Venture Unlocked: The playbook for venture capital managers

The art of raising from LPs in an economic downturn with Mark Suster, Upfront Ventures

Aug 30, 2023

Mark Suster, managing partner of Upfront Ventures, discusses the current state of venture fund fundraising and explores different sources of capital for emerging managers in the venture capital space. He also discusses the benefits of hosting events for LPs, the differences between raising funds from institutional LPs and family offices, and the decision-making process of big pensions and family offices when it comes to investing in emerging managers versus established firms.

52:10

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Mark Suster

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Quick takeaways

LPs should be approached based on their specific situations and investment strategies.

Emerging managers should prioritize reserves and maintain a balanced portfolio approach.

Deep dives

The Current State of Venture Fundraising

Venture fundraising has been impacted by the macro challenges in the market, with a significant drop in capital raised in 2022 and early 2023. This affects both big and small funds, as the market has shifted from a period of easy fundraising to a more challenging environment. The oversupply of capital in recent years has created a misconception that fundraising into startups was easy. However, the current market conditions are reminiscent of the post-financial crisis period in 2011, where venture capital was questioned as an asset class. LPs have been impacted by the denominator effect and the numerator problem, causing them to slow down their pace to venture. Despite these challenges, there are opportunities for emerging managers to focus on specific pools of capital, such as pension funds, sovereign wealth funds, and RIAs who are increasingly interested in venture investments.

Introduction

4min

Sources of Capital for Emerging Managers in Venture Capital

18min

Benefits of Hosting Events for LPs and Non-Obvious ROIs

3min

Raising Funds from Institutional LPs vs Family Offices

20min

Investing in Emerging Managers versus Established Firms: Trade-Offs and Risk Diversification

3min

Behavior Dynamics and Reserves in Venture Capital

5min

Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued evolution of the VC landscape.

Today we’re excited to bring Mark Suster back on the pod. Mark is the managing partner of Upfront and also a frequent contributor of great content for the venture ecosystem through his blog, Both Sides of the Table, which I’d highly recommend you subscribe to.

Mark and Samir were recently talking about venture funds raising in this market, and we thought it would be timely to record a session on what we are seeing, and how venture fund managers should think about navigating in this market.

About Mark Suster:Mark Suster is a Partner at Upfront. He previously was the Founder and CEO of two successful enterprise software companies, the most recent of which was sold to Salesforce.com where Mark became VP, Products. Prior to being a founder, Mark was a software developer at Accenture where he lived and worked in Europe, Japan and the U.S.

Mark is a graduate of UCSD and has an MBA from the University of Chicago.

In this episode we discuss:

(01:51) With fundraising down from its high in 2021, what are GPs and LPs saying about the market(04:33) What institutional investors are saying about the market(09:19) How emerging managers can access larger global pools of capital(13:47) Building a sales pipeline for your fundraising process as an emerging manager(18:03) Moving deals through the mid-funnel death trap(21:55) Non-obvious things managers can do to improve their fundraising(25:29) Strategies to talk to Family Offices versus large institutional investors(30:49) How to stand out as a manager in a crowded field(34:17) Preparing for an LP meeting(38:45) The bull case for venture moving forward(41:44) How are LPs thinking about venture as an asset category and about the liquidity premiums across the entire market(45:49) Putting in the work to find good managers versus investing in a larger brand name fund(47:30) The importance of having a reserve as an emerging manager

I’d love to know what you took away from this conversation with Mark. Follow me @SamirKaji and give me your insights and questions with the hashtag #ventureunlocked. If you’d like to be considered as a guest or have someone you’d like to hear from (GP or LP), drop me a direct message on Twitter.

Podcast Production support provided by Agent Bee

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit ventureunlocked.substack.com

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