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Beezer Clarkson

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2023-10-18
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2023-10-18
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  1. “Green the movies. I thought Madeline Albert, whatever, edit out the names. I thought it was a fascinating position for the US government, but now know, like that was said, that was like when college. And I was like, what could I be? And then I was like, no, this is definitely about the private world. I love it. I love being an LP. I love working with early stage managers, the emerging and the established.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Yes So I started at Sapphire 12 years ago now, and I always thought this is what I wanted to do. But then when you get into the doing of it, no, this is like my life's work. If you said me, what else do you want to do? I used to kind of think I wanted to be Secretary of State. That is so never, ever, ever happening. We toss that idea out when I was about 24”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Yes, so we were very excited. We announced this about two weeks ago that we've taken over the early stage venture fund mandate for Cousters. And what this means, so for folks that aren't familiar with CAUSTERS, they're the world's largest educator pension fund in the world, which is pretty cool. And they've been to their credit running an emerging manager program now for decades. And back in the day when they started it, it was a mix of private equity, some healthcare, some venture. And going forward, they had now picked us to work with them on the early stage venture fund and they pivoted to focus on specialized managers and were their venture specialist, which means we now are going to take their money, which we're very grateful for them trusting us with and deploy it into US early stage venture funds emerging. So that's funds one through three, which then is additive to our existing program. So the answer is yes, we're deploying more.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “I think this feels a bit more traditional venture, which doesn't feel terrible to me. I think the industry is still healthy. I think it's going through, the world's going through a bit of a rough patch, so this is not a fun time.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “I would suspect for at least the next 12 months to the extent that people feel pressured to raise, they're going to try to be more LP aligned if folks don't want to do it. There's a couple in the market now, SUSA very publicly tweeted about changing, it's not an opportunity fund per se, but changing out their, I think they had two funds and now they're having three. They're raising independently. So folks are looking at it and talking about this.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “I think you have to ask each one. I'm always surprised at the different viewpoints around the room on any given opportunity fund. I know some people that do it to try to get into the core fund, segue in. They used to be, oh, the other thing we're seeing in this market is people are unstapling their funds because a number of LPs felt dragged into it to the point of I want to support you. I'm not so excited about this other vehicle, but I want to support you so I'll write a smaller check. But yes, I think it's a combination of things. And I think that's also why fund four to seven has the same challenges. And people also, you have to bring up the next generation and people management, if you're doing deals, who in the firm is also thinking about people management and people training and all these things come into play that is much more about managing a firm than just investing. But you need to do both if you're going to be that kind of long term.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “It's fantastic and it's great. And I mean, to her point about it's 15 years per fund, I mean, this is like a body of work for 30, 40 years. That is a long time to do one job. People should be allowed to stop.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Back in the day, you had three years between funds, you're talking about a decade of investing. So I think performance would be able to be being seen. And then tied into that is like strategy and all those things. And then I think team, it's very, very hard to do this because no one documents it. But you could see we ran the numbers on funds that from every year who was the one that has gone on to raise the most vehicles, core vehicles. Not all the other layered, they went multi-strategy. We didn't track all that. AO shocked the fund sizes didn't balloon as much as I thought they would because the dollars were going into these other growth vehicles. But you see these funds that got to fund four, five, six, and then never raised another fund. It would have to be some combination of team and track record. Maybe you did so well you didn't want to keep going. There's a positive side of that, which is it's good.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Doesn't surprise me as much. What I think is also interesting is just if you play out one Fund one to fund eight, the numbers are terrible because you've got such a large breakage in the early years. But even if you get to a fund four, there's still pretty significant breakage going on to the other years because then performance can be seen.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Yeah, sometimes people don't realize if I'm making a personal commitment every two or three years, that can be expensive, and you might not understand that. It could be the GP themselves don't really want to do it. What was also sort of heartbreaking was the Fund one to Fund 4 on average. Again, these are averages, some years are better, some years are worse, is 17%. So it's not a slam dunk, but even if you get to about $100,000,”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “To our conversation before institutional LPs, this is why they don't make a lot of new bets every year is because they're looking for managers they think they can be with over multiple fund cycles. But I can tell you if you want me to digress into graduation rates, we've been looking at data going back to 1995. I was shocked at the breakage. The breakage between fund one and fund two is not every year, but averages out to be about 50%. Well, again, because we've got the law of large numbers coming in at fund one, there's so many smaller funds.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “That's not untrue because sometimes things just mess. But if there's consistency elsewhere, there's consistency of theme, consistency of thinking, consistency of team. Just going back and asking different LPs in their portfolios, it's very hard to have three or four funds in a row that'll be called a 3x.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Oh, you'd have to pull into so many different books. But I think the numbers will tell you if you ask different LPs if you can get three or four funds in a row with strong DPI, that is world class. Usually there's a funder too which has a tougher time. Like no surprise, 2021 might be a tough interest.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “There's so many fewer of those than people thought. I appreciate because TVPI looked bonkers the last few years. People thought it looked different. But I think maybe this is the value of being old. I mean, I've been playing in Venture in some form or another since 2000, and I was doing emerging markets in 94 for project finance. And I can tell you it is hard.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “We've definitely tested a bunch of hypotheses and different things, and I keep going back to this, but it's so clear in early stage if you're not taking a big swing for the fence, which doesn't mean saying taking ridiculous, I haven't thought about it risks, right? But you just have a lot of people that think that they can do sort of smaller investments, like I call the growth equity mindset in the smaller earlier fund, which probably can work in some scenarios, and it works for some LPs that want to do direct investments. I just don't think that's where you're going to get the long-term.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “It was a real early, so do a couple of things being super exceptions early on. But to the point of, I'm going to quote Nikhil from your last podcast with him from Footwork. Exceptions should be made for exceptional people. And yes, to this day, that always sticks in my head.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “This kills me. So I passed on the initialized fund one because we had just launched, yes, I know, I know. It was bad. No, I know. No, trust me, I know. But we were Series A and we were looking for $75 to $200 million fund sizes, and they were sub 10 in C. So it was outside of scope. I get it. But it goes outside a scope.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “I find it actually a bit mind boggling that people, I mean, if you want to have a pop up business, do something direct because even then it's not sure. Like a job can be four or five years and you can try different things, right? With the way compensation, equity structures work. But becoming a GP, like, yeah, it is. Assuming you're not doing evangelist and it's not a small endeavor, if you're trying to bring in other people and other LPs, it's a very wide financial services business.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “The great managers understand this who they are as an investor and how they build their firm is so specific to them. And then you have to have that. I really do think there has to be that interplay of the two of them for it to become a great firm. And I think a lot of people don't realize that. And they think it's just an easy business to pop up. And it can be. But then that's a smaller business and it's not necessarily going to become a long, enduring firm.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Was better. It's so hard to read, it's so complicated, it's so not useful, it's supposed to be a tool to understand how our relationship works, and it's just big legal pile of documents. But I think some of these things just end up being logjams in the ecosystem. And the point is that's just not the point. If you get to that place, it's a big mess anyways.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “I'm going to kind of take a sideways answer to this. I have always really just greets me when people say something's can't be done. I hate being told something's not possible and that you can't do it just because someone hasn't done it before doesn't mean you can't do it. It just means it's harder. You are a case in point on this, right? I mean, what you've been taking.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “Well, I'm going to give a shout out. Pitchbook just did a new ranking for based on, I'm not sure what metrics they pulled. It was like Capital Calls versus distribution. I don't know how they knew this, but Union Square had the first and the third spot. So shout out to them.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “I really do think these conversations are happening either with the GPs or amongst the LPs. I hear people talking about it and just sort of understanding why the manager did or didn't. And is there a cogent reason? Whatever that reason is, it makes sense. Like there is definitely times when there was small floats. And if you sell, it could be detrimental to the company. There were times where it sort of gets at the, are you a fiduciary in the kind of way that I want to be associated and people will make choices? And then there are always going to be some managers that have that kind of L people that people will just keep working with. I think that list is getting smaller. I think the names are switching around.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “I don't know if they're saying this to their GPs, but you hear a lot of people having concerns that they're now going to ride the TVPI all the way back down. To your point, you can manufacture some distributions, right? Like you can find if a company's not working, I think managers are now. I'm having more conversations with more managers who are like, hey, we're just going to try to find some soft landing for these companies. It's just not going to work, which we've been expecting for years to my point about loss ratio. So that doesn't wildly surprise us. But you're not going to 3x your fund that way, right? You'll retain more than zero, but it'll kind of creates fodder on the bottom. You can't force a company to go public.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “It's delicate. We should have good reasons to start with. That is the first principles of it. And then you share your thinking. You say, here's what needs to be true for us to be able to come back. And we want to come back. We've shown people TVPI charts and say we have to choose based on productivity. And it's not that we don't believe in you. It's just taking longer. Or some people graduate out of our program because they get launched, for example, right? So we'll do merging and establish. But if you're going to go on and raise a $1.5 billion fund or something that's outside of our program. Yeah. We think that's great that they've grown up and done that, but that's not in our program.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “No, he talks about someone sort of investing the capital that they're really a manager of, or are you sort of an employee of a firm? And you need to manage the business. So it's not saying they're not making thoughtful decisions, but it's a different viewpoint if you're like, oh, I'm going to be here for three years. Do you know the average CIO is like a five-year tenure? I actually thought there were like 15 years. But no, a friend of mine was like, oh no, it's three to five years. I'm not picking on those individuals, but I'm saying if you're then in the stack and you're working for a firm and you're deploying capital as an LP, you might be taking a different risk appetite than if you're someone who's like, hey, listen, we're going to go find the next amazing fund and we're going to be with them for a long time. And this is a very different mentality.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “I think there's been many conversations with LP suggesting GP slow their role. If a fund came to you in the beginning and said, we're going to do an annual raise, I know some funds who say this, and ELPs understand it and they sign up for it, then they understand they sign up for it. Yeah. So I see that happening. I see a lot of other funds saying, you know, this is going to be a two to four year raise, or the LPs are like, hey, we'd like to see a bit more traction in your companies. Could you delay your fundraising or just slow it down and see what happens? Give it another six months, like getting through this market to our earlier conversation is not going to be necessarily easy and seeing how it rolls. I think those conversations are happening. You don't get fired for buying IBM. I'm using Chris Duvos' line, so I always want to give credit when I'm stealing somebody's murder.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  28. “Many people raise bigger funds and have 5% ownership. You end up with the like, well, then now you need this very large exits, which I wish everyone gets. Like there's no button, there's no shortage of wishing this works, but it just historically you're like, well, you're going to have an incredible batting average. And again, we want that to be true. That would be lovely. History would argue that's very unlikely.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  29. “I agree, but then you need to be leading and getting what we're seeing is leading and getting low 9 to 11 to 12% ownership.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  30. “Agree. I think there's no one size fits all, and I definitely think for emerging managers, the management fee and the GP commit need to be looked at in the business case. Like, what are they using it for? We've had some funds in our program where I'm a little worried they can't pay their rent because you're like, there's no way this management fee can pay for it. So it doesn't surprise me when smaller funds have a 2.5 management fee because you just have fewer dollars. What you typically as an LP like to see is as you layer the funds, the fees come down or you stop pulling fees on some vehicles. But again, it's always in the context of what's the fund trying to do, how many people are there, what are the cost structure. And true point about GP commit, yes, it has been an unnecessary barrier to entry for too many.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  31. “I think depending on who you are as an LP, the fund size can drive some misalignment, right? To your point about much larger funds and what they're trying to do and how they're trying to create returns and financial stability. But that also comes with, and this has been discussed on Twitter ad nauseum, if it comes with a lot of management fee, and if you are able to work in a fund and make millions of dollars per year in management fee, that's very different from an LP who needs the money back to fund whatever it is they're trying to fund with it.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  32. “My most benevolent answer is a lot of these things were probably put in place when TVPI and DPI were not so dissimilar, and so these things made more sense. And now just the last few years made it look really just a lot more confused.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  33. “Well, back in the old days of Venture, TVPI didn't rock it up in one year as quickly as it is now. So a lot of these systems were put in place when things were a little bit more prosaic and how they managed along. TVPI used to be a pretty decent signal. Not perfect, to see what DPI was coming. That, I would think, to Eric Paley's point, got a little broken recently because it was just very hard. If your company has raised three times in a year and is now worth $10 billion and you're a 50 million seed fund, that's a huge change, right? And up and down. And so there was a number of LPs that were telling their managers just don't mark it up or mark it up a little bit, like be really conservative, but it's hard to then argue to the auditors you can't market to the last round if it was like two months ago because the auditors will say typically they're like use the most recent last round if it's in the last six months”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  34. “Let me tell you another thing get paid on DPI, some get paid on TVPI, meaning that how they're holding their portfolio is relevant to how they are viewed, not just for their personal paycheck, but how it might be measured by an external U.S. News& World Report and other things. There's a whole push-pull in the market.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  35. “Oh, okay. That disputes my theory. Because a lot of times seed managers only might have information rights by the time a series B or C comes up, so they might not have all the information that someone in the boardroom has.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  36. “Well, and then I heard stories, and this is a story, so put it under the rumor and hearsay bucket, but that last year, end of 2022, when the odders were getting involved, they were telling GPs to talk to each other to try to figure out how to value things. Because if you weren't close enough to a public comp, you had to value it off of the last raise, which is a logical method. But if a company had raised three times in 2021 and was 100x multiple on revenue, and the company hadn't grown that much, it raises a lot of questions.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  37. “I do know the auditor. I know. I don't know. They might not, but I'm saying you could ask Grape's and say, Are you seeing these companies being held differently? And I would like to think the LPs would”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  38. “Well, overvalue is a relative term. I mean, I think if they ask the question, I think one of the things that GPs forget is that they can ask the LPs what they think. And you'll learn incredibly interesting information, like, no, your colleague, they might not.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  39. “Everybody shares it, but if what you're asking is do people value their companies differently? Yes. If you're an LP that has an existing book of venture business and you guide over different times, you will 100% see that people will value their companies differently.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  40. “Well, I know a lot of LPs that will ask their managers and then go back home and take another 20 to 25% off the top. Because there's things that nobody knows. And then sometimes you're just, we're just all wrong and something turns around like AI happens and some companies become rocket ships because they've managed to do something with AI that works in the market. And other companies not. AI intelligence software has just so changed the market and what people are looking for that their companies now seem out of date. And it was really strong, but the customers aren't buying the same way because the product doesn't compete as effectively.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  41. “The only other time that would be equivalent would be 99, 2000, and I don't know if there was the volume of funds in the market then. So in absolute numbers, he's probably right. It's entirely possible”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  42. “I think there are ways of saying it that LPs can understand. We have managers who are very good at showing us, hey, here's the ones that we have questions on. They could turn it around. You never know. Here's the metrics. Like you just go to the metrics and you talk about it, what's going on with the teams and you know where they're at. And venture is a risk business. You don't go into early stage and expect every company to work. And one of the weird things about the market for the last 2020 to 2022, we did not as an industry have the loss ratios, even probably back earlier, that one would expect invention. Like you just had all these companies getting funded so they could continue to try. And then it even became more relevant actually for the GPs to be able to talk about what was going on in the company. And now there's, it's clearer if product market fit's been hit or if companies have just a ton of money and might spend time trying to find it.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  43. “I don't disagree. I know this sounds so boring. Investing in a fund is art and science, and the science part cleans the deck very, but the art is very hard on the people, right? That's a people business, and you have to go and spend time. But on the math of it, we just underwrite a Series A fund to a 3X and C to a 5x, and you just look at what the numbers line up at, and you say, okay, so given the ownership and giving the AUM, what needs to be true to return the fund one time, half a time? And then you say, okay, let's say the number is $2 billion. How many $2 billion exits do you think you're going to get in your fund? And you can tell me what you think. And then again, history is not always the same, but you look at this and you say, okay, to your point, you go back and you look at some very strong performing funds and you say, how many did they have and what was the percentage of other companies? And you apply that math. And again, like the future could be different, but you realize just how hard it is. It's really hard.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  44. “40, 45. We've yet to run the math and see a fund that's gone over $50 million that doesn't have to start having some trade-off between ownership and AUM. I mean, again, like you can get a Coinbase in your fund and then, yeah, it moves the dial, even if you have a $100 million fund, right?”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  45. “Oh, it's such a good topic. You can do it. You can certainly do it on a smaller fund. You have to then have very high hit rate, or I should say this way, the companies that exit have to exit even bigger vis- ⁇-vis your fund size. So a lot of those funds that have the small ship.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  46. “He's the riskmaster. But it was a really nice framing of your point about how do you take risk and what's your appetite for risk and how do you think about it? And it's, yes, when you're swinging for the fences, going back to what I said before, it is incredibly hard to be an early stage fund that has outperformance without a couple fund returners. You have to shoot for outperformance. You can't be like, oh, my TAM's five and I'm going to get all of it. That might work in private equity. It might work at gross stage. It does not work if you're trying to drive for outperformance in your fund.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  47. “Well, you just talked about the attitude around power law much better than I did. And yes, I don't disagree with you. I remember I used to work at DFJ many years ago, and somebody had this perspective on Tim Draper. They just said he sees fear very differently than the average person.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  48. “And it takes a little bit of time. I mean, it's not going to happen. It's not that it can't. It's just very hard to do when you're first fund cycle because there's just not enough time.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  49. “So there's the whole myth or not myth of the persistency bias and venture. When you're with 20 VC, if you get these wonderful companies, other entrepreneurs can be like, oh, Harry's a great investor. He's got these wonderful other entrepreneurs that I know, these great companies that I know. And so they'll bring you deal flow. And then LPs see that and they say, oh, Harry has this great deal flow. It might not be proprietary deal flow, but it's proprietary access. And then the LPs want to join the party. And they come and then that gives you capital to keep going and running your business. And even though everyone always has a caveat of past performance does not guarantee future, there does seem to be, and there's been a zillion people studying this, so I can't quote them all, but trying to figure out is there a persistency bias in returns. Again, people have disputed it, people believe in it. You have to pick your side of the table, but enough people invest believing that once you get that flywheel going of the best entrepreneurs coming to you, that they will persist. And that's why the LPs then also want to work with the same managers and that. So you just need to sort of figure out a way to get that going.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source

  50. “Correct. No, no, it's a thing. I'm not saying it's not a thing. We just do our own work and want to have our own opinions. A lot of the other LPs are doing ventures to the earlier conversation against a myriad of things they're doing. And they don't, with some exceptions, have huge teams. So people have to pick ways of making decisions. And if they know if they co-invest with whatever endowment or foundation frequently, they probably know them as people. There's definitely folks that refer us deals that we co-invest with. And you're like, oh, I know how they process. I know how they think. That at least gives me some level of understanding versus somebody who when you call them and you say, why'd you invest in this fund and they say, oh, I'm only here for the direct deals, I don't care about the return as much. It's not that it doesn't matter. They're not doing it for the fun return. They're trying to write a 30 or $50 million direct check. We might like the same fund, but we're liking it for different reasons.”

    2023-10-18 · The Twenty Minute VC · 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 · IDENTIFIED FROM THE TRANSCRIPT · source