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
July 10, 2023 Pitchbook : LP-led secondaries volume is expected to overtake GP-led volume this year
LP-led deals are poised to lead the secondary market in 2023. Fueled by more favorable pricing agreements, LP-led deals could overtake GP-led volume by a 60/40 (or maybe even a 70/30) split. (read more…)
CATEGORY: capital, downturn, secondaries
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…)
May 12, 2023 SaaS Capital : SaaS Capital 2023 B2B SaaS Retention Benchmarks
Across all SaaS companies, the 2023 median net retention is 102%, which is unchanged from 2022. Median gross retention is 91%, also unchanged from the previous year’s survey. One of the biggest takeaways this year is the evolving relationship between median net revenue retention and ACVs. Historically, the data showed little correlation. Over the last few years, we have seen signs that the highest ACVs showed higher median net revenue retention. This year’s data showed a direct, positive relationship with median net revenue retention rising as ACVs increase. Growth rate continues to be positively and exponentially correlated with net revenue retention, while gross revenue retention is a “table stakes” benchmark – to have a shot at performance parity with your peers, GRR must be at least 90%. Companies that primarily use month-to-month terms and annual contracts show median net revenue retention and median gross revenue retention that is essentially the same at 100% and ~90% respectively. (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
January 12, 2023 Anu Atluru via Substack : Rise of the Silicon Valley Small Business
The Silicon Valley small business, the SV-SB, is a hybrid of sorts — it intertwines small business values and discipline with big tech know-how and ambition. Founding teams may look like that of a “traditional” Silicon Valley startup. They’re native to Silicon Valley ethos, skills, and playbooks. But, beneath the surface, they’re different. You might see more solopreneurs and studios (and LLCs instead of C-corps). They value autonomy and flexibility. They envision a range of potentially good outcomes — not binary, all-or-nothing scenarios. (read more…)
CATEGORY: bootstrap, leadership, resilience
December 16, 2022 David Friedberg on All-In Podcast : State of the Markets
"What happens to the bottom 75% of Venture Firms. It's such a staggering demonstration of what people call the power law, which is how excess returns accumulate to a minority of investments. The market cap of 43% of companies that have gone public since 2020 is $750B. The market cap of the other 300 companies is only $26B. The cash that went into the $750B is $136B, and the cash that went into the $26B is $107B. And so the cash that went in to generate that $26B, that $107B, that's your bottom 50%. And the top 50% put in $136B to make $750B. And I think it gets even narrower as you move into that top quartile. And this is only the companies that went public, so this is only of the top companies and the top funds that were actually able to IPO. So it highlights how much of a power law actually plays through. The bottom 75% or the bottom 50% of various fund vintages is below 1.0. They lose money for their LPs consistently. It's a cycle, and so the next generation comes through and LPs make a portfolio of bets, and they hope that they make enough bets in the right VCs that their portfolio generates greater than market returns, greater than 15-20%." (read more…)
CATEGORY: capital, VC, winner take all
October 14, 2022 Sifted : Who are VCs kidding with their phony fund sizes?
I’ve seen everything from funds announced in the media that aren’t even incorporated yet, pre-first close funds announcing the target size of the fund as being raised or, to make it a bit more concrete, firms announcing their fund size when they only have like 0.02% of the capital effectively raised. I love the hustle mindset; truly. But I also love transparency and honesty. And I dare say I love integrity above all. This behaviour has real consequences on our beloved venture ecosystem — most of them negative. LPs should be held accountable because they should reference check before building any type of conviction. VC investors should be held accountable because they just shouldn’t be doing this! Ecosystem builders (accelerators, incubators, tech event organisers, etc) should be held accountable to cross-check before inviting “pseudo” VCs to their events, pitch days, panels and so on. Media should be held accountable because journalists have a responsibility to interrogate news and not just print whatever is fed to them. Founders should be held accountable because they should publicly call out the VCs who do misrepresent themselves, just as much as they should celebrate the VCs who are doing good work. (read more…)
CATEGORY: capital, leadership, VC