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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. “I think I used to have a less nuanced view on that. And you would think, yes, pick a wonderful endowment that is a great name and is a great portfolio. You would say, if they invested, obviously it's a great fund, but you have to understand why it works in their portfolio versus our portfolio. And so it's not necessarily playing the same role. And so you have to dig a little deeper and say, well, who are they and why are they doing 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

  2. “I don't know. I think it's hard, right? I don't know. We'll have to wait and see how many deals come out of it that they find really useful. I mean, back in the day, like Sequoia Scout program was very famous for them. But I do think one of the upsides to that, regardless of whether or not it's working out for the VC doing that program, a lot more smaller funds have been able to be stood up because they have. I've seen DACs where really all of the LP capitals come from other venture funds or other venture people as individuals or off the funds dollars. And they're now in business. We saw DEX in the beginning and it was notable there were one or two people be like, oh, look, Mark Andreessen is an LP. And then you get your 30th DEC that has Mark as an example, but there's many others. And it no longer is the same signal that it was before. But still to your point about the death of microfunds, like there's just a lot more ways of starting a fund now, which is great.”

    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. “We haven't seen it yet, and I really don't wish the death of the microfunds. We are big believers in the power of small vehicles, and it can work. I think also what you have in the market today, the number of VCs who have built really replete LP programs. They've made investments in 50 plus VCs. And granted, these are deal sourcing strategies. They aren't necessarily launching 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

  4. “Yes, the 7% interest rate market's playing with it a little bit, but we have a magic wand, take that out of the equation. It was that way of looking at it. If I'm an LP that has to write a hundred million dollar size check, unless you want to be 100% of a fund, like you just, you can't do it. 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

  5. “There is a class of LPs that need to write very large checks. Those are vehicles that work for that fund size. We also have to understand, I mean, I know you get this, but I think sometimes other folks forget that LPs are not in the same business of risk taking the way that GPs are. You're trying to preserve capital at some level for all the various reasons. So there is a logic to if you need to write $100 or $150 million check and you want some alpha, but you don't want to risk losing it. Why the larger vehicles can be a place to put your money?”

    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. “Right, so there's a little bit of timing muddle on that, and then there aren't that many. A lot of the folks that were in that size have grown up into bigger funds. And so unless, to your point, unless they want to have their fund size or whatever, 40% lower, I don't know if they'd go back out and raise that because they also have people in their firm that want to build their careers and want to invest capital. So if you decrease your fund size, that has material impact on what your investing team is doing.”

    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. “Yes. I hear the same thing. I hear a lot from LPs. I would like to be able to write a 2025 million dollar check. I want to be able to grow it over time. I want somebody who's up and coming, so not too large and potentially whatever comes up with a large platform, too big of a fun size, or maybe it's too diffused, or maybe it's too many strategies for their taste. But I don't want to take a ton of risk on not knowing if they can't pick. That's Goldilocks. I mean, it's lovely. We like that too, right? There's all sorts of positive things there. But if you weren't in them earlier, it's hard to sometimes dig in then because the existing LPs are thinking the same thing.”

    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. “Depends on where you're shopping and who you are. I don't need to detail this. I mean, all of the good journalists are out there detailing all the large growth funds and their changes in sizes for us. So those are Those are known and out there.”

    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. “Not quite that dramatic, but maybe it's not 250, maybe it's 150. Because the math kind of goes two ways, which is if the round sizes are getting a little bit more decreased or they can go earlier, they can find other ways. I think people are pulling it in.”

    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. “Correct. So you might see some more wobbles, but I would say even for some of those funds, I've seen other LPs come in to fill it, or they're taking down their fund size. So there's ways of managing that is my point. I'm seeing more fund threes and fund fours where this is coming up as a conversation because you do have a bit more data. I do try to think through the pacing of 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

  11. “You're an institutional LP coming into a fund one, I'm going to caveat this and say most of the institutional LPs I know that do fund ones tend to do spinouts. And then the LP base is usually more institutional than the fund one that's coming up out of Angel, just to draw a comparison. So I think those institutional fund ones from day one will have a much easier time raising fund too because most LPs have been in the venture business for a while know that there is only so much you can show in two to three years of work. So, barring something going really awry, a change in strategy, a breakdown in team, whatever, something really falling apart, they will do fun too because you just will not have enough data to know until fund three. I think it's different for the smaller fuel.”

    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. “I think if you went back to 2018, it wouldn't be that wildly different. I think what we saw was that the whole world kind of got caught up in this idea of you have to play the game on the field in 2020 and 2021. And I think LPs can be just as susceptible as GPs are. I mean, we are all at the end of the day human. I think today you want to see what you've always wanted to see in the past, but people released a bit on the aperture around it, which is you want to see people that are going to be getting into great companies, good fiduciaries, and managing their team. I don't think it's actually different. I just think back when it was sort of this big run up when we were in the bull market, it looked like there were a lot more nodes and areas that could be very productive and people went for it because there's a lot of FOMO. LPs and GPs alike. And now on the other side of that,”

    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. “So, whatever was some smaller number, and if you could then sell in the $100 billion round and 50x your money, 20x your money, that doesn't sound anything different from what we've said in the past, which is that people sell into these high rounds and make money, that's not illogical. It's like anything on Twitter. If people say, hold on to your winners, there's usually a sub bullet that's not making its way out on Twitter. But like, so I think originally when a lot of that language was stated, it was because people were selling dramatically earlier. I'm going to make up numbers, but let's say 200 million or 400 million versus 10 billion or 5 billion or even a billion. But the idea of taking some money off the table, those two are not diametrically opposed. And I've heard LPs that used to say hold on to all your winners all the time are now saying, well, I meant that, but in context, there are times when it could be useful.”

    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. “I bet some well. But again, to the point of if you can sell 10 or 20%, let's say you got in, what was OpenAI's first round, but it was not $100 billion, 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

  15. “Yes, we are seeing that coming together in the market. I think the challenge is exactly what you said. Somebody wants the 80% discount and the person selling might not want to sell at an 80% discount. So I think the market still hasn't fully connected. I think we're seeing some the tip of the iceberg. And if the market doesn't come back, there could be a lot more. And that is when, to your point about when endowments and foundations and other LPs have to make some really hard choices about what they keep in their portfolio and what they don't.”

    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. “Going to be tough. I mean, people will probably have to keep tightening their belts. I mean, we've seen this before, it took a number of years post-2000. It did take about three years to correct and for venture to come back in. And there was just a lot less money being committed to funds. And so you'll see a winnowing out. But you also, as a fund manager, if you wanted to wait an extra two years before you raised, you can, but you can still manage your portfolio and wait till it develops and then come back.”

    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. “Everybody has to decide. Some people just make it work with a smaller check or they take it from somewhere else. Some LPs will say we believe we can get back in later. Some LPs have to exit.”

    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. “It's hard to give a common answer. I do know when a lot of endowments start looking at the EL model and being willing to go very long on that, they shifted to that, and maybe some people are rethinking it. I do know there are some managers, some LLPs, sorry, when I say managers, who are like, we're just going to have to pause for a bit while it rebalances, which also has its own dangers. I mean, there is a very long history of looking at venture returns, which says if you're not in the market, you just don't know how to call the exit. So you have to be consistent about committing. But if you have a bunch of existing managers who are still putting money in the ground, you could probably skip a year and still have money going in, just not be re-upping or making no investments.”

    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. “So I've sat through multiple investment committee sessions with larger funds, so larger LPs managing multiple funds who are looking at, well, how do you manage this? You also have liquidity profiles that you have to keep. Like you can't be too illiquid because it violates their rules. And just where are you going to clip your coupons, so to speak?”

    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. “Correct because you also have at the same time is not only people that are existing established venture investors know that it can take 10 years for an exit to happen. Like that's not a surprise. But if you've built a portfolio and you've got publics and privates and other areas, you can manage your liquidity by taking money from other places as it comes in. But if the exit markets are generally shut for everybody, you're not getting your private equities necessarily distributing capital. So you can't use that to make your capital calls either. And you don't want to sell your stock when it's down if that's not part of your strategy. So there's just a lot of varying things going on that are hitting budgets and a lot of LPs that manage endowments or foundations have an annual budget that they have to spend money on, right? For whatever their business is. So they still need to figure out how to make those payments.”

    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 think it's kind of all tied together, right? If the entrepreneurs are slowing down their fundraising so they can produce the metrics necessary to convince a GP to invest, then the GP is going to call less capital and then deploy their funds slower. And then LPs are going to be slower. We saw numbers about like 12 to 18 months, which is historically atypical, right? Usually it's three years. So if now they're lengthening back out to three years, yes, there's fewer funds being raised. And I think there's a lot of, we can get into this or not, of people trying to figure out what is the health of the underlying companies, what's really going on. And there's so many things going about YLPs are slowing down. A lot of LPs also pre-spent future budgets, if that makes any sense. Like if you were raising a fund every 18 months and I thought you were raising every three years, I had two choices. Either I pull from future year budgets or I reduce my check so that I stay consistent in my deployment, even if you're raising faster or I end up spending money or committing money earlier than I anticipated. And then right now, given what's going on in the markets, a lot of”

    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. “I understand his point. I think from a very specific LPGP perspective, it's hard to find on when you'd get out of the investment. We have managers that would have potentially sold into some of those later rounds because if they could sell, I'm making up the numbers, but 10 or 25% of their ownership and return a fund or half a fund and still hold some for the upside and then potentially distribute the stock when it's high. Again, you have to wait for a lockup and there's all these parameters that might not make it possible. But you can make money on those deals. Absolutely.”

    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. “But consumer can too. Again, if you do look at the returns, if you consider the Facebooks, the Coinbase's, but they are fewer and far between. What we saw in 2020 to 2022, again, you have the Coinbase, you had a couple more. If you got out when Peloton's stock was high, like there were ways of making money, but it's not as consistent as the enterprise. So we do want both in our portfolio, but we're conscious of the exit dynamics.”

    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. “We just do early stage, so we, which in our definition that means we started out originally with Series A and we've now moved down into seed and pre-seed. So within that area, we then look at what is the overall underlying distribution of companies that we have. We are proud venture geeks and we do publish some of our findings. So last year we ran our consumer enterprise report. And enterprise does tend to have more consistency of exits, but you get the big spikes in the consumer ones. So if you ain't based, for example, you don't get 10 of those at the same time historically, but you will get just more enterprise exits, but lower typically exit size. Like, yes.”

    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. “LPs are like snowflakes. No two are the same. So some people do like diversification. I know some LPs that specifically look at the overlaps or the lack of overlaps between their managers and what they really are trying to do is they cover the seed market for exactly this point. And they want to make sure if they catch something, it happens. And then what the LP does is sort of a look through on the math and says, well, if I'm putting X dollars into this fund and they're putting Y dollars into this company, what needs to be true for those companies to be productive on my side? And I know other people that say, hey, I think this area is really interesting, so I'm fine if I've got two or three managers that invest in the same area and even in the same company because if they hit one, it's going to be that much more productive. And it really comes down to how the LP wants to build their portfolio.”

    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. “Think of a growth stage portfolio, it's not that one doesn't want to have a power law company and have it return 100x and be two to three times your fund. It's just a much harder you have a large fund. So a lot of those funds end up having a number of exits that then end up adding up to driving performance. In an early stage fund, we've yet to see a fund that's returned three or more acts that does not have a company that's returned at least one time the fund. And that's what I mean by like you can't do the single and base hits like oh I got a 2x on this deal, I got a 3x on that deal. Those were all great to add to the portfolio but if you don't have a fund returner or a couple half fund returners, we haven't seen a fund that's hit out performance.”

    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 would say really understand the importance of the power law, which I know sounds like a bit of a nitty gritty. And I'd gotten this advice from other LPs, which is the difference of having a power law defining company in your portfolio and the experience of that for the GP along with the entrepreneur really changes the understanding of how venture works. And you really just can't onesieosies at DAO performance. It's hard to walk that until you really feel it. And then you see these activities, you see the companies taking off, you see the difference in what it looks like to have that kind of a power driver in your portfolio.”

    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. “Well, I'm PSR. So I manage Sapphire Partners, which is the LP strategy of Sapphire. And we invest in early stage venture funds, US, Europe, and Israel. And that's what I do.”

    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. “Let me tell you another thing get paid on DPI, some get paid on TVPI, meaning 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. A lot of LPs also pre-spent future budgets. If you were raising a fund every 18 months and I thought you were raising every three years, I had two choices. Either I pull from future year budgets or I reduce my check. Right now, given what's going on in the markets, a lot of LPs are feeling liquidity strains. I wouldn't say a crunch, but there's different demands on those dollars.”

    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