Neil Datta’s Post

Seed VCs are turning to new ‘pro rata’ funds that help them compete with the big firms Alpha Partners, SignalRank and now SaaS Ventures help seed VCs pay for shares when big VCs try to price — or push — them out Lee Edwards, partner at Root VC, has a saying at his firm that “pro rata rights are earned, not given.” That may be a bit of a stretch since pro rata refers to a term that VCs put in their term sheets that gives them the right to buy more shares in a portfolio company during consequent funding rounds to maintain an ownership percentage and avoid dilution. Still, while these rights are not exactly “earned,” they can be expensive. One of the latest trends in VC investing these days are funds dedicated to helping seed VCs exercise their pro rata rights. https://lnkd.in/dRM3RvdA By Christine Hall

Big news from Index Ventures! We’ve raised $2.3bn in new funds—an $800m venture fund and a $1.5 billion growth fund. Across nearly three decades of investing, this latest announcement is possible because of a strong foundation built by exceptional entrepreneurs, incredible LPs, and a team of investors, strategists, and operators all deeply committed to our craft. 108 Index-backed companies have reached a valuation of $1 billion or more, 23 have surpassed a $10 billion valuation, and 57 became publicly traded companies. I look forward to seeing what the next generation of entrepreneurs will create. I can only imagine it will be even better than what I can envision today :) https://lnkd.in/gDxiN8ig

Norwest Venture Partners is breaking records as it raises $3 billion for his 17th vehicle! Norwest Venture Partners is making headlines once again as they raise a staggering $3 billion for their 17th fund, maintaining their fund size despite the current market downturn. Founded 65 years ago and backed solely by Wells Fargo, #Norwest Venture Partners has been a powerhouse in the #VC space. With a legacy of success and innovation, Norwest is led by senior managing partner Jeff Crowe, who has played a pivotal role in the firm's growth and impact. Backed solely by Wells Fargo, Norwest's latest fundraise of $3 billion is a testament to their continued strength and resilience in the face of market challenges. Despite the downturn, Norwest remains committed to staying competitive in the dealmaking environment, focusing on growth equity, healthcare, and investments in regions like India. Norwest's diversified approach sets them apart, allowing them to navigate market fluctuations with agility and foresight. Operating globally with investments in North America, India, and Israel, Norwest's multi-strategy fund encompasses early-stage and growth equity businesses, with a recent addition of a biotech team to enhance their healthcare practice. The article on TechCrunch in the first comment. Want to stay up to date with the market? Here my newsletter: - Linkedin: https://t.ly/s541W   - Substack: https://lnkd.in/dzfGJzmW

Today, along with my Partner Liza Benson, I am thrilled to share the final closing and launch of MV Core Fund III! With $230M in fresh capital, our latest fund brings the firm’s total assets under management to more than $500M. Thank you to all of our investors, strategic partners, portfolio companies and friends of the firm - you are the foundation that propels our journey forward and we celebrate this milestone together with you! And of course, a huge thank you to the best-in-the-business Moderne Ventures team - your hard work is what keeps us growing and delivering results, quarter after quarter. Today’s venture investing environment is among the best we’ve seen in decades and we are thrilled to have fresh capital to deploy while continuing to scale our one-of-a-kind industry immersion program, the Moderne Passport, to help create customers for our companies and value for our strategic partners and the Fund. Even after two decades of venture investing, we are more inspired than ever for the innovation that lies ahead. Let’s GO! 🚀 Read the full press release here: https://lnkd.in/gimNQWbe Check out these stories featuring our news: The Wall Street Journal: https://lnkd.in/gszsXk3m Axios: https://lnkd.in/g_sEfta2 Crain's Chicago Business: https://lnkd.in/g6iy4wf5

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

Family offices play a crucial role in the venture capital industry. However, some of them still hesitate to invest in VC due to past unsuccessful forays into the asset class. In our latest blog post, our principal, Andreas, breaks down the three most common mistakes we see family offices make and shares insights on how to avoid them. #VentureCapital #FoFs #Investing #FamilyOffices

🐣 Wonder how family office managers can better serve the next generations of the family (instead of protecting their own hides)? So many gems from this Multiple Capital post on how family offices can better invest into VC: 🧗♂️ Venture capital outcomes... are governed by exceptionalism 📛 Adverse selection is one of the main obstacles family offices face when pursuing direct investments. 📈 a risk-averse mindset... leads to the common misconception that investors should focus on somehow lowering the risk associated with venture capital by doing things such as only investing in later-stage companies, avoiding certain industries or technologies that are deemed too risky or insisting on onerous terms and control rights. However, this should never be their goal. #capitalmanagement #diversification #venturecapital #fundraising

I don't do a lot of stories about firm/fund launches, but I thought this one was worth digging into because of the existential debates currently happening about the future of venture capital. The VC asset class has expanded enormously over the last 10-15 years. Many of the biggest firms have tens of billions of assets under management and are only getting bigger. It has made me wonder whether VC firms must become next JP Morgan / Blackrock / Blackstone, accumulating as many assets as possible and raking in fees, or else wither and die. (Bigger funds tend to mean lower returns, btw.) The other big question is whether the firms that cling to the old school, traditional unscalable VC model can survive in a world of giants. Some investors are trying to forge a new path in the middle. I thought Nicholas Chirls' approach with his new firm, Asylum, was interesting. It will stay small, invest slower, and seek out companies that require less funding. He wants to model the firm after A24, the indie film studio. Read more about it and the broader industry debate happening here: https://lnkd.in/gXmnviv5

In the past few years many VC firms have raised new funds smaller than their previous funds, which goes against the historical trend. The weak fundraising environment definitely had a lot to do with it, but some investors chose to scale back. This trend suggests some VCS are taking a more cautious approach to investment, driven by market uncertainty and a greater emphasis on long-term value creation. Investors are increasingly focusing on sustainable growth, thorough due diligence, and supporting their portfolio companies through more turbulent times. For founders, this means a stronger focus on capital efficiency and building businesses with a solid path to profitability. For VCs, it’s about balancing the need for returns with a more thoughtful, patient approach to backing the next generation of innovators. I'm of the view that this is all good for the industry and the economy, but I do wonder where all this capital efficiency is going to come from after two years during which most of the startups that have managed to stay afloat have already been forced to cut costs to the bone. Interestingly (from my perspective, at least), one area where many startups could still cut costs considerably without sacrificing quality is on legal fees. I'll be discussing how next week at Startup Boston. Register here: https://lnkd.in/e9a4S2TP. #VentureCapital #Fundraising #Startups #InvestmentTrends #SustainableGrowth #Entrepreneurship #VC

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