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Venture is 10,000x more attractive in 2019 than in 1999

VC is a challenging asset class for many investors (LPs)

While you can identify the ‘best’ firms, access is more often than not constrained. VC is less than transparent. It’s somewhat of a ‘closed’ club. Many LPs have dabbled a little and failed. Most institutional LPs do not have the DNA for VC. See also my previous posts.

Add to this: 'catchy' headlines about unicorns, many seemingly with no actual business model, and poor post IPO underperformance – Snap, Lyft, Xiaomi etc.

Then it is not odd then that many investors are skeptics.

And there are quite a few misconceptions about VC

  • A new ‘tech bubble’ – technology can seemingly disrupt every industry in winner take all markets

  • Too much money – exemplified by the USD100bn Vision fund

  • Crazy valuations – Bytedance USD 75bn, WeWork USD 47bn, Airbnb USD 29bn

  • And more!

Particularly seed and early stage venture is attractive

But when taking a closer look, which Mark Suster of Upfront Ventures does in this well written and insightful post, it is clear that they are just that – misconceptions.

Further, for those investors who take the leap, spend the time, and stay the course the above challenges can be overcome.

I have long been positive on VC, not least early stage, and find that I share most of Mark’s views. And have over time backed these views with commitments.

A deep dive into what has really changed in venture capital

Here’s a quick summary of Mark’s post. But I would still encourage you to read the post in full and download Mark’s presentation.

  • VC funding is up, but mostly driven by late-stage mega-rounds

  • Today’s very large late-stage rounds are really ‘private IPOs” allowing especially early-stage VC investors to capture more value

  • If you can get into the best deals early, VC has never been better

  • Today everything and everybody is online at 400x the speed

Mark’s summary: “So yeah, venture is still a thing :)”.

Couldn’t agree more!

But remember, investing in venture requires a specialist skills.

Stay illiquid!


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