YouSaid · the spoken record

David Clark

lines on the record: 82
first: 2024-03-25
most recent: 2024-03-25
sittings or episodes: 1
sources: podcast

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“Thank you. And I've really enjoyed the fact that we don't necessarily agree on everything. And that's what makes a market. If everyone agreed on everything, life would be so dull”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you never know. You never know. But I think, you know, going back to what we were talking about around succession, for me, it's really important that we've got some really good people in our team. And it's super important that they have a pathway to grow and become the next leaders of the firm. And I don't want to get in their way. At the same time, I love what I'm doing. And so if they feel it would be useful for me to hang around in some capacity, I'd love to hang around and support them. But I think it's really important that they're the ones in 10 years' time that are driving the company, driving the strategy, driving the future of VenCap. And if I can be helpful to them, I'd love to be helpful to them.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“I think if you look at the performance, that the best university endowments in the US have had from venture, then definitely the challenge is will they end up doing the best managers or will they get pushed to do local managers? And I think that's one of the challenges that we've seen, you know, particularly in the UK when the government gets involved. They want to try and encourage the UK venture scene. So they'll incentivize or restrict the ability of local investors to choose managers by performance. They'll choose them because they want to try and grow the UK venture seat. And for us, that's really dangerous. It hasn't worked.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I mean, I guess the one man, and it really hits close to home. I have a huge amount of respect for the folks at Benchmark and what they've done. And it's a really painful one. So back in the day, we were investors with both Merrill Picard, TVI, who were the precursor firms to benchmark. And I remember having a conversation with Bruce Dunlevy, and he said, we're spinning out, we're forming this firm, you know, we said, great, we love you guys. We'd love to invest. And he went, fantastic. It's five million dollars. So this was be mid-90s. At the time, we were managing a portfolio for a UK pension fund. And they had the sign off on anything we did. So we went back to them and said, we've got this great investment, five million dollars, benchmark, you know, fantastic track record from these established firms. We're really excited about it. They went great. But we can only do four. So we went back to Bruce and said, we're in.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“What we can't afford to do though is gamble the money that our investors entrust us with. You know, we have a very specific strategy that we think is able to generate strong and consistent performance across the cycle. One of the things we do want to try and encourage is to get people into the venture ecosystem from a diversity of different backgrounds. So one of the things we do as a firm is we've signed up to a charity called Gain, which is girls or investors. So we take as placement student for six weeks in the summer to give them exposure to that. We run a 12-month placement scheme for university students and we've done that for six years and so far everyone that we've taken on board has been a female student. I look at some of the things that some of our managers are doing in terms of trying to encourage diverse founders and things are happening there. But it's tough and I totally take your point.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“32 years ago, seriously. But I also look, I think about, you know, who's growing up in that village today and what's their chances of being able to create a career and venture. It's really hard. You need to be an exceptional person in order to do this well as a GP. I would like to see the sourcing of GPs broaden. I think it's a challenge. We had the conversation off air about it.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“I think venture at the highest level is quite exclusive, and so I'd like to try and democratize venture to some extent. And that works on multiple levels, so it's about giving everyday investors the opportunity to invest in a Sakaia or an Axel or an Andreessen or Kleiner Perkins or an index, and not just Ivy League endowments, because I think for the average person, it's tough and venture done well can really drive significant outperformance over a long period of time. So I think giving individuals access to that, I think, would be great. But I also think looking at who comes into venture as well, I mentioned in the village I grew up had ever heard of venture. I was looking, someone was willing to gamble on me.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“So if you had spoken to me maybe not quite the last 12 months but certainly sort of two or three years ago, I think we were incredibly sceptical about LPs doing direct co-investments because we looked at the data, you know, we know 60% of deals don't return capital and we just thought why would LPs be doing this? What's the likelihood that they're going to be getting into those top 1% companies? My view has definitely evolved on that. I'm not all the way there yet to say that that actually it's a good thing, but I do think there are situations in which there are different ways to optimize for those top 1% companies. One is to do it through the best primary managers. One is to do it through secondaries. And I also think another way selectively is to do it through directs. But directs and established companies not with seed stage managers. What would you most like to”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“Part Yeah, I think the importance there is you have to triangulate. And so there's not just one specific source of information that is primary. And you also have to understand, you have to have that relationship with your VCs that you know, are they the sort of person that craps on everyone? Are they the sort of person that gives everyone a great reference? You need to sort of have that history with them where you can put that into context, what they're saying. And I think that's really important. And that just comes from time and building those relationships and having those conversations. And it's getting harder. It's getting harder, you know, particularly where you mentioned firms that have big IR departments and it's harder to have that interaction with individual partners. You've got to work it more.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“Didn't follow up on that. But now we'll actually say we'll phone that manager up and say, like, why haven't you done any deals with this group? Is it just that you're in different parts of the market? Or are there specific reasons for not having done those deals? And I think sometimes we learn interesting things from that. So I think that's probably the biggest thing that's come out of our decision review process is not just to reference people who we know work with each other, but”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“I think one of the challenges with investing in venture is that there are so many unknown unknowns, and the degree of randomness that is involved as to whether something is successful or not is high. And the earlier you get, the greater that degree is. So I think there are certainly things that we couldn't have been expected to predict at the time we were doing the deal. And one of the things we do with our investments is sort of four or five years post-investment, we'll do a decision review analysis of those to see what can we learn from that and how can we improve our decision. One of the big things that we learned was we used to only take references on managers from VCs that they had invested alongside. So we wanted to know what were they like as a partner, what were they like on the board, what we didn't do was if somebody was operating in a particular space and we knew one of our managers was one of the top investors there and they hadn't done any deals with that manager. We just”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“to accompany. So I think there's parts of the industry where you will see that craft approach. And for me, it's still around the seed stage, the series A, maybe the early B's. Before things are really driven by the underlying metrics of the business, and it's more about an understanding of market potential and taking a view on founders, the more quantitative the decision becomes, the more that excess returns will probably get competed away.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm not going to argue with Doug I think what you've seen is over the last 30 years, the venture industry has expanded significantly. There's almost multiple parts to that industry now. I would say it depends on which part you're talking about. If you're talking about the people that are raising multiple billions of dollars to do the crossover deals, the late stage private rounds, then I think that is more of a capital allocation exercise than it is a kind of craft. So I think returns there will probably come down because the weight of capital will make entry values become efficient and we've seen that in a lot of other areas as well. So parts of the market, I think that is true, but I also think there are other parts of the market where that's less true because it isn't necessarily about is capital a strategic advantage in certain parts of the industry, I think it's still a case that too much capital can be detrimental.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“To go back to the average, it's going to go back to that sort of 60%. So I think there's a lot of pain still to be had. So that's not just companies who are going to see their values reduced. I think there's a lot that ultimately aren't going to be successful and go out of business. And we haven't really had the wave of that happen yet. It feels like that's still to come. I don't know. I'd be interested in your perspective as a VC as well. How are you seeing that?”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“Existing, so I think there's no question in my mind that there's still more pain to be had for existing funds. You know, I look at the carrying valuations that we see for a lot of companies and they vary quite wildly. Some of our managers have been pretty aggressive in writing things down. On the times, one of the things we are interested in is when we do get pitched from newer managers, one of the things we look at are where are they holding their marks? And generally we've seen the new managers holding last round value marks and not writing anything down where it's the more established managers that are perhaps ahead of the curve in writing stuff down. So I do think we're only part of the way through that. One of the other things we track is loss ratios. So what percent of companies backed by our managers are below one x? Historically for an early stage fund, that's been 60% of companies don't return 1x cost. You know, we've seen that reduce significantly for more recent vintages. My sense is that it's going to”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“Because we think the growth is probably more economically sensitive. If you think about what goes into the driver of a great growth, entry valuation is probably disproportionately more important than it is on the early stage. And also the size of exit is as well. So, you know, we've gone through a period where we've had some very strong performing growth funds. And if I showed you a list of the TVPI of all our core manager funds, you would not be able to predict which was a growth fund and which was an early stage fund. Our best performing core manager fund in the last 15 years is a growth fund. It's really interesting there. But I think we feel comfortable that, again, the best managers have that ability to pick the best companies. And as companies are staying private for longer now, it does feel that there's more of an opportunity to generate venture type returns from slightly later stage investments.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“It's all the same. In aggregate, it's all the same. You know, it's a 0.1, 0.2 TVPI difference. It's all the same. The growth funds come back quicker with the distributions come back earlier in the growth funds.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“Again, we go back to the data and we look at the performance whichever way we cut it. It's really interesting. So we looked at what's the performance of the early stage US funds from our core managers from 2005 onwards. What's the performance of the growth funds from our core managers from 2005 onwards? What's the performance of the non-US funds from 2005 onwards from our core managers? It's all the same.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“We've got one or two managers that would have seed funds, but there's probably three or four seed funds that we're invested in across our managers. The majority of them would be early stage, and that would be A and early B's. And then virtually all of them would have some kind of fun to do later stage deals, whether that's a fully fledged growth fund or whether it's more of a kind of continuation fund, a sort of opportunity fund, a select fund, that sort of thing, it varies. We want to be sort of roughly 50-50 between early and growth. challenge to manage that. If we end up being sort of 45, 55, I think we're comfortable with that. We don't want to be 30, 70.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“We've talked about fund sizes. That is something that we continue to look at and to monitor. And it's important that we still feel comfortable that whatever the fund size they're investing out of, that there's an opportunity for them to return the fund with a single investment, certainly for early stage funds. I think for later stage funds, we probably want to see half the fund come back or the potential to return half the fund from a single”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“For us it's about net performance. What does that performance look like after the fees and carry have been taken off? And if it's consistently top quartile and it's consistently strong, then we're relaxed about that. I would prefer to see the carry be tiered. So I've got no issues about paying for performance, but I think it's important ideally I'd like to have that alignment of interest so that if you do have, if you have a great manager that has a poor performing fund, then that's reflected in the economics that go back to them for that specific fund. As you said, there's a whole line of LPs queuing out the door wanting to get into these managers. So that's, you know, realistically that's not going to happen. Ultimately for us, it comes back to what's the net performance.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“Do you know what I mean? I think they're more polite than that. But I think we recognize that we will give our opinion to our managers where we think there's something there that it makes sense for us to talk about. If they don't want to listen to it, then that's fine. Ultimately, they're the ones that are playing the game on the field. And as an investor, we trust them to do that. If they decide that that ultimately they're seeing such great opportunities that they want to put their fund to work in 18 months, then they've earned that right to do that. But they've also must recognize that they will be held accountable for what they do. You know, it's not to say that we'll walk away from a manager if they have one bad fund. That's not the case. You know, we look at these as long-term relationships. If there is a bad fund as part of that, we want the managers to be honest about, have they really thought about what are the reasons for that? What are the lessons that they've learned? Now, they might just be saying that and we'll continue to do what they want, but ultimately it comes down to if it's happening consistently, that's going to impact.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“So, one of the lessons I said we've made all the mistakes in the book, one of the mistakes we made in the late 90s was deploying our funds too quickly in, I think we had one fund that was fully invested in 15 months, and it was the worst fund we had. So it was in 1999 vintage fund. So as you can imagine, not the best outcomes there. And I think one of the lessons we learned there was that time diversification in a fund is so important. We look to invest all of our funds across a three-year period. And one of the things I'm really proud of was that when I look at the fund that was deploying 19, 20, 21, we did that in a quarter under three years. So even though our managers were coming back, some of them in 18 months, we still maintained that time diversity in our portfolio. That was really important. And it's something we talk, you know, we push our managers on all the time is that we want to see three year investment cycles for them.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“I think we want to be honest with our managers. There's also limits to how far that honesty is going to go because we want to give them an explanation as to why. And it's up to them if they want to accept that explanation if they want to push back on it and we'll have a conversation, but ultimately it's unlikely to change our mind. I think most of them, you know, where we have had that conversation have accepted it and moved on.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“We think we've got a couple of really good companies here. We're not selling them. We don't want to force liquidity. We want to ride them as long as we can. Then that's great. In others, it would be, ah, okay. That's interesting to know. We think there's probably some of our B companies that we can generate liquidity events for in the near term to help address that.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“So one of the things we do with a lot of our managers is we send them our internal benchmarks. So we will compare all of their funds to all of the other. And this is great because Cambridge or Pitchbook or Prequin compare, they show the market, but our managers want to really understand how do we compare with our peers. So one of the things we do is, you know, every quarter, every six months, we'll send them the benchmarks that obviously all anonymize, but we'll show where their fund ranks because it's a relatively small number of managers, we group it by three years. So if you're a 2015 fund, we'd compare you to funds that we did in 1415 and 16. So there's a decent sample size there. And by doing that, it shows them it's obvious if they're not performing. So we do it by IRR. We do it by TVPI and we do it by DPI. So we've had some conversations with people where we've said, look, you know, you guys are really good on IRR and TVPI, but you're lagging on DPI. How are you thinking about that? And some of them will go a little.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“The two reasons we would say no to an existing manager would be performance and succession. So the succession in a way is team.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“So there's been an instance of a manager where we've only done one fund and there were very specific reasons for that. It was mainly a China fund and there were some team issues.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“But I think that's more confirmatory diligence, that like, have we missed something here? It's not a case of do we think there's something we're worried about here. It's really a case of making sure that there's not something that's fallen through the cracks that we haven't missed. And also, you know, to be perfectly honest, if something goes wrong in the future, we want to be able to point to our LPs and say, look, we've actually done a thorough job here. We're not just sitting there and on the beach smoking cigars and not doing any work. We are properly looking after the money that we've been entrusted with.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“Like, if you ask me today, I could tell you who we would re up with and who were the ones where there's more of a decision. I think 90% of the managers that we have, you know, were very happy with. We know we're going to re-up with them. And in a way, our diligence on them is a continuous process. It's not about, oh, they're now raising a fund. Let's kind of meet them and talk to them for the first time. We spend time with our managers as much as we can without getting in their way. But we also, you know, make sure that we're doing a lot of work.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“Because they've understood that actually we're not going to try and do that. There's a group of people here that want to work together and when we're done, we're done. I really respect that, that they haven't tried to pretend.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there's two interesting ways of doing it. So if I look at the firms that are on, I look at someone like Excel, who is probably on the third or fourth generation now of leaders within that firm. I think they'd probably admit that they didn't get everything perfect, but I think they've handled most of those transitions pretty well. And it's really hard. I think Sequoia have a really interesting way of doing it as well, where people kind of step aside and don't Valentine step aside for Mike and Doug. Doug stepped aside for Roloff. So I think they understand the importance of doing that. The other way is I think Foundry Group have done a really good job.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“It's trying to sort of understand who the value drivers within a portfolio, who are those top potential 1% companies, and then understanding who actually sourced those deals, who did the work, are they the ones that are being elevated within the partnership? And is there enough room at the top end to let them have the freedom to come in and continue to do those deals and ultimately start to influence the behavior of that partnership and the strategic direction?”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“Do you know what I mean? Yeah It's probably a fund later than the issues would start to emerge, but at the same time, you probably hear General Scuttlebut about what's going on in there and how much of that actually plays out. You can almost hear too much and not understand or find it a challenge to really appreciate what's material for the firm and everyone likes a moan about where they work. That's never changed. I think for us, what we tend to look for is to make sure that firms have that process where we're seeing a continual flow of new people coming in and they're being valued for the work that they're doing and the senior partners stepping aside.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“When we look at the firms that have done it well, I think they recognize its importance and they don't wait too long to address it. There's one of the managers that we back that have that has a policy that says once you get to a certain age, you're out unless you're invited by the rest of the partners to stay within the partnership. I think what that does, it really sets the precedent that this is a partnership, it's a firm and the firm is more important than any individual. And I think that's really important. And where we've seen firms not handle it well, it's where the senior partners and maybe the founding partners have just been there for too long. They've kept too much of the economics. They haven't cleared a path for the people below them to come and really step up. Things change so quickly in venture that you've got to have that continued fresh blood coming through. Otherwise you get stale really quickly.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“It depends on where you are in that company's life cycle. So at the time NVIDIA went public, it was a very different business. And I don't think you could have predicted the AI wave. I look at what happened with Square, for example. So Square went public. It was a couple of billion dollar company. I know two of the venture investors in there held on to that for several years post-IPO because they knew the cash app was coming. They knew there was another leg there and they felt that the market wasn't fully valuing the option value of that second product line. And so where you have that sort of situation, then I think it's absolutely right for the venture investors to continue holding.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“And things go wrong. It's not going to be fatal for them, but they trust their judgment that actually by doing that they can significantly.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“When we talk about venture, there's a power law, but that is even true when you look at public companies that come from the venture industry. So there are a handful of public companies that have continued to compound at high levels for multiple years after going public. It's not a systematically different company post-IPO than pre-IPO. Yes, there's reporting differences and they've got to manage, you know, to quarterly expectations to some extent. But I think the very best companies can continue on that journey. It seems odd that if you're in one of those top 1% companies, ride it all away. Don't try and sell it early because you need to get points on the board. And again, this comes back to what do our managers do really well and what differentiates the very best managers from the rest of the pack. They recognize when they do have one of those top 1% companies and they have the confidence and they've got the history to know that if they do hold on.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“It depends on why they didn't distribute. I don't think you can take it on a company-by-company basis. I think you have to look at the overall volume of their work. Let's say they had 10 companies that went public and they decided to hold one of them and they distributed the rest. And they decided to hold that one because there were very specific reasons why they felt there was significant upside there. Then we have no problem with that. But it should be the exception rather than the norm. And I think it's interesting that the criticism that Sakai had for the Sakai Fund, it's absolutely the right idea. It just happened that they implemented it at a time in the market where you saw a significant correction once it was put in place.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“We tend to sell because we don't think it's our job to hold public stock for our investors. They have their equity managers who do that and would do a better job than we would. Now, we don't necessarily go back to the VCs and say to them, you should distribute as soon as a stock comes freely tradable. You know, we want them.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“They will distribute over time, so it probably takes eighteen months, twenty four months for a position to be fully realized from those managers. So we're getting to the stage now where those companies outwent public in the sort of second half of 21, that they certainly distributed the bulk of the shares that they had. There is some still left. So, you know, we are seeing liquidity still coming back, but it will take time to replenish that inventory. So even if we start to see IPOs in the second half of this year, it's going to be six months before those shares become freely tradable. And again, it will probably be another 12 to 18 months before those positions ultimately get fully distributed.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the denominator effect has dissipated. I look at the distributions that we're getting and we had a good 2023, but that was on the back of things that went public in 2021. And one of the metrics we track is what's the value of the public stock that's held by our managers. And that number has been coming down. And there have been no new ads to that list for the last 18 months or so.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“Persistence, understanding the entry point as well. Even great firms go through challenging periods of time. You know, one of the reasons why we see great firms fail is because they don't handle succession well. And some of them will handle succession badly but get there eventually. So there may be an opportunity to intercept during the period where people are thinking, is this still a manager that makes sense? You know, we talked about intercepting a number of our existing managers post-financial crisis. I think there's an opportunity today. You know, we know the lack of liquidity is having an impact on a number of LPs because they need to have distributions coming back in order to make new commitments.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“It's looking at those top 1% companies. We have a list of all the top 1% companies that we think that are out there, they're the ones that have exited, the ones that are just below, and we're looking at who are the investors in those. Who are the early stage investors? And we start to see names that we don't recognize. That's when we'll get interested and we'll do a little bit of work to see, you know, is this, you know, where did they intercept these companies? Maybe that's when we'll do some soft referencing amongst our GPs and say, what do you think of such and such? If they're not in that screen, then we're not going to spend our time there. And this goes back to the conversation we had right at the start about is it harder to be an LP today? Yes and no, depending on how you're looking at the industry and how you're screening the potential candidates for investment.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“I want to say we've never invested in a manager that has come into us directly. I'll reply to all of them. It's not something we want to spend our time looking at. We have a pretty simple screen. You know, we want to look at what we think are those top 1% companies. We spend a lot of time looking at who are the early stage investors in them. And then it's a case of us trying to reach out and build relationships with those managers. Our deal floor is all outbound.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“We want our VCs to understand when they need to get involved and when they need to get out of the way because there will be certain points in a company's life where they do need help. No success happens in a straight line. You look at most of the companies out there that have been successful. At some stage they had a near-death experience. And I think the role of a founder, it can be at times incredibly lonely. There are times when a VC needs to be there for that founder and needs to give them a have a hard conversation with them and needs to deliver a bit of tough love, but also needs to be supportive in a way to be a psychological support for that founder. So I think the best VCs are able to do that and can pick and choose their times. There are clearly VCs out there who just need to back off a whole heap.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“It has to be material. It's not just the ownership, it's also the role of the investor in contributing towards that success. So if you wrote a $50,000 seed check and turned up 15 years later and found you had a company that went public at a $10 billion valuation, then that's less interesting for us. If you were leading around, if you were on the board, if you were working with the entrepreneur very closely, if you were adding value.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's because you get a better sense in fund one as to whether or not they've been able to find one of those top one percent companies. And once you have found those top 1% companies or experience and our data suggests that you're more likely to be able to replicate that, again, going back to some of the academic data that's out there, it does suggest that that first success is actually random. But once you've had that first success, there's a high likelihood or higher likelihood that you can then leverage it and start that virtuous circle and begin to build a franchise.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think as an investor, we don't feel we need to be out there trying to test these new theories. What we need to try and do is to find when something is working to jump on it as quickly as we can and then trying to get access in there where we have more signal and more conviction that it's not just a good story, a good narrative, but actually it's going to result in strong performance. We are looking at adding new managers in the market today because we think that signal to noise ratio looks a lot better because we're now starting to see a lot of those companies that raise money in the height of the Zerb era begin to come back down to ground and get a sense of what they're really worth. And so I do think over the next couple of years, you will start to see managers differentiate themselves. But I think for us, the earliest we would intercept a manager would probably be fun three. And that's where we've had the most success.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and I think it totally accept that one of the challenges of venture is that the feedback loop is so long. And to be honest, most LPs probably aren't going to be in the same job when that feedback comes. So they're more worried about deploying than they are about what happens 15 years down the line when the performance data is actually in. But then I would kind of flip that around and say, let's go back to the first principles. So totally accept that. Let's go back to the first principles. Let's go back to the underlying performance data and let's see what strategies can be successful. We think venture is such a power law industry. But there are strategies.”
2024-03-25 · The Twenty Minute VC · 20VC: Lessons from 32 Years of Fund Investing | Why Exits Will Be Larger & Funds Sizes Bigger | Top Reasons to Turn Down Potential Fund Investments | Fees, Carry, Deployment Pace; What Do LPs Inspect When Fund Investing with David Clark, CIO @ Vencap · IDENTIFIED FROM THE TRANSCRIPT · source