Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape.

Limited Partners (LPs) use various filters and metrics to assess how investable a venture fund is. One of the more heuristic measures is assessing the GP’s alignment with them through the percentage of a fund’s commitments that the general partner(s) themselves contribute — In VC this is typically 1–3% of total fund commitments.

As you’d expect, LPs typically prefer fund managers with higher GP commitments as % of the fund (“skin the game” concept).

While I believe there is general merit to linking fiduciary incentives to an investment manager’s stake in a vehicle, it is far too simplistic of a metric to rely on as a visceral filter. Like many things in capital markets, changing programming (in this case, LPs) is hard to do. …


Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape

This post was original posted on my substack; subscribe to my newsletter to get updates on new posts and releases of the Venture Unlocked Podcast.

Recently, AngelList’s Rolling Fund product has been a frequent topic of discussion within early-stage investing circles. Over the last few weeks, I’ve had dozens of conversations with LP’s and GP’s to get their thoughts on the product.

There have also been some great Rolling Fund articles; Minal Hassan wrote a great early summary here, and Winter Mead penned a very thoughtful and balanced piece from an LP’s perspective in weighing the pros and cons from his perspective.


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Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape.

For emerging managers, the actual capital raise of a fund represents the most significant friction point for getting off the ground (and early on, scaling a firm). This issue has prevented many aspiring investors from starting firms, and has led to the advent of models such as the AngelList Rolling Fund product.

There are several reasons for fundraising being so difficult:


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Photo by Basil James on Unsplash

Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape

Up until near the Global Financial Crisis (GFC), the venture capital asset class was more or less monolithic, with firms sharing similar attributes on partnership composition, stage and sector focus, and fund sizes.

Post GFC however, the industry has greatly evolved be distinctly fragmented with several varieties of funding sources and models. Today, traditional seed funds, solo-capitalists, sector-specific funds, studio and incubator models, rolling funds, family office, and platform VC firms all drive capital to the entrepreneurial ecosystem. …


Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape

If it wasn’t clear a few months ago, it is abundantly clear now that not only has the world has shifted immeasurably from COVID-19, but the very definition of what is “normal” is forever changed.

What appeared to be a virtual impossibility back in March, the equity markets have hardly flinched with US equities currently down only ~15% from record highs & the private markets (particularly early/growth) still showing plenty of forward momentum.

However, when the US public markets were down nearly 40% in March, most had assumed that the capital faucet for venture funds and companies would drip dry for the remainder of 2020. …


Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape

I’ve spent a considerable amount of my shelter in place time having discussions with some very smart people in the market about what this economic dislocation might mean for the emerging venture fund landscape. See my latest posts here & here for some of my observations and thoughts from this month.

Over the weekend, I asked the emerging manager community questions that were most topical:

[While I tried to keep the questions verbatim for the sake of accuracy, I combined some questions together for efficiency and paraphrased others for clarity. I realize I haven’t gotten to all questions, which I will try to do over the course of the week when I have free time.] …


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Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape

Over the last few weeks, our daily routines have been disrupted by the continued spread of the novel Coronavirus, and many of us may contract or have loved ones contract the virus. Please stay safe, and take every precaution to stay healthy.

While it’s impossible to accurately project the path of the pandemic, it is safe to say that havoc in the financial markets is a short term certainty — In the last week alone, we experienced a 2,000 point drop in the Dow, and clear signaling that the fed will exercise aggressive monetary policy this upcoming week with a large fed funds rate cut. …


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Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape.

As we move into month three of the COVID-19 outbreak, the impact on the global economy has been unmistakable, and arguably the most significant since the US came out of the last recession. Conferences have been cancelled (SXSW!), business travel has nearly grinded to a halt, companies such as Amazon and Twitter have asked workers to stay away from the office, and the public markets have encountered massive turbulence.

Historically speaking, private early stage markets lag behind public markets by 12–24 months, and capital pullback typically occurs only after a sustained period of extreme volatility or downward shifting movement. And while it is far too early to understand the medium to long term effects of the virus on the private capital markets, companies (see Sequoia’s latest cautionary piece) and venture funds must start planning for a potential new reality. …


Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape.

When we launched our emerging manager focused effort in 2012, only a small coterie of sub-$100MM venture funds existed (<100). Our thesis was that this segment of the market would represent one of the most important components of the redefinition of the venture landscape that began in ~2009.

Our approach is fairly simple for the emerging managers. While banking services are ostensibly our offering, our core product offering for emerging managers is the delivery of a suite of services to help our clients launch and scale newer venture franchises (this includes everything from fundraising advice and assistance, to providing access to the resources, network, and data specifically tailored to this segment of the market. …


Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape.

Understanding the family office perspective on venture fund investing

Having covered the emerging venture landscape for nearly a decade now (stay tuned for our updated Micro-VC database, which we will release next week), it’s abundantly clear that family office capital remains the dominant capital source for emerging venture funds — in our last survey of over 100 first time venture funds, an average of 67% of capital closed came from family offices (the exceptions are spin-out managers, which often attract institutional LP capital at Fund 1). …

About

samir kaji

VC/tech advisor, venture blogger, active angel investor, banker

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