with a minority took 33 meetings to raise $750K. All female teams without a minority took 53 meetings to raise $1.2 million. All-male teams with a minority took 48 meetings to raise $1.3 million. All-male teams with no minorities took 49 meetings to raise $1.6 million. Mixed-gender teams with a minority took 50 meetings to raise $1.1 million. Mixed-gender teams without a minority took 45 meetings to raise $1.8 million (read more…)
CATEGORY: capital, resilience, VC
May 25, 2023 Juniper Square : The State of Venture Capital in 2023
While 63% of VC firms plan to raise capital this year, 66% believe the process will be more difficult than in the past. 45% of respondents say that their LPs are pressuring them to find exit strategies for the portfolio. (read more…)
CATEGORY: downturn, resilience, VC
May 17, 2023 Inside Venture Capital : VC Fundraising for first-time fund managers
Last year, VCs slowed their fund deployment into startups. However, they were able to raise funds worth $170.8B in 2022, surpassing the previous year's total of $158.5B. As a result, U.S.-based VC firms had $289B in dry powder available at the end of last year. LPs were making commitments to new VC funds until the end of last year. However, most of the new capital was being raked in by experienced fund managers. On the other hand, first-time fund managers found the fundraising environment very challenging. Debut VC funds secured $10.2B in 2022, less than half of the $22.2B secured in the previous year. Pitchbook expects the environment to remain challenging this year for emerging fund managers, who may witness an even steeper drop in funding. S2G Ventures senior managing director Sanjeev Krishnan believes that "A lot of investors would probably prefer the new Sequoia fund to a new emerging fund manager right now." (read more…)
January 28, 2023 Chris Harvey via LinkedIn : What VC Fund Size is outperforming?
Emerging funds have a higher percentage of outsized returns, but larger growth funds deliver more consistent returns (for example, median returns of 1.86x for fund sizes $500m+ vs. 1.67x for funds under $250m). In other words, emerging funds have a higher slugging percentage, while growth stage funds have a higher batting average. (read more…)
CATEGORY: capital, resilience, VC