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What Do LPs Think of the Venture Capital Markets for 2016?

Both Sides of the Table

At the Upfront Summit in early February, we had a chance to have many off-the-record conversations with Limited Partners (LPs) who fund Venture Capital (VC) funds about their views of the market. LPs See The Over-Valuations and Don’t Like It. All isn’t completely rosy in the LP views of the venture industry.

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Announcing NextView IV

View from Seed

But it is also large enough to write a $2M check to lead a post-seed round for companies that are starting to scale. What hasn’t changed is that our heart lies in working with founders to find product/market fit and to begin to grow. Because of this, we are always grateful to all of our LPs for their trust.

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What’s Really Going on in the VC Industry? What Does it Mean for Startups?

Both Sides of the Table

But VC is an “illiquid asset&# so funds didn’t disappear quickly - In 2000/01 the stock market quickly adjusted punishing investors in the NASDAQ and in individual public technology stocks. So as of 2008 total LP commitments were still at nearly $250 billion. So the people who invest in VC funds have two problems.

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The Changing Structure of the VC Industry

Both Sides of the Table

The rise of “micro VCs” or seed-stage funds. 15 years ago we were at the peak of Internet hype with the launch of many over-capitalized businesses with a market size & opportunity was limited. The VC market has right-sized (returned back to mid 90′s levels & less competition). Where are we today?

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Flexible VC, a New Model for Companies Targeting Profitability

David Teten

More and more startups are pursuing Revenue-Based VCs , but “RBI” doesn’t fit everyone. Flexible VC 101: Equity Meets Revenue Share. By tying payments to actual revenues, founders and investors remain aligned around the company’s real-time performance, good or bad. Flexible VC: Revenue -based. Of the Inc.

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Off to the Races with Team Nextview

View from Seed

At the seed stage and as companies scale, helping the founders I work with identify and reach their goals, personally and professionally, gives me energy and purpose. I made over a dozen angel investments and a few investments in VC funds as an LP, expanding my focus to new geographies, sectors, and stages.

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IRR is a vanity metric

VC Adventure

Interim IRR is much too easily manipulated and in some cases incents behavior counter to the long-term benefit of LPs (and GPs). A few examples: In an up market, IRR values quick capital deployment. Traditionally LPs have viewed this as positive. Both were valued at greater than 50x revenue (one was, I think, 70x revenue).

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