The most interesting / useful survey of LPs allocating to emerging VC managers that i have come across - courtesy of @Samirkaji and @Beezer232 (with some observations in thread) - pevcbanker.com/lp-survey-resu…
2/ “established” VCs seek super stable sources of capital and hence seek out endomwments and pension funds who invest across multiple cycles and take time to build very long term relationships
3/ and these investors because of their size are often ill suited to smaller managers, effectively shutting them out of this market segment, except for the view who have active “small tickets” emerging manager programmes
4/ Fund of funds suffered from a trope whereby many investors considered “fees on fees” players were destined to disappear - this hasn’t panned out in any meaningful way
5/ Fund-of-funds have continued to justify their existence through selective investor management and by being good partners to the VC they back - nowhere is this truer than in the emerging manager segment
6/ Fund-of-funds tend to know the VC market inside out and provide good validation to emerging managers (in the absence of the world’s most sophisticated endowments, of course)
7/ in particular they provide much needed comfort to family offices - who have desire to be exposed to tech investments but have much less visibility on and experience of venture managers
8/ the task of selecting venture managers is hard - it’s an incredibly undifferentiated product from the outside and most VCs are decent at selling themselves - especially in Europe where so few have track record
9/ vertical focus by VCs is often a legit strategy but it’s as often used to “tick the LP box” - anyone who says they invest in SaaS + marketplaces + emerging tech + companies with network effects / accreting data plays ... basically covers the whole market
10/ as noted in this survey - the direct co-investment strategy is now a major trend - I’m curious to see how this plays out as brand-name VCs fight with internal syndicates on later stage rounds 🤔
11/ As with most things I revert to first principles - who are the best entrepreneurs going to choose as their funding partners ? This game is about being picked as much as it is about picking.
12/ and a big question for LPs especially family offices is : how do I keep getting access to the best emerging managers as they mature and started getting approached by the best FOF and endowments ? /EOT
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