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

Oct 18, 2023

Beezer Clarkson from Sapphire Partners discusses LP landscape, 2020-2022 years in review, building a top decile firm, and LP perspectives and challenges. They explore the mindset of successful investors, fund performance analysis, and CalSTRS choosing them to manage their early stage venture fund. The speaker also reminisces about friendship and mentions sponsors Cooley and HMC.

49:45

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Episode guests

Beezer Clarkson

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Quick takeaways

Having a power law defining company in a portfolio can significantly impact overall performance in venture capital.

LPs are facing liquidity strains in the market, leading to adjustments in portfolio management and challenges in making fund distributions.

Taking big swings in early stage venture investing and aiming for outsized success is crucial for achieving strong returns.

Deep dives

Importance of Power Law in Portfolio

Understanding the significance of having a power law defining company in a portfolio was highlighted. It was emphasized that having a company with significant returns can change the understanding of how venture works and drive overall performance. It was also noted that in early-stage funds, having a company that returns at least one time the fund is crucial in achieving outperformance.

Challenges in Valuing Investments and Misalignments in LP Incentive Mechanisms

03:55

Understanding the Importance of Power Law in Venture Investing

01:18

Taking Risk and Outperformance: Insights on Fund Size and Ownership

01:14

Introduction

2min

Understanding the Power Law and Achieving Outperformance in Venture Investing

2min

Importance of Fund Returners, Portfolio Diversification, and Exit Dynamics

2min

LP Perspectives and Challenges

17min

The Mindset of Successful Investors and the Relationship Between Fund Size and Ownership

2min

Analyzing Fund Performance

20min

Discussion on CalSTRS choosing them to manage their early stage venture fund

2min

Reminiscing, Friendship, and Sponsors: Cooley and HMC

2min

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?

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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

Episode guests