Chris Gonzales’ Post

It is no secret that many VCs are facing pressure from their LPs to return capital as LPs have become overallocated to private assets in recent years. The problem is exits are few and far between in the current market with already-low counts of M&A transactions dropping by about 6.5 percent, IPOs dropping by nearly 40 percent and SPAC deals dropping by one-third from Q4 2023 to Q1 2024, according to data from CB Insights. That's why Dan Engel told me he "decided to get creative." His firm Santa Barbara Venture Partners closed out Q1 2024 with four exits from its vintage 2020 debut fund, three of which happened in the span of just four weeks. Engel leveraged the secondary market, a long-stigmatized strategy, to achieve gross IRRs of 33 percent and 44 percent on partial sales of his firm's stakes in two companies. He told me that the strategy has been supported by other GPs in the industry, albeit quietly. "I really don't get why other VCs aren't doing the same. It's a strategy that some are quietly agreeing makes a lot of sense, but they aren't going to get loud about it because it will make them look bad." Read more on Venture Capital Journal. #venturecapital #secondaries

The rise of higher valuations and a decrease in IPOs are driving VCs to pivot towards Opportunity Funds. With IPO markets frozen and many startups overcapitalized, we’re witnessing a shift in strategy. The new approach emphasizes selective follow-on investments, secondaries, and a strong focus on AI-driven sectors. Find out more about how VCs are adapting to the current market dynamics:

Summary: Early-stage VC firm Kearny Jackson has secured $65 million in capital commitments for its third fund. The bi-coastal firm primarily invests in B2B SaaS and fintech infrastructure. Key takeaways: Kearny Jackson emphasizes time to value for its portfolio companies and has a mix of LPs from various backgrounds including Sequoia and Marc Andreessen. The larger fund size gives the duo more leverage to execute their strategy of gaining more ownership in their portfolio companies. The firm has made notable investments in companies like Motherduck, Cortex, and Comulate with its first two funds. Counter arguments: Some may argue that the smaller ownership stake targeted by Kearny Jackson may not be as favorable to founders. The firm's reliance on LPs for funding may limit their ability to make riskier investments.

In today's venture capital landscape, LPs are more cautious toward opportunity funds. This shift arises from top companies' perceived overvaluation, overcapitalization, and uncertain paths to public markets. The recent IPO slowdown only adds to this sentiment, prompting some VCs to reconsider their strategies. Companies must strengthen their internal foundations before seeking capital. By demonstrating solid operational efficiencies, robust financial health, and a clear value proposition, businesses can better position themselves for future opportunities in the capital markets. Adapting to these evolving dynamics is essential for sustaining growth and capturing investor confidence. What strategic adjustments are you considering to navigate this landscape? #VentureCapital #InvestmentStrategies #BusinessGrowth #BuildValue #StrategicAdvisory #OperationalExcellence #CapitalMarkets #FinancialHealth #IPO #StartupFunding #RecurrentRevenue

Demand for VC funds that double down on winning investments is shifting as investors see their best companies as overvalued, overcapitalized and without a clear path to go public. GPs typically run opportunity funds to back standout portfolio companies as they mature. The pitch to LPs is that it increases exposure to growth-mode companies on the verge of profitability or an IPO. With the IPO slowdown, that pitch has fallen flat. VCs have dialed back their opportunity offerings—or reoriented those strategies to go after secondary stakes in startups or other venture funds. https://lnkd.in/g4cyPe_T #lps #bearish #venturecapital #vc #opportunityfunds #vcfunds #gps #ipo #slowdown

Navigating the venture capital investment landscape can be a lengthy process, with the average time from initial funding to exit increasing by 2.5x since the early 2000s. Given the subdued exit landscape and the market's demand for a greater variety of liquidity opportunities, both investors and founders are turning to secondary transactions to achieve liquidity before a sale or IPO. In the 19th instalment of Orrick's Founder Series, Jamie Moore and Kristy Hart offer top tips to help UK startups navigate the increasingly popular world of secondary transactions.   https://lnkd.in/eEPpRu9D #VentureCapital #SecondaryTransactions

Lead Edge Capital's Mitchell Green is reshaping the investment landscape, urging investors away from overvalued VC deals. With successes like Alibaba and Duo Security, Green credits a strategy that focuses on lesser-known, scalable companies. Forget the crowded venture capital space—Lead Edge is thriving by tapping into companies that others overlook, like tax-planning software companies in Texas. Even as Green navigates investments in major Chinese companies like ByteDance, he's eyeing the future with an agile investment strategy. Mitchell's insights are a clarion call for investors looking beyond traditional VC models to find robust growth opportunities in 'control deals.' Is this the future of venture capital? Let's watch and see. Source: TechCrunch #Investment #VentureCapital #Innovation #Growth #Strategy

Nice piece from PitchBook around VC opportunity funds: "Demand for VC funds that double down on winning investments is shifting as investors see their best companies as overvalued, overcapitalized and without a clear path to go public." Interesting change of tack from Lightspeed, however - whose "preliminary fundraising has reportedly emphasized secondary equity stakes and LP fund positions. The firm could also take controlling stakes and execute turnarounds of floundering firms. That would depart from the typical opportunity fund playbook of throwing more cash at growing portfolio companies. The shift speaks to how VCs are adapting their strategies to a different market." #venturecapital #vc #privatemarkets #opportunityfunds

The hidden years of inception stage. Founders & LP’s rarely understand that the journey of building a great company can involve up to three years of work before an early stage VC will get involved. h/t Peter Walker for the years from incorporation data from Carta https://lnkd.in/e5fFkvDt #vc #founders #investing Antler

Venture capitalists are embracing the secondary market as a viable option for generating exits in a market where liquidity events are scarce. The stigma around selling on this market is starting to fade. #VCJ #VentureCapital #Secondaries