1/ It's that time of year - my LP EOY analysis on the state of venture in a few simple charts & color commentary

Valuations are shifting, fundraising is slowing & LPs face tough calls. But this isn’t the first time we’ve been here—and there’s opportunity amidst turbulence 🧵 2/ The intersection of @PeterJ_Walker’s recent @Carta analysis, GP @ed_sim & LP @Samirkaji combined insights + the latest @PitchBook data (& a helpful illustration via @nytimes) paints a nuanced picture of the early-stage landscape.

🔻🔻🔻

🧵1/ We've seen a ton of spirited discussion around @cartainc's recent VC fund performance report.

We compared @SapphirePrtnrs early DPI analysis against Carta's corresponding cohorts & wanted to share lessons learned.

TLDR: As LPs - we don’t think cause for any 🚨s. Here's why👇 2/ First, it’s important to remember that interim marks are just that - interim.

They can give an indication of how things are going in a fund at a high level, but do not necessarily predict final outcomes or speak to nuances within portfolio companies.

1/👑 Once upon a time, today's legendary venture funds were emerging managers…

Which is why today I’m excited to share that @SapphirePrtnrs is launching a new program to invest in emerging venture managers with a sole LP, @CalSTRS, the world's largest educator-only pension fund!

Why we are excited about this next chapter👇 🧵

As part of this new program, we are taking over the management of five existing CalSTRS “New and Next Generation Manager Funds,” representing $1.4B AUM.* Collectively, we have invested in 300+ emerging managers.

Our plan going forward is to invest ~$100M/year into emerging venture managers.🙌
@SapphirePrtnrs @CalSTRS @natewcl @LauraLPThompson @isabel_bloch @EvanTarzian 2/ Since we started Sapphire Partners more than a decade ago, we’ve had conviction in EMs as a critical part of the venture ecosystem and a successful LP portfolio. We built our investment program to reflect and support this.

We are frequently asked what drives #outperformance for a #VC

To answer this we created a database of enterprise vs consumer performance 📊to spot patterns & analyze returns

🧵to share high level findings, but to dig deeper, download the full report👇

🔗bit.ly/3Cf17Uv First, let’s define a power law::

We mean that only a small percentage of returns is responsible for a large percentage of overall return value, either for a specific fund or the industry as a whole.

To reserve or not to reserve, that is the question… and a question we are asked frequently by #VCs.

The answer? It depends on your investing strategy, but TBD on results.

😉 #VCs take a couple different approaches in their initial check vs follow on strategies. Here’s what we see in our database ➡️

#OpenLP

Best wishes for 2022 everyone! 🎉

As we enter the new year, I wanted to share a bit of LP perspective.

We all know the venture market was on 🔥 in 2021, but how is that actually manifesting and what does that mean for how the proverbial table is being set for 2022? Here’s what us LPs are seeing and some of the questions LPs are asking themselves going into 2022.

#OpenLP

Hey GPs - In the last few weeks I’ve had multiple asks about emerging manager benchmarks/what we are seeing for 2019 (and other recent) vintages.

So here’s a quick 🧵 breaking down what we see in the case of 2019 venture funds and the greater LP context…

#OpenLP Key point: 2019 funds, emerging or otherwise, are *really* new.

Stating the obvious here, but it’s worth reiterating.

In the olden days of venture, asking about benchmarks on funds <2 years old wasn’t a thing.

It’s September - time for the annual run to raise/close out #VC funds before the end of the year. For many #GPs - this means reaching out to an LP who passed on a previous fund. This thread deep dives into what to keep in mind as you circle back and reach out to #LPs that passed in the past (which I *do* recommend doing btw)👇

#OpenLP

Lots of ink is spilled parsing differences b/w pre-seed vs seed vs early stage (etc…) investing. But some truths hold across all stages of venture investing! @alexiskold digs in here: startuphacks.vc/blog/7-truths-… #OpenLP Truth 1. Venture outcomes are driven by a power law.

Power law is an immutable law of the universe, and that extends to #VC too. Most startups fail, but the biggest winners, when they happen, tend to be huge.

VC’s NEED 🦄’s (and decacorns!) to succeed.

The great debate in #VC “follow-on/pro-rata investing” vs “multiples on dollar invested” continues... #OpenLP --> .@fintechjunkie wrote a fantastic thread detailing the power of concentrating #vc’s capital into its best companies.

https://twitter.com/fintechjunkie/status/1364641555055837188