20VC: Mark Suster on The Biggest Fundraising Lessons for VCs, Why the Correction in Venture is Still to Come, Why Private Equity Will Replace IPOs and M&A as the Exit Path & The Woke Left and a Trump Administration; What Happens?
May 1, 2024
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Mark Suster, General Partner @ Upfront Ventures, talks about fundraising lessons for VCs, the future of IPOs vs private equity exits, and the impact of extreme political ideologies in society. He shares insights on transitioning from entrepreneur to VC, challenges in market volatility, and the rise of hard tech founders in the industry.
Fundraising lessons for VCs include balancing LP relationships and strategic messaging.
Private equity may replace IPOs and M&A as exit paths due to liquidity challenges.
Investors should prioritize disciplined investing practices and market potential for high returns.
Deep dives
Impact of Overvaluations on 2021 Market Trends
Valuations in 2021 have surpassed historical norms, leading to a correction period. Notably, top firms like SoftBank, Tiger, Koachu, and Insight heavily influenced the market with marked-up deals. The tendency for peak investments coincides with market peaks, indicating a potential extended correction period.
Venturing into Venture: Mark Suster's Journey
Mark Suster, a Silicon Valley veteran, transitioned from serial entrepreneur to venture capitalist in 2007 after selling his software company to Salesforce.com. His unique founder-turned-investor perspective brings invaluable insights to Upfront Ventures, focusing on understanding founders' challenging journeys and offering strategic guidance.
Navigating Market Pressures and Investment Strategies
Amidst market fluctuations, Mark Suster emphasizes the significance of rational entry prices and disciplined investment decisions. By balancing cashflow and selling positions judiciously, he adapts to changing market conditions and anticipates corrections. He underscores the importance of selective investments and strategic approaches to maximize returns amidst evolving market landscapes.
Impact of Decreased Costs on Startup Growth
The decrease in costs for launching products and services, notably in the technology industry, has spurred a significant growth in startups thanks to innovations like Amazon Web Services and relandable SpaceX rockets. This cost reduction, exemplified by the shift from millions to hundreds of thousands of dollars for startup investments, has democratized entrepreneurship and accelerated the pace of innovation in various sectors like space technology and national defense. Startups are seizing the opportunity presented by lower entry barriers, leading to an influx of new ventures and spinouts seeking to capitalize on the changing economic landscape.
Importance of Strategic Investing and Market Alignment
Strategic investing involves nuanced considerations beyond mere financial backing, focusing on aligning with the right market dynamics, valuations, and team capabilities for long-term success. The key lies in maintaining discipline in evaluating opportunities, valuations, and exit environments, with an emphasis on capital efficiency and long-term growth potential. By prioritizing market potential, founder quality, and valuation discipline, investors can navigate the complex venture landscape to identify high-growth opportunities and drive significant returns. This approach underscores the significance of patient and disciplined investing practices, guided by a blend of market insights and team assessment to optimize investment decisions.
Mark Suster is a General Partner @ Upfront Ventures, one of LA's leading early-stage venture firms. Prior to leading Upfront, Mark was a serial entrepreneur having founded two software companies, selling both with the last selling to Salesforce.com. Mark is also a prolific writer and one of his favourite pieces, Lines Not Dots is one for the ages.
In Today's Episode With Mark Suster We Discuss:
1. From Serial Entrepreneur to Leading VC:
How Mark made his way into the world of venture having sold two prior companies?
What does Mark know now that he wishes he had known when he started in venture?
What advice does Mark give to all young investors starting their career today?
2. How to Raise a Fund:
What are Mark's single biggest lessons from 15 years of fundraising for funds?
Should managers look to institutions or friends and family first?
Are LPs sheep? Do institutions anchoring funds lead to many others jumping in?
What is the right amount to do a first close on? What is the right way to message the first close?
What are the single biggest mistakes Mark sees managers make when raising?
3. Exit Environments are F******: What Now:
Why are IPOs not the liquidity events that everyone thinks they are?
When does Mark believe IPO windows will open again?
How does Mark evaluate the M&A landscape today?
With little M&A and IPO activity, why does Mark believe private equity will step into their shoes?
With the change to private equity being the buyer, what does that mean for the sale price of the assets? What does that mean for the future of venture returns?
4. Trump, The Woke Left and The World Around Us:
Is Mark concerned about the potential of Trump winning the election?
Would Mark rather a Biden administration as the alternative?
Why is Mark so worried by the woke left?
Does Mark always believe there has been this deep-seated anti-semitism in the US education system? What can be done to remove this from our education system?
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