The Up Round #1
The Memo
Welcome to the first edition of The Up Round, a "round-up" of relevant news and resources for fund managers building a best-in-class firm. To start, expect us to land in your inbox every other weekend.
We kicked off Open Investor this week with a framework to help GPs prepare themselves as they kick off the Associate hiring process (link). Remember to check out the accompanying template. For those that want to know the why behind Open Investor, be sure to check out the first post, "Hello World!" (link).
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Evercore to Lead "Strip Sale" of Tiger's VC Portfolio
It's no secret that Tiger's venture book has seen better days with the firm marking down its value by roughly 30% last year. After trying to sell select investments earlier this year, Tiger has tapped Evercore to sell a "strip" of its portfolio to prospective buyers. This structure would mean that a buyer could purchase a portion of Tiger's equity in a variety of different startups, across different funds, at a discount. The liquidity would be welcomed by Tiger LPs as the firm is looking to raise a $5B fund- scaled back from $6B. (link)
Other Reads, Listens, Watches
VCs Facing Pressure to Divest from China (link). It should be no surprise that America's heightened geopolitical tension with China is causing VCs to rethink their strategies and involvement in China. Some firms have divested their ownership in Chinese businesses while others are reassessing the role of their China offices, flagship funds, and related operations. Noteworthy firms with a Chinese operation: Sequoia, Lightspeed, Matrix, GGV, and Redpoint, among others.
Venture Debt Following SVB’s Collapse (link). "In terms of lending standards, there has been a focus on revenue growth and profitability. Lenders are looking for startups with a track record of consistent revenue growth as well as a clear path to profitability. For unprofitable companies, this also means scrutiny of unit economics, as lenders want to make sure the capital is used for value-accretive investment."
The Signature Block: The Emerging Manager Report Q1 '23 (link). A survey of 195 fund managers who are raising or have closed their first or second fund. Interesting to note a few things:
- The solo GP movement might be fizzling out with only 26% of surveyed fund managers planning to remain as the sole partner at their firm
- Fundraising is tough. 91% of managers found it difficult or very difficult to raise, nearly a third of GPs reduced their target, and 42% of managers plan to raise in 1-2 years but over two-thirds say that intros to LPs would be the most valuable thing for them right now. Side note: shouldn't liquidity be the most valuable thing to seek help on or ask for?
- 67% of fund managers report that valuations are decreasing with 77% of respondents saying that deal flow is the same or more compared to Q4 '22
Tweet of the Week
Heard from a VC LP this week:
“If you just had liquidity on Byte and Stripe, it would release an incredible amount of cash back into the system - I think most people don’t realize how many LPs’ overallocation issues could be solved by one or two companies”
— Meghan Reynolds (@MeghanKReynolds) May 20, 2023
We've heard this sentiment from multiple foundation and family office LPs with regard to "winners" in both their VC and PE allocations. A sale or partial exit of a single large investment by fund managers could unlock meaningful dry powder - part of which could be recycled into existing and new relationships. The unknown is how much will be reinvested into VC given rising interest rates and a current proclivity towards liquidity. It might be that decision-makers just drag their feet till they feel more comfortable with the current environment.