VCs are selling shares of hot AI companies like Anthropic and xAI to small investors in a wild SPV market

VCs are clamoring to invest in hot AI companies, and willing to pay exorbitant share prices for coveted spots on their cap tables. Even so, most aren’t able to get into such deals at all. Yet small, unknown investors, including family offices and high-net-worth individuals, have found their own way to get shares of the hottest private startups like Anthropic, Groq, OpenAI, Perplexity, and Elon Musk’s X.ai (the maker of Grok). READ MORE

Why Are Exits A Perennial Problem For VCs?

Venture capital firms (VCs) suffer with exits more than private equity (PE). Traditional wisdom suggests that they invest earlier in the life cycle and have to wait longer for the exit. Is this the real reason?

The past two years have been challenging for distributions for both VCs and PEs, especially the former hitting a 14-year low of 5% in distributions as a percentage of net asset value. Average distributions to paid-in capital (DPI) for VC funds launched in 2018 stand at a meager 0.3 times for both EU and U.S. managers, while DPI for funds launched in 2013 is at 1.1 times and 1.8 times, respectively. READ MORE

Main Risks And Opportunities For Venture Investors

Emerging markets provide numerous options for venture investors seeking development and variety. These countries have a large population of young, middle-class customers, propelling their marketplaces to grow faster than developed ones.

My experience as an investor has shown that the choice of investment focus depends on the geographic market. The LATAM, MENA (the Middle East and North Africa) and SEA (Southeast Asia) regions seem to be the most attractive. There, projects can receive an additional boost factor due to the market’s rapid growth. READ MORE

Private equity and mismanagement: Here’s what really killed Red Lobster

There are lots of stories you can tell about why Red Lobster declared bankruptcy this week. You can point to the impact of the COVID pandemic, which put a dent in the full-service dining market that Red Lobster never recovered from. (According to its bankruptcy filing, Red Lobster’s guest count is down 30% from 2019.) You can cite the impact of inflation and higher wages for restaurant workers, which has raised the cost of dining out and made cheaper fast-casual restaurants more appealing to consumers. And you can enumerate the chain’s marketing missteps, including its introduction of the now-infamous Ultimate Endless Shrimp for $20 promotion in May 2023, which cost Red Lobster $11 million in losses in less than a year. But the biggest reason Red Lobster went under is pretty simple: Its owners sank it.  READ MORE

The Goldilocks Scenario Every VC Is Hoping For

Over the past few years, we’ve witnessed the meteoric top of the venture and startup markets where valuations were through the roof, investors were competing with each other on speed (instead of due diligence), founders were exclusively focused on raising the next round, and startups had an almost unlimited source of capital to pursue growth at all costs.

Those days ended with a series of significant blows to the ecosystem including the Silicon Valley Bank collapse, global wars and rising interest rates. READ MORE

The VC reset lets ‘quality deals’ shine

Raising venture capital has never been a given, but economic factors in the 2010s led to a historic flood of startup investment that gushed forward throughout the last decade. Now, the tides have turned. The return of interest rate hikes has sobered the VC community. 

That’s a positive thing, according to Nasir Qadree, founder and managing partner of DC-based Zeal Capital. “I think the market needed a reset,” he said, “to understand quality deals.” READ MORE

The Power of the 118-Hour Decision

Here’s how people think great things happen in Silicon Valley: A bright-eyed startup founder sketches a groundbreaking idea on a napkin. The napkin is picked up by a savvy venture capitalist. The VC glances at the sketch, gets excited, and wires millions of dollars to the young entrepreneur. And a unicorn—that is, a company that will reach the $1 billion level in value—is born.

This narrative of high stakes, fast decisions, and a risky gamble is alluringly cinematic. It's also a myth. And for anyone who wants to be a successful founder or investor, it’s a dangerous one. READ MORE

Defense Tech Funding Slows At Start Of Year

Defense tech became a popular topic last year — especially as the likes of Gecko Robotics, Shield AI and True Anomaly racked up big rounds — but this year has not continued that hot streak for the industry.

Through the middle of May, funding is less than half of what it was at the same point last year, per Crunchbase data, despite the war in Ukraine continuing into its third year and tensions in the Middle East running high.  READ MORE

What Will it Mean for the Innovation Ecosystem if a Recovery in Venture Fundraising Takes Longer than Expected?

Everyone is watching to see when venture fundraising will rebound. There has been much speculation surrounding when it will bounce back, and PitchBook is is now predicting it could be 2028 before we see a real recovery in venture fundraising. In this post, we explore the prognosis for a recovery and what it could mean for the greater innovation ecosystem.

Venture capital firms, or “VC’s”, experienced massive growth in 2021 through 2022, seeing their assets under management (AUM) grow 58% to $3.8 trillion. Fundraising was a principal driver of that growth; however, after those record-breaking years, venture fundraising has fallen off significantly. PitchBook analysts don’t expect this to recover to those kinds of highs until after 2028.  READ MORE

How Venture Capital Uses Revenue Multiples

The deeper you get into venture capital, or equity investment generally, the more familiar you will become with the concept of “multiples” as a tool for quickly analyzing company value.

However, there is a divergence of views about the role multiples play in venture capital investment decisions. A generational divide opened up over the past decade, with a younger cohort of investors using multiples more aggressively. READ MORE

4 tricks venture capitalists use to make meetings better

“I’ve searched all the parks in all the cities—and found no statues of committees,” proclaimed the famous British writer G. K. Chesterton. VCs are well aware of inefficiencies and biases in groups; they also know that these biases are particularly dangerous in a highly uncertain world. And they know that team members with prepared minds can make the right call if they design a process to avoid these blind spots. In our research and work with VCs, we observed many specific practices with which VCs equip themselves. The next time you huddle in a room with your team members, you’ll be more likely to make a better decision with these four mechanisms we have learned from VCs.  READ MORE

How the drivers of private equity value creation are changing

Private equity (PE) firms thrive on their ability to acquire and build great businesses even in challenging times. They are skilled at creating rapid value and adapting their plans as circumstances change. They have always had a differentiated approach that gives them an edge, and their interventionist nature is key to getting returns in a competitive market.

Given the significant ongoing shifts in the macroeconomic environment, what can PE firms do differently now to keep their private equity value creation plans on track? READ MORE