The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: Are LPs Open For Business? What Does it Take to Raise a Fund Today? How Has What LPs Want to See in Fund Investments Changed? Why Do LP Incentive Mechanisms Need to Change? Which Funds Will be Hit Hardest with Beezer Clarkson @ Sapphire Partners

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Oct 18, 2023

Beezer Clarkson, who leads investments at Sapphire Partners and has a rich background with Morgan Stanley and Draper Fisher Jurvetson, dives into the evolving landscape of Limited Partners in venture capital. She discusses how LP expectations are changing, particularly regarding liquidity and commitment strategies. Beezer also critiques the current LP incentive mechanisms, suggesting they need a rethink. Finally, she emphasizes the importance of pinpointing standout companies for fund success, showcasing the necessity of both strategic thinking and transparency in this competitive space.

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INSIGHT

Power Law Importance

Understand the importance of the power law in venture capital.
A single power-law company can significantly impact fund performance.

INSIGHT

Fund Returners

Early-stage fund outperformance requires a fund-returning company.
Multiple smaller exits alone don't typically drive top-tier returns.

INSIGHT

LP Investment Activity

LP investment volume has decreased, but commitments are still being made.
The pace of new commitments has slowed down, reflecting market conditions.

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Beezer Clarkson leads Sapphire Partners‘ investments in venture funds domestically and internationally. Beezer has invested in some of the best firms of a generation including USV and Point Nine to name a few. Beezer began her career in financial services over 20 years ago at Morgan Stanley in its global infrastructure group. Prior to joining Sapphire in 2012, Beezer managed the day-to-day operations of the Draper Fisher Jurvetson Global Network, which then had $7 billion under management across 16 venture funds worldwide.

In Today's Episode with Beezer Clarkson We Discuss:

LP Landscape: WTF is Going On:

Are LPs really all closed for business?
What has changed in what LPs want to see from managers they are looking to invest in?
What has changed about the size and pace of new commitments for LPs?
Are all LPs moving away from growth?

2. 2020-2022: Years in Review:

Are LPs frustrated by managers who reduced deployment timelines to 12-18 months?
Are LPs frustrated with managers who did not take liquidity when they could have done?
How does Beezer advise managers on when and how to take liquidity in their best positions?
Are managers accurately marking their portfolios to their LPs today?
Why does Beezer believe the incentive mechanism for LPs is broken today in many ways?

3. How To Build a Top Decile Firm:

Why does Beezer believe if you want to have the best returns, you have to have one company that returns the fund? Can you not do it with multiple half-fund returners?
Is ownership core to all the best firm's top performance? Is it the size of outcome or the size of ownership that drives the best performance across the board?
What does data show on how the best funds take significant risk? What are their loss ratios?
What are the core tradeoffs to Beezer between scaling AUM and providing top decile returns?

4. LP Markets: The Times They are a Changing:

Does Beezer believe LPs will remain cold on large $1BN+ growth firms?
Which segments of the market are hot? Which are cold?
What are the most significant changes we will see in the LP markets moving forward?
Is today the new normal or are we in a downturn that we will come out of?