Taking the Pulse of the LP Community
In May, we held the second annual RAISE LP-Only Summit with over 200 LPs in our community. During the meeting, we polled our attendees about their preferences, concerns and general sentiment during this rocky time in VC.
Two themes that emerged were:
1. There’s frustration with the excesses of the past few years.
When we asked our LP community about their most consistent frustration with venture, 55% said “excessive fund sizes” was most frustrating, and 23% said “Economics > 2/20” was most frustrating.
This clearly corresponds to the blowout fundraising in the VC market over the last few years and fatigue over those excesses.
We also asked the group, “When a firm comes back to market for a subsequent fund, how invested (i.e. cash in the ground) should the prior fund be?” The overwhelming majority (62%) felt that prior funds should have a minimum of 60% invested before starting to raise again, and 16% thought a fund should be at least 80% invested.
In current fundraising conditions, funds should prepare for a particularly chilly reception if they are perceived to be coming back too early.
2. LPs increasingly want to see specificity in funds: one stage, one sector.
When asked the question, “If you had to choose just one approach, which would you want your venture managers to pursue?”, 71% said they’d want VCs to focus their efforts on one stage (e.g. Seed/A, late stage), vs. supporting companies across their lifecycle (29%).
And when asked, “What types of VC managers are of greatest interest to add to your portfolio?”, 72% said they’d prefer sector specialists, and about 10% would want geographical specialists. Only 18% were most interested in generalists.
Not coincidentally, we have seen the RAISE GPs over the past seven years become increasingly focused on narrower investment themes.
Finally, we got some insights into how LPs might deal with assets stuck in funds from firms the LP is no longer supporting. We asked them at what price they would consider selling these assets in a secondary transaction, and nearly half (45%) said they had assets they’d consider selling at or below NAV. And this was in early May!
We’re looking forward to getting another pulse check with hundreds of LPs in October, when they join us for the seventh annual RAISE Global Summit, October 20th in San Francisco. We have 500 emerging funds applying to attend, with the RAISE Selection Committee determining the 100 who will be invited.
So if you are like the other LPs we spoke to recently and you’re looking for the next generation of focused, right-sized funds, RAISE is the place to meet them.
Click here to learn more and to request an LP invite.
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Disclaimer
The Tipping Point Series, including Featured at RAISE articles, (“Tipping Point”) is a collection of interviews with fund managers who (a) have previously raised a venture capital fund and (b) are providing advice and insights into the formation and management of venture capital funds (the “Presentations”). Tipping Point is not an offer to sell or a solicitation of an offer to buy any security issued by any venture capital fund, including without limitation, any venture capital fund managed by Tipping Point’s speakers, presenters, or producers.
The Presentations do not (a) provide investment advice with respect to any security or (b) make any claim as to the past, current, or future performance of any security or venture capital fund, and Tipping Point expressly disclaims the use of the Presentations for such purposes. The Presentations are not intended to constitute legal, tax, accounting, or other advice or an investment recommendation. Prospective fund managers should consult their own advisors about such matters with regard to their venture capital funds. Raising a venture capital fund involves significant risk of loss of income and capital, including loss of the full amount raised and invested, which may occur as a result of identified or unidentified risks.
Tipping Point is produced by Raise Conferences, LLC (“Raise”). Raise is a private invite-only venture capital conference, which provides a forum for venture capital funds to network with and present to potential venture capital investors. Although Raise produces Tipping Point, the Presentations are independent of Raise’s conference and do not provide any forum for the Tipping Point speakers, presenters, or producers to solicit the sale of any securities.
