LP Survey Micro-VC
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The document discusses the results of a survey of limited partners (LPs) that invest in venture capital funds. Some key results include: 1) In 2017, the total number of US-based micro-VC funds that closed decreased 16% from 2016, but total capital raised increased 5%. 2) Fundraising timelines for successfully closed funds decreased in 2017. 3) The majority of survey respondents were single family offices/high net worth individuals (33%) and fund of funds (31%). 4) The majority of LPs, both institutional and non-institutional, prefer GPs to actively pursue secondary transactions to manage their portfolios and provide earlier distributions. 5) Aside from
LP Survey Micro-VC
- 1. Benjamin Black Managing Director and Co-Founder, Akkadian Ventures Samir Kaji Senior Managing Director First Republic Bank What Does the Data Say?
- 2. Rules of RAISE Our goal is for all participants to feel comfortable and open in order to encourage an authentic exchange of information. To this end, we ask the following: 1. KEEP THE TRUST. We ask that all attendee’s input be kept confidential. So please: no social media, blogging, or press release without prior consent. 2. BE PRESENT. Nobody likes talking to a roomful of people who are looking at their phones. 3. KEEP IT REAL. Building a business from scratch is hard. Let’s talk about the hard stuff and leave the self-promotion at home.
- 3. Massive Uptick in Micro-VC In 2017, total number of US-based Micro-VC funds that successfully closed decreased 16% from 2016, but total capital raised increased 5%
- 4. Fundraising Timelines Fundraising timelines for successfully closed funds decreased in 2017!?
- 5. LP Survey Respondents 33% 31% 12% 16% 8% Other: Corporates, Trusts, etc.
- 6. Typical Capital Commitment by LP Type 76% 12% 12% 38% 31% 31% Single Family Office/HNI Fund of Funds 17% 17% 33% 33% Foundation/Endowment 11% 33% 23% 33% RIA
- 7. Approximately how many venture capital firms will you add to your portfolio in 18-19? 48 3 2 76 5 5 16 3 3 27 3 3 0 10 20 30 40 50 60 70 80 Aggregate Average Median Single FO/HNI Fund of Funds Foundation/Endowment RIA
- 8. How many emerging managers (first or second fund) do you expect to allocate to in 2018-2019? 36 2 1 48 3 3 11 2 2 20 2 2 0 10 20 30 40 50 60 Aggregate Average Median Single FO/HNI Fund of Fund Foundation/Endowment RIA
- 9. Thematic vs. Generalist Fund Preference 45% 23% 32% 53% 18% 29% 0 10 20 30 40 50 60 Thematic Generalist No Difference Institutional Non-Institutional
- 10. Investment Focus Preference 25% 39% 36% 12% 47% 41% 0 5 10 15 20 25 30 35 40 45 50 Geographically focused Agnostic on company location No Difference Institutional Non-Institutional
- 11. Fund Size Preference 53% 25% 22% 59% 23% 18% 0 10 20 30 40 50 60 70 Relatively smaller funds with a focus on providing co- investments and SPVs Relatively larger funds with all investments going into the fund No Difference Institutional Non-Institutional
- 12. Should GPs actively pursue secondary transactions to manage the portfolio, reduce downside risks, and shorten the time to investor distributions? Yes 84% No 16% Yes No
- 13. Aside from poor investment decisions, what about investing in venture capital funds do you find most disappointing/annoying? 17% 8% 19% 17% 29% 0% 5% 10% 15% 20% 25% 30% 35% Transparency Team Turnover Illiquidity Strategy Drift/Investment Valuation Premium Fees
Editor's Notes
- #4: 4X increase in dollars raised, with over 800 fund closed since beginning of 2013
- #5: Much of this can be attributed to repeat Micro-VC funds (Fund II-Fund IV) having closed in 2017 versus Fund I offerings. Many Fund I offerings that started in 2017 have not had a close as the fundraising cycle has become frosty for new managers.
- #6: Good cross section of LP’s. As expected, we didn’t get pensions as they rarely allocate to first time funds, particularly of the size of most first time VC funds.
- #7: Capital Commitment Analysis 52% of Fund I offerings we’ve tracked over last year have targets of <$20MM. Single Family Office/HNI over 75% had an average allocation size of <$1MM. 70% of Fund of Funds had an average commitment per fund of $5MM (with 40% of the respondents indicated an average allocation per fund of $10MM+) Foundations/Endowments and RIAs invest relative to their own asset sizes, however $10MM+ was common for this group.
- #8: Capital Allocation Summary Fund of Funds followed by Single Family Office/HNIs have been the most active venture capital fund investors. Fund of Funds have an average of 40 funds across their portfolio (~3-4x than the other LP types)
- #9: Capital Allocation Summary LP’s are primarily investing in existing managers, but still expect to add a few new names over the next two years. Fund of Funds will be most active in new venture names. Approximately 2/3rd’s of these new venture allocations will go toward true emerging managers (Fund I or Fund II offering)
- #10: Institutional (thematic vs. generalist) VS non-institutional (Single FO/HNI)
- #11: Where is the investment focus
- #13: Fine