A Year Of Misplaced Fear (And Why It's Time For Investors To Leave The Crowd)
Many venture capital LPs have reacted to recent economic uncertainty by concentrating investments in megafunds, mistaking perceived safety for better returns while potentially sacrificing the higher upside that venture investing is meant to deliver. In this guest commentary, Sara Zulkosky, co-founder and managing partner of Recast Capital, contends that smaller emerging VC managers are a more attractive source of long-term returns for investors willing to look beyond the crowd.
Key Takeaways
- Guest Author By Sara Zulkosky We've spent the past 12 months navigating a relentless wall of worry: a series of macro shocks that have brought venture capital LPs into a sit-and-wait posture.
When you drill down, however, the innovation economy hasn't had a sudden collapse in fundamentals.
- It's an understandable psychological defense mechanism.
If you're an investment officer, it's hard to be criticized for backing a brand-name firm.
- The LPs worth challenging are the ones who could invest in next-generation managers and choose not to.
And so it comes as little surprise to me that for two years running, LPs have reported their venture allocations are underperforming their benchmarks.
- The latest research , a study of nearly 2,500 VC funds from 2000 to 2024, found that emerging managers had an average IRR of 17.
- We'll be over here building the future.
Stats & Key Facts
- #Crunchbase data shows that through April of this year, 80% of all U.
- #venture investment went to rounds of $500 million or more , spread across just 29 companies.
- #True venture - the smaller, disciplined, sub-$100 million funds - keeps working.
- #15% as compared with established managers' 9.
Many venture capital LPs have reacted to recent economic uncertainty by concentrating investments in megafunds, mistaking perceived safety for better returns while potentially sacrificing the higher upside that venture investing is meant to deliver. In this guest commentary, Sara Zulkosky, co-founder and managing partner of Recast Capital, contends that smaller emerging VC managers are a more attractive source of long-term returns for investors willing to look beyond the crowd. Guest Author By Sara Zulkosky We've spent the past 12 months navigating a relentless wall of worry: a series of macro shocks that have brought venture capital LPs into a sit-and-wait posture.
When you drill down, however, the innovation economy hasn't had a sudden collapse in fundamentals. Investors' flight to perceived safety fundamentally misunderstands the risk profile of the moment. The flight to 'safety' Feeling uncertain, the herd does what herds do: run toward the megafunds.
Crunchbase data shows that through April of this year, 80% of all U. venture investment went to rounds of $500 million or more , spread across just 29 companies. Some have called this the bifurcation of venture.
For more details please read the original article at Crunchbase News.
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