E5: Mark Suster and Samir Kaji on the 2024 Venture Market, IPOS, and Secondaries
Feb 17, 2024
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Discussions on the 2024 venture market, secondary sales by VCs, IPOS, strip sales, continuation funds, and early stage fintech. Insights on firms like IVP and Kleiner Perkins, mistakes GPs make with LPs, and top recent investments in AI, healthcare, and defense technology.
Renewed confidence in venture fundraising market for Series B and beyond.
Strategic DPI and liquidity management crucial for venture capital funds.
2024 critical year for Fintech IPOs with market corrections expected.
Succession planning and fresh talent vital for firm's turnaround and adaptability.
Deep dives
IVP's 18th Fund Signals Renewed Confidence in Venture Fundraising Market
IVP, a venture capital fund well-known for backing startups like Coinbase and Twitter, is raising their 18th fund, targeting between $1.3 and $1.5 billion. This indicates renewed confidence in the venture fundraising market, specifically for Series B and beyond. The recent drop in valuations for Series B and C companies presents favorable tailwinds for IVP to invest in companies with improved financial discipline and better unit economics. With reduced competition and limited supply of capital for Series B, C, and D rounds, it is an opportune time for quality companies to enter the market.
Considerations for Fundraising and Right-sizing Target
When firms like IVP raise funds, the target size is influenced by supply and demand dynamics. The market conditions, investor sentiment, and LP supply are key factors in determining the appropriate fund size. To execute their strategy effectively, funds need to assess the current market and consider reasonable deployment of capital. Over-raising can lead to inflated valuations, larger checks, and potential strain on fund performance. Experienced managers take these factors into account during the fund-targeting process.
Fundraising Outlook and Market Conditions for Early-stage Companies
The fundraising landscape for early-stage companies is gradually shifting. While a reset in the market may not be evident immediately, signs of change are emerging. Funding cycles are lengthening, and raising capital takes more time and effort. The market has become more discerning, with increased scrutiny and diligence from investors. The pressure is on emerging managers and solo GPs, and not all funds that raise early-stage capital will succeed. However, the market dynamics are beneficial for top-performing managers who can navigate these challenges.
Examining the DPI Strategy for Exit and Returns
Distributions per paid-in capital (DPI) and liquidity management play a crucial role in venture capital funds. DPI represents the cash distributions or exits generated by successful investments. Managing DPI requires strategic decision-making, such as selling a portion of positions when they reach a certain threshold of return or when founders or LPs require liquidity. Achieving a balance between short-term gains and long-term returns is crucial, as optimizing DPI should not compromise the overall performance and potential upside of investments.
The Future of Fintech and the IPO Market in 2024
The Fintech sector experienced a surge of funding and valuations, but also faced challenges and market corrections. Fintech IPOs have come off their lows, as public stocks gradually recover. F prime capital's analysis suggests that 2024 will be a critical year for Fintech IPOs. The industry is expected to undergo a washout phase where some overvalued and underperforming companies will face difficulties. However, Fintech remains a cornerstone of the economy, and there is ongoing potential for innovative companies, particularly in AI-driven finance and novel infrastructure, to disrupt traditional financial markets.
Kleiner Perkins' Remarkable Turnaround and Succession Planning
Kleiner Perkins, under the leadership of partners like Mamoon Hamid and Ilya Fushman, has made a significant turnaround in recent years. Their commitment, diligence, and focus on working with founders have revitalized the firm's reputation and impact. Kleiner Perkins' success exemplifies the importance of succession planning and ensuring a continuity of strong leadership. Partnering experienced investors with fresh talent allows firms to adapt to changing market dynamics and strengthen their position as leaders in the industry.
Investing in AI voice bots and healthcare billing management
One recent investment made by Mark Schuster is in a company called Blam.ai, which enables AI voice bots and provides a low-latency platform for developers. Another investment is in Kubera Health, a healthcare startup focused on managing billing between payers and providers to reduce inefficiencies. Additionally, Mark's fund is putting 20% of its capital into hard tech and defense, specifically in satellites, shipping automation, and cybersecurity.
Investing in marketplaces for diamonds, event locations, and cat sitters
Jake's latest investments include Stone Algo, a marketplace for diamonds that offers a comprehensive database and scoring system. He has also invested in Gigster, a marketplace that helps book locations for various events and productions. Lastly, Jake invested in a marketplace for cat sitters and other services catering to cat owners. These investments focus on marketplace models, a space where Jake has seen significant returns.
David Weisburd hosts Mark Suster, Samir Kaji, and Jason Calacanis to discuss the 2024 venture market (00:46), secondary sales by VCs (20:13), IPOS in 2024 (40:47), and much more!
Timestamps:
(0:00) David Weisburd hosts Mark Suster, Samir Kaji,, and Jason Calacanis
(00:46) Thoughts on IVP raising $1.3 Billion for their 18th fund and different angles on the current fundraising market
(13:32) Mark's strategy today for (DPI)
(20:13) Secondary sales by VCs and best practices when disclosing selling after hitting targets
(25:08) Thoughts on strip sales, continuation funds, and exotic secondary vehicles. When should GPs pursue that strategy?
(40:47) F-Prime's 2024 State of Fintech Report, the IPO market in 2024, and early stage fintech
(49:35) Kleiner Perkins and how a firm reboots
(57:52) The apprenticeship model in Venture Capital, and mistakes GPs make when interacting with LPs
(1:12:35) Rapid-fire segment on top recent investments
