Good morning 👋
For better or for worse, I love hearing how LPs are thinking about the private markets.
Maybe that’s because I used to sit in that seat, or maybe it’s because I have a weird obsession with macro thoughts about niche industries. Who knows?
Harry Stebbings put out a question earlier this week about whether or not we will see more or less venture $ over the next five years.
Here is a breakdown of the best response to that question …
P.S. 🎧 We’re giving away a pair of Airpods Pro 2 to one lucky reader …
Whoever refers the most new subscribers this quarter (ending June 30) will win a brand new pair of Airpods on us.
Today’s highlights
Venture in 2030
Ramp data on businesses dropping their ad spend
JetBlue calls it quits on their CVC
The downside of secondaries
TOP
will we see more or less venture money in five years? 🔮
This question was asked by Harry Stebbings on X earlier this week. Meghan Reynolds (one of my new favorite follows) have her two cents.
These are here thoughts blended with our take:
There won’t be less $$, but the % of the capital (and possibly the amount) coming from traditional 10 year funds will be less. What’s filling the gaps? Evergreen funds, secondary funds, co-invest, direct strategies. If you’ve been following us for a while, we’ve written about this before (here, here, and here).
There won’t be less capital, but there WILL be fewer VC funds. The explosion of funds in 2020 was a temporary phenomenon. Survival of the fittest. 100% agree. The bar has been raised, LPs need liquidity to recycle, and backing another seed fund is not very attractive right now.
The % of capital that comes from E&Fs and pensions will go down, the % that comes from sovereigns and HNW is going up. Also sovereigns can eventually skip the funds and just do the deals direct (eg., the MGX in UAE) and then see #1 above. The HNW are actually able to skip the funds too with all of the SPVs offered by banks. Everybody wants to do direct, and everybody (funds included) overestimate the quality of their deal flow. This creates more fee sensitivity as more LPs think they can do what their managers do without needing to pay management fees. I’ve written in detail here why I don’t think that is a good idea.
I agree with the $700M series A,B,C fund math from your pod and think the LP world will agreement masse too. “VC” funds will get smaller but “Growth” Funds will stay big. I don’t entirely agree with this as we’re seeing more and more multi-stage funds popping up.
To that end, the size of VC industry will depend how define it. Is Databricks at $60B venture? Open AI at $300B? Do the funds doing that get included in the size ? If so, the industry will continue to grow at scale. Companies WILL stay private for longer and LPs will need exposure to the best companies (public AND private) in order to maximize returns. Nobody really has a good definition of “venture” anymore, but companies staying private longer is a real trend that every investor has to reckon with. Longer time to liquidity = lowered IRR, and investors are increasingly being asked to know when to sell.
Together with Republic
Private Markets Aren’t Just for the 1% Anymore.
Institutions invest billions into private markets because they may provide superior market positions and steady cash flow, even in a shaky market–now you can too.
For the first time ever, elite private assets are available to all investors for as little as $500 with Hamilton Lane Private Infrastructure Fund.
*Source: Hamilton Lane data, Bloomberg as of January 2024. Past performance is not a guarantee of future returns.
All securities come with specific risks not limited to a total loss of your investment. Past performance is not indicative of future results. Please review the risks specific to this investment on the HLPIF deal page hosted on Republic.com/hlpif
TWEET
HEADLINES
JetBlue sells off venture arm as airline’s losses mount (Pitchbook)
Maker of AI-coding software Cursor is doubling its valuation every 8 weeks (Pitchbook)
Apple and Anthropic reportedly partner to build an AI coding platform (TechCrunch)
Employer.com scoops up another fintech in purchase of MainStreet.com (TechCrunch)
Anthropic to Buy Back Employee Shares at $61.5 Billion Valuation (The Information)
RECS
📝 Insider: Get investment memos, market maps, behind-the-scenes updates, and other things we don’t send to the rest of the list. (Get your first memo free)
⚙️ Operator: Get everything in Insider plus all of the best tools, data, and other resources we have used to build this business. (Get 20% off)
📶 Boardroom: Add our team as fractional problem solvers (whenever you need it).
MEMOS
Outtake: Thoughtful cyber agents to secure high-profile people
HumanLayer: Human-in-the-loop agents
Chima: Interoperability for AI agents
Superpower: The all-in-one subscription for preventative healthcare
Documenso: The DocuSign killer
LINKS
🧪 Billion-Dollar Misfits—-Inside Y Combinator’s Startup Formula: Gary Tan, president of Y Combinator discusses the key to success and how it can make or break a startup
↙️ The Downsides of Secondaries: A good look at what are secondaries and the impact secondary sales have on current employees, future employees and equity grants
😕 How Early Wins Can Become Missed Fortunes in the Pro-Rata Trap: When early-stage investors don’t follow up in their best companies, their stakes quietly shrinks round after round
🗣️ On Taking Feedback from Investors: Advice on taking criticism without getting defensive
📶 The Future of Private Market Roles: Are the glory days of private market jobs over?
REFER
Win a free pair of Airpods Pro …
Refer more than other readers between now and June 30, and we’ll send you a paid on the house👇
Thanks for reading this far and giving us a little bit of your attention this week.
Feel free to unsubscribe whenever this stops becoming valuable to you.
- Clay
(Founder @ Confluence.VC | GP @ Outlaw)
